Radiology doesn’t escape far reach of healthcare reform legislation

April 7, 2010

Healthcare reform legislation signed into law last month by President Obama promises to bring sweeping changes to the healthcare system, potentially including the practice of radiology.

Healthcare reform legislation signed into law last month by President Obama promises to bring sweeping changes to the healthcare system, potentially including the practice of radiology.

Signed into law were the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Together, they seek to expand access to health insurance (through subsidies, mandates, and market reforms), reduce healthcare spending (primarily through cuts to providers in the Medicare program, including payments for diagnostic imaging services), and institute a variety of other health policy reforms. Beyond that, they portend major transformative change to the healthcare delivery system in the years to come.

For radiologists and other imaging providers, several actions will have a direct and immediate impact.

Cuts to diagnostic imaging payments

It is no surprise that diagnostic imaging has been a target for more than its share of the cuts. The strategy to cut spending for imaging services has been to decrease payments for the technical component of certain nonhospital advanced imaging services. Historically, CMS assumed that imaging equipment was used 25 hours per week (50% of the time) in applying practice expense relative value scale (RVS) values to payments for imaging services. If this utilization factor were to be increased, the cost of the equipment (and thus the payments) would spread over more units of service, thus lowering the payments per procedure.

The 2010 Medicare Physician Fee Schedule final rule had adopted a 90% utilization rate for certain imaging equipment valued at more than $1 million. CMS stated that included CT and MR services. The higher rate was to be phased in over a four-year period.

The Patient Protection and Affordable Care Act adopted a 75% utilization rate for CT, MR, nuclear medicine, and PET equipment phased in over four years. The Reconciliation Act, however, set the final policy: a 75% utilization rate, effective 2011, applicable to the same modalities that CMS defined in the 2010 Medicare Physician Fee Schedule final rule as using imaging equipment priced at $1 million or more: nonhospital technical-component CT and MR services. Nuclear medicine and PET services appear to have avoided a payment cut.

Greater discounts for same-day studies

The Patient Protection and Affordable Care Act also increases the discount for the technical component of additional imaging studies performed on the same Medicare patient, the same day, from 25% to 50%. Many may recall that CMS had proposed to do this beginning in 2009, but decided against it based on data from the ACR showing there were not efficiencies to warrant this multiple-procedure discount. Congress nevertheless decided to implement the increased reduction for multiple procedures in its quest for savings.

Provisions aimed at self-referral:

Disclosure. Physicians who order tests for their own patients, relying on the Stark in-office ancillary services exception for MR, CT, and PET services, are required to inform their patients in writing that the services can be obtained elsewhere and provide the patient with a list of suppliers of the imaging services in the area where the individual resides.

Appropriateness criteria demonstration project. The secretary of the Department of Health and Human Services may consider a project to study the impact of varying the payment to physicians who order advanced imaging services (MR, CT, nuclear medicine, and PET) in accordance with the physicians’ adherence to appropriateness criteria.

Potential transformative reform flowing from the legislation

The Patient Protection and Affordable Care Act has not immediately produced a systematic restructuring of the fee-for-service healthcare delivery system, but elements of the legislation could produce truly transformative change.

The creation of programs for Medicare payments to accountable care organizations and demonstration projects for bundled payments could escalate a move to more vertical integration of healthcare providers. The obvious question in the future is whether hospitals will be the initial recipient and dispenser of the payments for hospital-based radiologists’ services. Also, the reform law creates a new Independent Payment Advisory Board that is empowered to make recommendations for Medicare spending cuts that would go into effect automatically unless Congress votes to block them, potentially affecting all providers of Medicare services. The new laws also embrace value-based purchasing and comparative effectiveness research, both of which suggest the potential for Medicare payment based on quality outcomes.

It is also interesting to speculate how the increased population of insured patients will impact the practice of radiologists who practice in tertiary hospitals and are burdened with a heavy population of indigent patients. Beginning in 2014, individuals with income up to 133% of the federal poverty level will qualify for Medicaid. And those individuals with income below 400% of the federal poverty level will qualify for subsidies to purchase health insurance coverage on newly created state insurance exchanges. And, of course, the legislation mandates the purchase of insurance.

In today’s world, many radiology groups currently bear a large load of uncollectible debt. The elimination of bad debt could be a significant plus to many hospital-based radiologists. There is even speculation that the potential elimination of charity care could threaten the tax-exempt status, or at least the exemption from local real estate taxation, of many 501(c)(3) charitable hospitals. Time will tell.

In short, the healthcare legislation certainly has known short-term impacts on imaging providers. But it’s the potential for transformational-and currently unknown-changes that could be the lasting legacy of this legislation.

Mr. Greeson is a partner in the healthcare group of Reed Smith LLP in Falls Church, VA. He can be reached at 703/641-4242 or tgreeson@reedsmith.com.