Study predicts economic damage from Deficit Reduction Act

September 19, 2006

Nearly 90% of the outpatient imaging procedures earmarked for cuts under the Deficit Reduction Act of 2005 would be reimbursed at rates lower than the estimated costs of performing the procedure, according to a study conducted by The Moran Company.

Nearly 90% of the outpatient imaging procedures earmarked for cuts under the Deficit Reduction Act of 2005 would be reimbursed at rates lower than the estimated costs of performing the procedure, according to a study conducted by The Moran Company.

The study, commissioned by the Access to Medical Imaging Coalition (AMIC), a consortium of providers, physicians, patients, and manufacturers, looked at 145 imaging procedures whose payment would be affected by the caps imposed by the DRA 2005 legislation. Of these, 126 (or 87%) would be paid below the estimated cost of performing the procedures in the physician office setting.

"This is point-blank proof that Congress needs to pass the Access to Medicare Imaging Act (HR 5704, S 3795) to delay these cuts so the Government Accountability Office can figure out just what the impact on patients will be," said Tim Trysla, AMIC executive director.

The National Electrical Manufacturers Association (NEMA) endorsed the study results as demonstrating that recent congressional cuts in Medicare spending for medical imaging were ill-considered and will result in diminished patient care for Medicare recipients.

"This study shows what NEMA and AMIC have been saying to Congress since the reductions were set in place," said Andy Whitman, NEMA vice president for medical products. "It is now incumbent on Congress to do the right thing and delay the drastic reimbursement cuts."

Much of the overall reduction in spending brought about by the DRA would be concentrated on a limited number of high-volume procedures used widely by Medicare patients. These include MRI exams to detect brain tumors, nuclear imaging studies for heart problems, ultrasound scans to evaluate leg arteries or bypass grafts, and bone density studies for osteoporosis.

Under the DRA, aggregate Medicare payment for imaging services in physician offices and imaging centers would fall 16% to 18% below aggregate payment for similar services provided in hospital outpatient departments. This is in contrast to aggregate imaging spending prior to the legislation, which has been virtually identical in both the physician office and hospital outpatient department settings.

"These cuts are extreme, and they will unquestionably change how, where, and if Medicare patients get the imaging services they need," Trysla said. "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."

The results of the study are close to what would likely happen if the DRA was implemented early next year, as the study used a cost-estimation approach consistent with the procedure used by the Centers for Medicare and Medicaid Services. They confirm what had been widely suspected after the DRA cuts were passed, according to Trysla.

"The cuts were hastily crafted at the end of last year and it is hard to believe that Congress or the CMS anticipated cuts this severe," he said. "The DRA cuts overshoot the target and directly hit procedures that Medicare patients use all the time, for heart disease, back pain, tumors, and artery problems."

The Moran research used Medicare claims data and 2006 payment rates from the CMS Physician Fee Schedule and Hospital Outpatient Payment System to make cross-site spending comparisons and to assess the DRA reductions in relation to the costs of performing the procedures. It also factored in the expected volume in both the physician office and hospital outpatient settings.

The study findings contradict the widely held view that the physician fee schedule has provided excessive payments for medical imaging services when compared to the hospital outpatient payment system. Overall imaging spending in the two systems is virtually identical--or will be at least until the DRA cuts go into effect. The study concludes that "current payment policy, prior to the application of the DRA caps, does not exhibit a bias toward higher payments in one setting versus another."

Study findings also contradict the view that imaging payments under the hospital outpatient payment system more accurately reflect the actual costs of performing imaging procedures than do the rates under the office-based system.