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MedPAC recommendation targets high-cost imaging done in physician’s offices

Following the lead of some private insurers, Medicare may soon require preauthorization for high-cost imaging tests—including CT, MRI and PET scans—done in physician offices. This is one of two strategies aimed at reducing payments for Part B physician radiology services that was recommended by the Medicare Payment Advisory Commission (MedPAC) in its report to Congress in March.

The General Accounting Office (GAO) estimates that preauthorization could save the Medicare program $220 million by 2014 and about $1 billion by 2019. To make preauthorization work, the Centers for Medicare & Medicaid Services would establish a panel of experts, to be known as a Radiology Benefits Managers (RBMs), to assist in evaluating and adjusting payment for potentially overvalued imaging services ordered by physicians with their own imaging facilities.

The other strategy, which is more controversial, would be to reduce reimbursement. This would be accomplished by restructuring the payment formula to lower the equipment value factor that is part of the equation. The current payment formula is based on average imaging device operation of 25 hours weekly. The MedPAC report contended that practice-based imaging facilities actually operate on average 45 hours, or 90% of the time the practice is open for business.

Factoring in the higher percentage would reduce reimbursement for the practice expense for costly imaging services. The report suggested that the higher reimbursement for equipment is an incentive for physicians to purchase equipment. “Once providers purchase machines, they have an incentive to use them as frequently as possible,” noted the authors of the MedPAC report. They also wrote that doctors’ ability to self-refer patients to imaging facilities owned by their medical practice is a “major spending driver.”

CMS New Proposals

Other reasons for increased utilization are physicians ordering scans to defend themselves from malpractice suits, direct-to-consumer advertising, and a shift in device use from Medicare Part A [hospitals] to Part B [physician services].

The report noted that annual payouts for advanced-imaging tests rose from $3 billion to $7.6 billion from 2000 to 2006. MedPAC acknowledges that part of the rise in costs is due to increasingly sophisticated and costly technology for diagnosis and treatment of complex conditions. Authors of the report made a case that these services are overused and overpriced in some markets, citing the Dartmouth Atlas Project. This study documented drastic regional differences in spending per Medicare beneficiary for in-office imaging. For example, in 2006, such spending ranged from $62 in Vermont to $472 in Miami.

Professional groups oppose both proposals, but admit that high costs for imaging services make them a target for cuts. The Medical Imaging and Technology Alliance (MITA) claims that MedPAC’s report is flawed. “Based on insufficient data and analysis, the MedPAC report makes recommendations that will lead to dramatic Medicare cuts for imaging and have dire consequences for the diagnosis, treatment and care of patients,” said Ilyse Schuman, MITA Managing Director.

The American College of Radiology (ACR) challenges CMS’ assumption that radiology services are overused and the idea that imaging facilities operate during 90% of a practice’s business hours. ACR contends the percentage is actually about 48% in rural practices and approximately 56% in non-rural practices.

The organization noted that the Deficit Reduction Act of 2005 already imposed significant cuts in fees to imaging providers and further cuts could drive providers away from serving Medicare patients at all.

Although high-cost radiology services are the main target for cuts to physician services in this round of proposed cuts, once CMS puts a preauthorization function in place, it could expand it to other high-cost services, including expensive laboratory tests. This might ensnare proprietary molecular assays that cost payers thousands of dollars per test. Further, the need to slash spending for existing health services in order to divert the money to healthcare reform programs may be another reason that pre-authorization requirements are established for certain types of clinical laboratory tests.

Related Information:

Feds Target Radiology Imaging Payment Cuts

UPDATE: Senate Finance Committee Releases Policy Options for Financing Comprehensive Health Care Reform

MITA Urges CMS to Reject MedPAC Recommendation on Medical Imaging (PDF)