Is Outpatient Imaging On Its Way Out?

If you thought Deficit Reduction Act (DRA) was draconian, you may do a double-take at the 2010 Medicare Physician Fee Schedule (MPFS). While the 2010 schedule has not been finalized yet, every indication is reimbursement for imaging in outpatient centers will go down. The equipment utilization rate assumption for imaging equipment costing over $1 million, such as MRI and CT, in non-hospital settings is set to go up to as much as 90 percent and as little as 65 percent.

This represents another major blow to medical imaging. Every non-hospital site, whatever its imaging volume, receives the same reduced fee. The justification for this is costly medical technology is used so frequently that it pays for itself in a relatively short time period. In many sites, it does not.

As Medicare phases in these new rates during the next four years, we will witness outpatient-imaging sites closing their doors, unable to meet unrealistic equipment utilization rates. During this time of enormous uncertainties for U.S. healthcare, what do you believe will be the ultimate impact on imaging centers, patient care, the manufacturers, and the overall healthcare system?

ITN: In general, what will be the repercussions of this in your imaging area—equipment vendor or imaging provider?

Robert David Burke, M.D., founder and president of Midtown Imaging: Practicing in South Florida has always been a challenge due to the heavy managed care penetration and significant number of in- and outpatient facilities competing for patient volume. This changed following enactment of the DRA in 2007 when many marginal facilities closed. The current MPFS could be the second shoe to drop on the industry with devastating effects on the surviving facilities due to not being able to pass along the increased cost of operations, while being subjected to these cuts.

Peter A. Rothschild, M.D., medical director, High Field and Open MRI: The first imaging cuts a few years ago had a tremendous impact on our center. These new cuts may be steeper than the previous aggressive decrease in reimbursement for outpatient imaging. We see this storm on the horizon and are aggressively cutting back expenditures. Specifically, we have delayed the purchase of a high-field MRI to replace one of our older units. We have aggressively looked at what personnel we absolutely have to have, as well as outside services that we can reduce or eliminate. These new cuts will have a dramatic effect on the outpatient imaging centers, but to even a greater degree on the medical vendors.

Diane Wurzburger, senior director, Policy and Payment, Siemens Healthcare: The 2010 MPFS will reduce payments to non-hospital practices by 48 percent for CT of the pelvis, 46 percent for MRI of the chest-spine, 36 percent for myocardial SPECT, and by 27 percent for other cardiovascular-related services. Cuts to radiology services could impact up to two-thirds of cardiovascular patients as practices are forced to close their facilities.

Laurel Sweeney, senior director, Reimbursement & Legislative Affairs, Philips Healthcare: The cuts to Medicare reimbursement for diagnostic imaging are likely unsustainable for providers. When added to the DRA cuts sustained, they may push diagnostic imaging to hospital-only settings and could lead to disruptions in services, such as delays and congestion. Additionally, because commercial payers source the Fee Schedule as a basis for rate setting, we are concerned that the payment reductions will spill over into non-Medicare space, which could seriously compromise services for patients under the age of 65.

Hugh Zettel, executive director, GE Healthcare, Reimbursement Strategy: Two years since the DRA’s implantation, we’ve seen a drop-off in equipment sales and orders across the industry. That slowdown, plus the recession, has made it difficult for a lot of our customers to make investments in capital equipment. The result of the increase in the utilization rate is a decrease in the payment for CT and MR procedures. While PET equipment is also in this price range, reimbursement rates are established by local carriers and, therefore, are not impacted by this proposal.

Paul Budak, president of Merge CAD, a division of Merge Healthcare: Technical fee cuts will have a disproportionately large impact on technology-based solutions. With the 90 percent mandated medical equipment utilization rate assumption, it will become increasingly vital that medical device providers deliver technology solutions that dramatically improve efficiency and standardization in workflow of the these valuable studies – MRI and CT – to the medical imaging community. Additionally, these products should assist clinicians increase patient throughput and study volumes, while decreasing imaging costs.

