CMS reins in nuclear medicine, multiple imaging costs

November 5, 2005

The Centers for Medicare and Medicaid Services has decided to apply the federal physician self-referral law to nuclear medicine, reduce technical payments for cross-sectional imaging of contiguous body parts, and reduce payments on the Physician Fee Schedule, according to the final rule published by CMS this month.

The Centers for Medicare and Medicaid Services has decided to apply the federal physician self-referral law to nuclear medicine, reduce technical payments for cross-sectional imaging of contiguous body parts, and reduce payments on the Physician Fee Schedule, according to the final rule published by CMS this month.

Nuclear medicine, once exempt from physician self-referral prohibitions, will now be subject to the Stark II restrictions. These ban physicians from referring patients for imaging to a facility where they (or an immediate family member) have a financial interest. The rule includes both diagnostic and therapeutic nuclear medicine but does not apply to the in-office exemption that allows cardiologists to provide nuclear cardiac imaging in their offices.

Changing the in-office exemption goes beyond the scope of this final rule, according to CMS. The government states that the in-office ancillary services exception strikes an appropriate balance of preventing program abuse without unduly interfering with the practice of medicine. However, it said it will monitor the potential for abuse with respect to existing exceptions.

The proposed rule, published in August, was unclear about the fate of current nuclear medicine arrangements that would be in conflict with the change. The final rule states that facilities with such arrangements will have to comply rather than be grandfathered in. The Medicare fee schedule is effective Jan. 1, 2006, but CMS has extended the deadline by one year for nuclear medicine facilities affected by this change.

"CMS recognizes that the inclusion of nuclear medicine [in the Stark II prohibitions] may have an impact on some current arrangements under which patients are receiving medical care, and that some financial arrangements may have to be restructured. Therefore, CMS is delaying the effective date for this regulatory change until January 1, 2007," the document said.

Physicians who refer patients to a PET center that purchases radiopharmaceuticals - which are designated health services under the final rule - from a company with which the referring physician has a financial relationship may be in violation of the rule. The nature of this financial relationship will determine whether a violation occurs, according to CMS.

The arrangement could constitute an indirect compensation arrangement between the referring physician and the PET center. In this case, the physician may not refer to the PET center unless the arrangement complies with the indirect compensation arrangement exception.

Regarding the imaging of contiguous body parts in one session, CMS had intended to pay 100% for the first procedure and half for all others. In response to comments on the proposed rule, the 50% payment reduction will be phased in over two years. The reduction in 2006 will be 25%, followed by 50% in 2007. This change applies only to the technical, and not the professional, component of the exam.

Transvaginal ultrasound and ultrasound of the breasts will be excluded from this change pending further study, according to CMS.

CMS also delivered a 4.4% decrease in the payment rates for physicians' services in 2006, just slightly more than the anticipated 4.3%.

The Physician Fee Schedule specifies payment rates to physicians and other providers for more than 7000 healthcare services and procedures, from simple office visits to complex surgery. The schedule is updated on an annual basis according to a formula specified by statute that takes into account the rate of growth in overall Medicare spending for physicians' services in recent years.

The reduction in payment comes after several years of modest increases. The conversion factor upon which CMS bases the Physician Fee Schedule has been subject to cuts in the last several years, although Congress has intervened in three of the last four years to ensure physicians are not subject to those cuts.

"The existing law calls for a decrease in payment rates for physicians in response to continued rapid increases in use of services and spending growth, and Medicare does not have the authority to change this," said Dr. Mark B. McClellan, CMS administrator. "The current system is not sustainable, and the payment reduction offers further proof that we must move to a payment system that ensures adequate payments to physicians, but also supports high quality and efficient health care services."

CMS is particularly concerned about medical imaging's impact on Medicare spending. Medicare data show that nationwide, from 1998 to 2003, imaging utilization by nonradiologists grew 46%. The Government Accountability Office has reported that when nonradiologist physicians refer patients to facilities in which they have a financial interest, imaging is increased by up to 54%.

A major private insurer evaluated 1000 imaging providers and found that up to 50% of imaging procedures done by nonradiologists are unnecessary.

For more information from the Diagnostic Imaging archives:

ACR calls report on skyrocketing imaging distorted

CMS proposes imaging payment cuts, extends self-referral law to nuclear medicine

Panel builds case for new self-referral limits

Radiologists and cardiologists square off before Congress