Great expectations, poor healthcare

July 9, 2009

Expectations can be a problem. This is especially so when the government gets involved.

Expectations can be a problem. This is especially so when the government gets involved. President Obama recently recommended that the Centers for Medicare and Medicaid Services (CMS) base its reimbursement formula on a 95% utilization rate for advanced imaging equipment. The Medicare Payment Advisory Commission (MedPAC) has proposed that advanced imaging equipment be reimbursed on the basis of 90% utilizations. These suggestions are absurd.

While some freestanding imaging centers run at peak capacity, the majority do not. A study done by the Radiology Business Management Association found that rural imaging centers operate equipment only 48% of the time these office are open, and urban imaging centers not based at hospitals operate at only about 56%.

When calculating its reimbursement formula for diagnostic imaging services, CMS currently assumes that imaging equipment is in use, on average, 50% of the available time. The RBMA data suggest the current Medicare utilization rate is close to the rate at which imaging equipment is actually operated.

Because the utilization assumption is a key component of the formula used to calculate Medicare reimbursements, this disparity between actual use and the newly proposed utilization rates means the imaging community could be in for a radical change if either of the proposed rates is put into effect. Setting the utilization rate at a level significantly higher than the actual rate of utilization would have the effect of severely cutting reimbursements for imaging at many centers in the U.S., very possibly pushing many out of business. If that happens, patient access to advanced imaging will be severely disrupted.

Spending on advanced imaging has already decreased significantly since 2005, according to the Access to Medical Imaging Coalition (AMIC), flattening procedure growth in this country.

"Bureaucratic red tape, including long waits for appointments, delays in the waiting room, and patients driving long distances, will be typical if Medicare spending is reduced by levels proposed by President Obama or MedPAC," said Tim Trysla, AMIC executive director.

Some argue that the upward growth in imaging procedures is already curving down. According to a recent analysis conducted by The Moran Company, Medicare spending on advanced imaging, specifically CT, MR, nuclear medicine, and PET, fell by 19.2% from 2006 to 2007. In fact, the survey shows that the rate of imaging volume growth has been declining since 2005; for all imaging services, spending decreased by 13.3% from 2006 to 2007.

The proposed utilization rates, if put in place, will cut imaging reimbursement even more. The short-term negative effects on patient access to diagnostic imaging could be exacerbated in the long term by cutbacks in R&D necessitated by declining sales of new equipment. Ironically, the delays in developing advanced diagnostic technology will come exactly when the efficiency of healthcare in this country will depend the most on setting up an effective system of preventive care services.

If policymakers want Medicare reimbursement to reflect actual imaging equipment utilization rates, they should stay with the current rate assumptions. If they want to ensure that these rates are correct, they should commission a study, as AMIC suggests, of private and public sources to come up with an accurate utilization assessment.

If, however, they are just looking for a new way to cut reimbursements, they should be honest and say so.