ITN: How will your organization address the situation?

Burke: Obviously you cannot maintain or grow a business with only cutting costs, but this will be a primary focus in order to deal with the proposed cuts. New purchases and upgrades will be deferred until we evaluate the financial effects, and less personnel will be asked to do more. Additionally, our marketing staffs will be tasked with developing new lines of business, and all deficits in service to our referrers will be immediately addressed.

Rothschild: We are looking at the financial situation of our center much more closely than we ever did before. Even the smallest expenses are being looked at and approved by management whereas in the past they would have been simply signed off on by lower level personnel. We are also aggressively looking at areas to decrease our cost, from film to RIS to IT. Unfortunately, imaging centers are a fixed cost business, which in the best of situations runs approximately 7 to 8 percent profit. If the cuts are 20-30 percent, it will not take a rocket scientist to figure out that you will lose money on every government-pay patient that you see. The irony of the situation is that these patients are more expensive cost-wise for our center to deal with. They tend to be older and often more complex, meaning they may require extra sequences or longer imaging times. The older patients tend to move more, and many of these patients are very large, requiring extra staff to move them on and off the table. Worst of all, often they require an MD to be present for something as simple as a contrast injection. All of these factors make these patients more expensive cost-wise to scan.

Another way our organization is dealing with the decreased reimbursement is to scan faster. This puts a lot of stress on our staff and equipment. However, this is the only way we can survive in this environment. The bigger threat that I worry about than decreased reimbursement is limited access to imaging studies. If we don't have enough patients to scan, it doesn't really matter how fast we can scan them, and this is the greater worry that I have. The insurance companies have done whatever they could to limit access to MRIs and CTs. At the same time, local hospitals are buying up our physicians' practices and driving that business towards the hospital network. All of this leaves the independent imaging centers "out in the cold." This additional Medicare cut will probably be the "straw that breaks the camel's back" for most of the independent imaging centers throughout the country.

Wurzburger: In addition to ongoing advocacy with CMS and Congress, Siemens will continue to improve its equipment offerings and work to be responsive to our customer needs. With decreased reimbursement, there is a potential for disruption in patient care, as some non-hospital facilities will struggle to sustain a viable business model. We expect that some non-hospital facilities will be faced with the decision to either close or consolidate with other entities. Others may consider upgrading existing systems to increase efficiency and procedure throughput rather than investing in new equipment. Additionally, some non-hospital facilities may wish to add modalities that facilitate performance of clinical services that are not as significantly impacted by the reimbursement changes. Siemens will work with these healthcare providers to identify the most appropriate and effective solutions to maintain the quality of patient care. Appropriateness criteria to lead the right scan at the right time.

Sweeney: Philips Healthcare believes the change in the utilization assumption was not built on reliable data. The survey, conducted by MedPAC, was not a representative national sampling because it was conducted in only six urban areas and excluded rural imaging centers. A recent survey by the Radiology Business Management Association (RBMA), using current Medicare assumptions, found that imaging equipment in rural regions of the country operates only 48 percent of the time an office is open, while equipment in non-rural areas operates 56 percent of the time. Also, data collected by U.S. Oncology based on annualized first half 2007 utilization data showed 94 percent of all CT machines operated less than 50 percent of the time the practice was open. Further, MedPAC’s assumption does not account for the health or age of the patient – both of which are the two biggest determinants affecting the length of an imaging appointment and ultimately utilization rates. Philips is a founding member and will continue to work closely with the Access to Medical Imaging Coalition (www.rightscanrighttime.org) to advocate alternatives to payment cuts, such policies that ensure appropriate use of imaging based on established clinical guidelines. Additionally, we believe there is a bias in the Physician Fee Schedule formula against capital equipment that disproportionately affects diagnostic imaging services. We plan to work with CMS and legislators to explore necessary changes to the formula so the costs of providing these services are more accurately reflected.

