The bone densitometry market appears to have hit a rough patch. The once-hot segment has stumbled over the last several months as international demand slows, while equipment purchasing in the U.S. has been affected by confusion over proposed changes in Medicare reimbursement rates. Help could be on the horizon, however, both from new products reaching the market and from recent initiatives to increase the use of bone-mass measurement tests by U.S. physicians.
Bone densitometry's most recent boom cycle began in late 1995, when Merck & Co.'s Fosamax treatment for osteoporosis hit the market. Fosamax gave clinicians an alternative to hormonal-based drugs for treating osteoporosis, and prompted the acquisition of bone densitometry scanners in the U.S. to diagnose and track the progression of the disease.
Warning signs began to appear this summer indicating that the market might be cooling off, however. Hologic of Waltham, MA, reported anemic revenue growth for its third quarter (end-June), while Lunar of Madison, WI, and Norland Medical Systems of White Plains, NY, issued warnings that their revenues would be lower for the quarter ending in September. Hologic's upcoming financial results may reflect a slowdown in hospital sales for the quarter, according to an executive at the company, but this slowdown might at least be partly offset by increased sales to physician offices.
Several factors have conspired to cause sales to stumble in the last few months. Demand in overseas markets, for several years the mainstay of bone densitometry sales, has pulled back. Lunar, for example, has experienced a drop in Asian sales, particularly in Japan, for the company's products. Confusion in the U.S. market over future Medicare reimbursement rates is making matters worse.
Revised Medicare rates for bone densitometry, developed by the Health Care Financing Administration and published in the Federal Register in June, indicated a marked increase in payment for the use of peripheral densitometers and a dramatic decrease for larger axial scanners, bringing payment for axial scanning below the rate paid for the use of peripheral systems. Currently, axial scans are reimbursed at a rate of $121 and peripheral scans at $38. The new proposed rates published in the Federal Register pegged reimbursement for axial scans at $40 and peripheral scans at $57.
The new rates shocked the industry, because axial scanners, which are about twice the price of peripheral scanners, are widely believed to provide the best indication of fracture risk for the hip and spine and, therefore, are the preferred means for assessing patients suspected of osteoporosis. The figures turned out to be an error on the part of HCFA staffers that has had major consequences for densitometry firms.
"They made some serious mistakes for densitometry billing," said James Hanson, Lunar vice president of marketing. "We're in this quagmire, waiting for it to be resolved."
HCFA has acknowledged publishing erroneous figures, according to industry sources, and is expected to publish the correct rates soon, perhaps as early as November. The agency, which administers Medicare, may not be rushing to publish a correction because the new rates will not take effect until Jan. 1, 1998. But the rates published in June had an almost immediate effect on the industry, according to executives.