Imaging Reimbursement Reduced in Proposed Federal Budget

Steven Fox

February 16, 2012

February 16, 2012 — The Obama administration debuted its proposed budget earlier this week, and part of the plan calls for cuts in Medicare reimbursement for advanced imaging tests.

The proposal has been met with a blistering attack from the American College of Radiology (ACR).

In a statement released shortly after the budget proposals were announced, the ACR called the cuts "unsupported" and said that they threaten patient access to care and may actually push up Medicare costs in the long run.

Two main provisions in the proposed budget would affect imaging.

One would increase to 95% the assumed utilization rate for advanced diagnostic equipment such as magnetic resonance imaging (MRI), computed tomography (CT), and positron emission tomography.

The changes proposed in the budget would cut Medicare payments for advanced imaging procedures by about $820 million over the next 10 years, as reported by Medscape Medical News.

Some surveys suggest that imaging centers are using their MRIs and CTs more hours of the day than before. As the use of this type of expensive diagnostic equipment increases, the per treatment costs for purchasing, maintaining, and operating that equipment declines, making a reduction in payment appropriate. In other words, the higher the assumed utilization rate, the lower the Medicare reimbursement.

The other provision, aimed at reducing the number of unnecessary scans, would require physicians to get prior authorization before ordering expensive tests. The Medicare prior authorization program would be more or less modeled after programs that private insurers have increasingly plugged into their plans in recent years.

However, Bibb Allen Jr, MD, chairman of the ACR's Committee on Economics, told Medscape Medical News that cuts in reimbursement could block access to care and ultimately lead to higher costs.

"We think these proposals are a bad idea," said Dr. Allen, who is a diagnostic radiologist at Baptist Health System and Trinity Medical Center in Birmingham, Alabama. "We were able to show with data, back when a 75% utilization assumption was being considered, that even that was too high."

He said that surveys from imaging centers across the country, especially in rural areas, suggested that a 75% utilization assumption would lead to a curtailing of services, and therefore make it more difficult for seniors in those areas to get the scans they need. "And that could very well lead to missed diagnoses, complications in care, and expensive hospitalizations," he said.

Still, the Medicare Payment Advisory Commission (MedPAC) is pushing for higher utilization assumptions because of what it sees as the ballooning expenditures and unreasonably high pricing of imaging tests.

Uwe Reinhardt, PhD, an economist at Princeton University in New Jersey, shares that view. "By international standards, MRIs in the United States are extremely expensive," he told Medscape Medical News. "For example, Japan has many more MRI machines per capita than we have here in America. Yet an MRI there costs $200, whereas here they're $800 and up."

He added, "Imaging has been a thorn in the side of MedPAC for some time — at least a decade, I'd say. So I'm not surprised the administration would take this action." He did concede, however, that annual growth in imaging has abated somewhat since about 2004, a point that Dr. Allen emphasized several times.

Dr. Allen said that he thinks the claim that imaging is taking the lion's share of healthcare dollars "is way off base. As a percentage of total expenditures, Medicare is spending about the same amount on imaging as it spent as early as 2000," he said.

"Some of the impact of these reimbursements is not so easy to see just looking at the numbers," Dr. Allen said. "With reimbursements being reduced, a lot of imaging centers are having to postpone upgrades of their equipment, and that's very unfortunate."

He cited a national survey of 1000 voters conducted by the ACR. "We found that about 90% of Americans believe more cuts in imaging will cause medical problems to be missed. And 7 out of 10 people opposed further Medicare cuts in imaging."

Another economist, Stuart Altman, PhD, of Brandeis University in Waltham, Massachusetts, discounted the importance of the survey. "That's not science," he said. "There's no question that if you ask the average person in the street whether we should be using imaging to detect illness early, the answer's going to be yes," he said. "So I think the idea of conducting a poll of individual healthcare consumers isn't of much value."

He said that when it comes to Medicare issues, policymakers should be relying on informed opinions based on real data.

"These are complex issues, to be sure," said Dr. Altman. "There's no question that diagnostic imaging has its place. I think the general feeling is that we have created this really wonderful technology, but we're simply overusing it. We need to do these tests based on good evidence: whether the test is really needed, and whether the information we get will make a difference in how patients are managed," he said.

Dr. Reinhardt said he thinks it is unreasonable for imaging centers to push for higher reimbursements based on their machines not being use during all available hours. "They're saying they only use their machines 30% or maybe 50% of the time, and that because of that they should get a higher reimbursement so they can amortize the cost of the machines," he said.

"But what I think the administration is now saying is, 'If you have an MRI machine and you can't utilize it fully, you shouldn't have it,' " he said.

Dr. Reinhardt doubts that changes in reimbursement would lead to widespread closings of MRI centers in rural and suburban areas. "My hunch is that when the dust settles, those centers will still be there and will still be profitable."

But will higher assumed utilization rates put an unfair burden on rural MRI centers?

"It's possible," he said. But he added, "There are all sorts of rural and other geographic cost adjusters built into [Medicare] fee schedules, so you can always make these adjustments if, say, a rural MRI center has a legitimate reason for low traffic."

As to the new proposal for requiring prior authorization for procedures, Dr. Reinhardt said, "Medicare has always been accused by everyone for lowering prices but doing nothing to control volume. And here they're trying to control volume, the same way private insurers have been doing for years," he said. "It makes sense."

Dr. Altman agreed, pointing out that private insurers have been using some form of prior authorization for 40 years. "It's admittedly a cumbersome tool that often ends up being very bureaucratic," he said. Given rising healthcare costs, however, he sees few options, at least as long as the medical community is based primarily on fee-for-service arrangements.

"The most feasible alternative, I think, is to move toward bundled payments and capitation, and move away from fee-for-service," Dr. Altman said. "That way, the doctors themselves will be taking a hard look at whether a procedure is needed or not."

Dr. Altman said bundled payments or episode-based payments are a logical option. "You tell the delivery system itself, 'Okay. Here's a condition. You're going to get a fixed amount of money to manage that condition. You decide when you need to do these tests and when you don't.' "

Dr. Reinhardt agrees that it might make sense to shift Medicare away from fee-for-service to bundled payments for all the care being devoted to treatment of defined episodes of illness, or to capitation for chronic illness. "That idea's been suggested by a number of policy analysts. It's also been suggested by Medicare itself. But it would take a decade or more to get it implemented," he said.

For now, Dr. Reinhardt said he thinks the chances of getting imaging reimbursement changes through Congress are "very decent." He cited a couple of reasons.

"When the administration is defending the prior authorization provision, they can simply say, 'The private insurers have done this for years. Why can't we?' "

The second reason, Dr. Reinhardt said, is one of urgency. "We're a lot more desperate now than we were 10 years ago," he said. "Frankly, we are terribly desperate."

Dr. Altman and Dr. Reinhardt have disclosed no relevant financial relationships.

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