Zettel: We continue to work with industry advocates, including the Access to Medical Imaging Coalition (AMIC), to minimize the impact of utilization changes.

ITN: What impact will the new rates have on patient care?

Burke: The overall effect of the MPFS may be to drive non-imaging physicians away from the Medicare program and result in patients joining Medicare HMOs. As far as patient care in our facilities, there should be no change in the level of care provided. In rural or underserved areas, there may be a problem with access to imaging due to facilities forced to close.

Rothschild: Patient care is the overriding focus at our imaging centers. We are a physician owned, family run business and will not allow patient care to suffer, no matter how low the reimbursement rate goes. However, our center will be forced to scan patients faster, thereby having an increase in the efficiency of our current imaging equipment. I think the main area of patient care that will suffer, however, will be the lack of competition with large hospitals from efficient outpatient imaging centers, thereby decreasing choice for patients to get their MRI scan. Also, I think that report turnaround will also suffer, since the hospitals will have little to no competition. Therefore there will be no competitive advantage to turn around reports quickly and to have thorough, easy-to-read efficient reports. What we are seeing with local hospitals is that they simply find whatever radiology group will read the cases the cheapest, and with the advance of teleradiology; they are able to ship their images to the cheapest radiology group.

Wurzburger: The cuts in reimbursement for imaging services, in particular MRI and CT, will jeopardize patient care, as many community-based providers will struggle to maintain their practices. As practices close or consolidate, patient access issues will arise, especially in rural areas. Patients will migrate to hospital-based facilities, many of which are already operating at capacity. Given the aging population and influx of Medicare patients into the healthcare system, these hospital-based facilities will have difficulty managing the increased volume, resulting in a disruption in delivery and quality of care.

Sweeney: Imaging has increasingly become integral to clinical practice and provides physicians with real-time tools that boost diagnostic confidence. However, deep cuts such as these likely will change some of those dynamics as wait times and travel are not always options for patients who need immediate care.

Zettel: The November issue of the Journal of the American College of Radiology published a new study entitled “The Association Between Hospital Outcomes and Diagnostic Imaging: Early Findings,” which finds that hospitals that make greater use of inpatient diagnostic imaging exams achieve lower in-hospital mortality rates with little or no impact on associated costs. The peer-reviewed study, authored by David Lee, Ph. D., Senior Director, Health Economics and Outcome Research at GE Healthcare, reviewed more than one million patient outcomes in more than 100 hospitals nationwide. If outpatient centers are forced to close and hospitals are overburdened with imaging procedures, the likely the result will be longer wait times for exams and reports. Overall, fewer patients may be able to have imaging exams. Clearly, this would impact patient care.

Budak: We believe, if facilities invest resources to assist in improving workflow of MRI and CT studies, patients will continue to have expanded access to these important studies.

ITN: What will be the impact on the medical system overall?

Burke: As mentioned above, I believe more physicians will either limit their Medicare practices or leave the system altogether. Additionally there will be longer wait times for elective imaging studies as marginal facilities are forced to close under the burden of declining reimbursement.

Rothschild: The effect on the medical system will clearly be driving this country to a system much more similar to the socialized medicine seen in the European countries. I have a distinct and very unique view of socialized medicine since I practiced for nine months under this system in Sweden. This was quite an eye opening experience. I can tell you from first hand experience that socialized medicine is a disaster. My favorite saying is "If you think medicine is expensive now, wait until it is free," and this is absolutely true.
The effect on the doctors is phenomenal. Clearly, the smartest and brightest of the next generation will definitely choose not to go into medicine where they will be simply a government employee. When I was in Sweden, it literally took three radiologists to read the same number of cases that one radiologist would read in the United States. The doctors felt that they had no way to deal with the government but to unionize. When the doctors felt that they were being mistreated, they did what any union would do and went on strike. This had a devastating effect on patient care. If you like going to the DMV, you will love government healthcare.

