Reimbursement cuts could make exams money losers

September 20, 2006

Nearly 90% of the medical imaging procedures whose Medicare reimbursement rates would drop under the Deficit Reduction Act of 2005 would bring in less than the estimated cost of performing them in physician offices and independent imaging centers, according to a report released Monday.

Nearly 90% of the medical imaging procedures whose Medicare reimbursement rates would drop under the Deficit Reduction Act of 2005 would bring in less than the estimated cost of performing them in physician offices and independent imaging centers, according to a report released Monday.

The Moran Company, which conducted the study for the Access to Medical Imaging Coalition, a lobbying group for diagnostic imaging, found that 126 of 145 procedures (87%) whose payment would be affected by the DRA technical component caps would lose money.

"Physicians who look at the bottom line will have to consider very seriously whether they can provide these services in their offices," said Dr. Paul Freier, a cardiologist with Illinois Heart & Vascular in Hinsdale, IL, during a press conference Monday announcing the study.

The total cost of imaging nationwide has increased, but imaging often saves money, Freier said. Coronary CT angiography, for example, can in many cases deliver the same diagnostic information as a catheter angiogram, at considerable savings.

"Since we began performing coronary CTA, we have seen a significant decrease in the number of patients sent to the hospital for a more invasive coronary angiogram," he said.

Imaging performed in physician offices or independent imaging facilities is reimbursed using a formula called the Medicare Physician Fee Schedule (MPFS). Imaging performed in the hospital outpatient setting is paid through the Hospital Outpatient Prospective Payment System (HOPPS). HOPPS rates are generally lower than the MPFS because HOPPS takes into account inpatient revenue, among other things.

Provisions in the DRA mandate that the technical component for nonhospital outpatient imaging be reimbursed at the lesser amount of either the MPFS or HOPPS rate. This change will result in a 25% to 45% reduction in revenues for imaging performed in physician offices and independent imaging facilities.

The Moran study found that the DRA-mandated payment policy will have a highly concentrated effect on a limited number of high-volume procedures for which MPFS rates happen to be higher than the corresponding HOPPS rates. These include brain MR exams, chest CT exams, nuclear cardiology exams, ultrasound extremity scans, and bone density studies.

Researchers used a formula similar to that used by the Centers for Medicare and Medicaid Services to calculate the esimated cost of a procedure. They then used the proposed technical component (TC) capped rate to calculate the percentage loss in dollars between the 2005 MPFS and the 2006 proposed cuts. Two examples are:

  • 70496TC, CT angiography, head. MPFS rate: $424; HOPPS rate: $297; estimated CMS cost: $1209; DRA capped rate: $297; capped payment as percent of estimated cost: 25%; capped rate versus estimated cost: −$912

  • 70545TC, MR angiography head w/dye. MPFS rate: $447; HOPPS rate: $371; estimated CMS cost: $1129; DRA capped rate: $371; capped payment as percent of estimated cost: 33%; capped rate versus estimated cost: −$758

The following abbreviated examples show more procedures whose capped payment as a percentage indicates a loss in dollars compared with the estimated cost of the procedure:

  • 71260TC, CT thorax w/dye (46%)

  • 71275TC, CT angiography, chest (37%)

  • 70553TC, MRI brain w/o & w/dye (39%)

  • 72193TC, CT pelvis w/dye (49%)

  • 75552TC, heart MRI for morph w/o dye (25%)

  • 78494TC, heart image, SPECT (75%)

Only four x-ray procedures out of nearly 200 examined will be negatively affected by the DRA.

The report contradicts the widely held view that the Physician Fee Schedule has provided excessive payments for medical imaging services when compared with the HOPPS. The study found that overall imaging spending in the two systems is virtually identical. When the DRA cuts go into effect, however, overall reimbursement for in-office imaging falls by 16% to 18%.

"These cuts are extreme, and they will unquestionably change how, where, and if Medicare patients get the imaging services they need," said Tim Trysla, AMIC executive director, at the press conference. "You cannot cut MRI of the brain by 49%, ultrasound for prostate cancer by 72%, or CT for abdominal aortic aneurysms by 52% without affecting patients."

Nancy-Ann DeParle, a former administrator with CMS and now with JP Morgan Partners in Washington, DC, said she was floored by the secretive process in which Congress cut imaging reimbursement and by the level of the reductions.

"This is a textbook case on how not to do healthcare policy," DeParle said.

Tom Scully, another former CMS administrator now senior counsel with Alston & Bird of Washington, DC, said the congressional mandated cuts are "sloppy policy at best."

Rather than arbitrarily slash imaging funding, Scully said Congress should look at the recommendations made by the Medicare Payment Advisory Commission (MedPAC). Many of MedPAC's suggestions deal with image quality and physician training. He suggested that Congress can assign payment rates that reflect the quality of the equipment.

"One of my frustrations is that Medicare pays exactly the same amount for a study regardless of whether the scanner is 10 years old or brand new," he said.

Bipartisan bills have been introduced in the House (HR 5704) and Senate (S 3795) calling for a two-year delay in implementing the imaging provisions of the DRA while the government studies the consequences of the cuts. The House bill has over 100 sponsors from both sides of the aisle, which shows the "strength on a bipartisan basis that these policies need to be removed," Scully said.

The chance of Congress passing these bills is sketchy, however. Members are scheduled to recess at the end of September, and they will then be focused on the November elections. Many may come back as lame ducks.

"Out main focus is to include the bills when Congress revisits the SGR [sustainable growth rate] for physician payment," Trysla said.

For more information from the Diagnostic Imaging archives:

Hasty budget action spurs petition for delay

Trouble by the numbers: Imaging's reimbursement bubble bursts

CMS abandons extra payment cuts for multiple imaging procedures

Bipartisan Senate bill calls for DRA moratorium