Medicare bill sets stage for changes in radiology

January 8, 2004

Increased payments could boost equipment salesMost of the attention given the Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed into law Dec. 8, has focused on the inclusion of pharmaceuticals. But there

Increased payments could boost equipment sales

Most of the attention given the Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed into law Dec. 8, has focused on the inclusion of pharmaceuticals. But there is more to the legislation-both good and potentially bad.

High on the list of positives is the financial boost healthcare facilities are likely to get for their services. Each year, Medicare reimbursements could be adjusted for inflation, creating an environment increasingly conducive to the sale of medical equipment. But there's a catch. To get these enhanced payments, institutions eventually will have to prove they have increased the quality of care and become cost-efficient.

This carrot-and-stick combination could be tailor-made for PACS specifically and healthcare IT in general. Sorely lacking since the introduction of PACS has been a strong financial incentive for its adoption. Most capital equipment offers an immediate reward: reimbursement for procedures done with it. Gains from the use of information technology have been harder to nail down, as IT promises to make the use of other medical equipment more efficient.

The revamped world of Medicare will force IT to prove its worth. Information technology will have to prove it enhances quality of care and productivity or, at the very least, to serve as the means for documenting the positive effects of other efforts. Failing to do so will mean hospitals will lose out on enhanced reimbursement. The radiology industry would lose out as well.

"If hospitals get paid more, possibly they will have better operating margins, which means they can afford to purchase up-to-date equipment," said Eleanor Kerr, director of government relations for Siemens Medical Solutions.

Institutions will get a free ride in 2004, when their Medicare payments are adjusted for inflation, regardless of documented improvements in patient management, according to Kerr. Things will get stickier from 2005 to 2007, when institutions must earn these adjustments.

"Congress, administrative agencies, and thought leaders in policy are very interested in quality and eliminating medical errors," she said. "They want to provide incentives for providers to purchase IT, if for no other reason than to report on quality improvements."

Workflow tools built into IT and PACS, as well as the scanners themselves, could be major contributors, if their benefits can be documented. The same may be true for the introduction or increased use of cost-effective medical techniques. CT angiography might replace x-ray aortography or even coronary angiography, if efficacy and cost savings can be proven.

Incentives have been developed for hospitals that can hold down the cost of treating people with chronic disease, such as diabetes and heart failure, according to Kerr. This emphasis could easily extend to other areas. Ripe for the picking is oncology, where PET/CT can improve quality of care as well as restrain costs by enhancing patient management. The same may be true for CT virtual colonography, which might reduce the cost of screening and cut mortality from colon cancer, if the patient-friendly nature of the underlying technology leads more people to be screened.

Equipment sales of cost-effective products could boom in such an environment. Rising reimbursements to healthcare institutions could amplify this effect further, as facilities hire more staff to do more procedures.

But there is also the possibility that this growing interest in cost savings will have an adverse effect on the adoption of technologies. Radiology in the past has been a lightning rod for accusations that imaging equipment is being overutilized. The writing may be already on the wall for a recurrence of this problem.

A provision in the Medicare bill freezes payments for durable medical equipment for three years and calls for the implementation of limited competitive bidding. DME products are nothing like imaging equipment, but they have attracted the attention of policy makers to technology, and that could be a sign of trouble.

"This could be used as a precedent to go into other areas where Congress sees growing costs, such as diagnostic imaging," Kerr said. "It is something about which we need to be vigilant."