Wurzburger: The impact to the overall medical system resulting from these significant reimbursement cuts include a potential reduction in the number of providers and non-hospital facilities, a reduction in the number of imaging services available to patients (especially in rural areas), while an increase in patients due to an aging population and fewer non-hospital facilities will result in longer wait times at hospital-based facilities and a decrease in the quality of care. Additionally, imaging services are a central component of preventive services and early diagnosis of disease. Limiting appropriate imaging service choices as a result of significant reimbursement cuts will impact the clinical effectiveness and cost effectiveness of treatment options and outcomes.

Sweeney: For the past several years, the trend has been to provide more clinical services in non-hospital settings because it was believed to be efficient and cost effective. Payment reductions of this magnitude will likely reverse that trend and push more services back to the hospital settings. We already are seeing evidence of this as larger cardiology practices, which had provided services such as nuclear cardiology, ultrasound and CT, are either selling their practices to hospitals or looking to form some sort of joint venture with the hospital.

Zettel: Clearly, the CMS policy signals that they want to shift payments from specialists to primary care, which makes it difficult for the non-hospital site of service (physician office, independent diagnostics test facility) to continue providing imaging services.

ITN: Do you feel medical imaging has been unfairly targeted for reimbursement cuts compared to other medical specialties?

Burke: I believe the method of determining UR is flawed and results in non-statistically correct assumptions. Surveys are limited and often incorrectly filled out resulting in incorrect data. Additionally most of the recent growth in medical imaging has come from the non-imaging sectors of medicine, such as in office ancillary services and has been misinterpreted and commingled with stats showing the extensive growth in the number of imaging studies occurring on an annual basis.

Rothschild: I absolutely feel that Medicare has unfairly targeted medical imaging due to the increasing expenditure on imaging. What they don’t see is that this increased spending has occurred with a tremendous decrease in expenditure for other branches of medicine such as surgery. When I was a medical student, the most common reason for surgery at the hospital was exploratory. What that meant was they had no idea what was going on and simply would open up the patient and look around to try to see what the problem was. Today, this would be called malpractice, and this is mainly due to the advances in imaging. It is clearly significantly cheaper to do an MRI than exploratory brain surgery. Also, the complications are much less, and imaging allows for earlier diagnosis of many disease processes, thereby decreasing the cost of treating these diseases.

However, this does not come into the calculations when the government looks at what they are spending on healthcare. The other big factor is that the younger doctors today, from orthopedic surgeons to neurosurgeons, have grown up with MRIs and CTs and have lost much of their clinical diagnostic ability due to their reliance on these studies. A perfect example is in the emergency room, where doctors simply get a CT scan on any patient that they feel has a complicated diagnosis. Unfortunately, the pressure to limit access to advanced imaging will force the physicians to rely on their diagnostic abilities, which clearly are not of the degree that physicians possessed 20 to 30 years ago.

Wurzburger: Yes, these changes to the 2010 MPFS, coupled with the DRA cuts in 2007 (nearly 20 percent reduction in payments for advanced diagnostic imaging), and congressional proposals to cut Medicare reimbursements for imaging and impose billions of dollars in taxes on medical devices, including imaging devices, represent a “triple hit” to imaging services, that, if enacted, will reverse the progress on the war on cancer and other diseases.

Sweeney: There is a prevailing presumption among many lawmakers and payers that increases in imaging utilization in non-hospital settings are largely due to inappropriate tests or direct financial incentives rather than clinical incentives. However, there is no credible data that supports these presumptions. Imaging utilization has grown because there are clear clinical benefits in disease prevention, early detection, diagnosis and treatment. Diagnostic imaging has increasingly replaced more complex, invasive procedures, and Philips Healthcare believes the current accreditation requirements and appropriateness demonstration project included in last year’s Medicare legislation addressed these issues sufficiently.