 John Buckhalter AGI Healthcare Group |  Richard Jensen Radiology Associates of Tarrant County |
As the Deficit Reduction Act (DRA) enters its second year amid ongoing challenges from physician and patient advocacy groups, anecdotal reports suggest that DRA limits on imaging’s technical component have led to the near or full collapse of many smaller imaging facilities.
Other physicians and CEOs report making hard choices, curtailing expansion and delaying equipment purchase.
“The overall impact on Medicare revenue from the DRA can range from zero to 50 percent, depending on the modality and particular mix of exams,” said John Buckhalter, vice-president of AGI Healthcare Group, a radiology-niche consulting firm in San Ramon, Calif. “PET, MR, CT and DEXA have been most affected, incurring reductions from 25 to 50 percent, with PET Medicare reductions in the 45 to 50 percent range. It’s certainly put a damper on opening new facilities and those already marginal may now have to merge, sell or simply close their doors.”
Advocacy Efforts Shift to Mitigating Effects
Having failed in strenuous efforts to keep the DRA’s imaging provisions from ever taking effect, groups like the American College of Radiology (ACR) and allied organizations are now working with Congressional supporters to obtain relief from the DRA’s estimated $13 billion, 3-year reimbursement cuts—cuts that targeted the technological component of outpatient imaging and, critics say, were rushed through Congress without debate.
Already shouldering DRA’s 2007 burden, physicians also face the largest Medicare payment cuts to date. The 2008 Centers for Medicare and Medicaid Services (CMS) Medicare Physician Fee Schedule (MPFS) includes an average 10.1 percent cut in its conversion factor.
Passage of bills before Congress seeking to curb the effects of the DRA on imaging is uncertain. Rep. Carolyn McCarthy, D-N.Y., introduced the Access to Medicare Imaging Act of 2007 last Feb. 28. The proposed legislation calls for a 2-year moratorium on the medical imaging reimbursement cuts included in the DRA and a Government Accountability Office impact study. The bill and its Senate counterpart remain in committee.
“Patients throughout the U.S. depend on medical imaging because it often detects critical illnesses at their most curable stage when they are less costly to treat,” said Rep. McCarthy, a nurse, addressing Congress on Sept. 24 to call for more co-sponsors. “Better, less invasive care often means easier recoveries and greater patient comfort are additional reasons why drastic cuts to medical imaging do not serve the patient well.”
ACR Board of Chancellors Chair Arl Van Moore Jr., M.D., said physicians must be realistic. “Unless a credible ‘pay-for’ can be found to provide monies to reverse the DRA, I would say the horses are out of the barn,” he said. The way to curb spiraling costs is not global reimbursement cuts but programs that encourage appropriate utilization and robust facility accreditation, said Dr. Moore.
“We believe there’s a fair amount you can save by doing the right test for the right reason, at the right time, with the right equipment, instead of what we have now,” he said.
Revenue Boom Put Imaging in Spotlight
Already a $100 billion industry, diagnostic imaging is the nation’s fastest-growing physician service expenditure. Its annual growth is estimated at 9 percent, about triple that of other physician services. New technology development has flourished on this growth, but analysts report that skyrocketing costs may overshadow R&D while creating serious concerns about appropriate utilization, self-referral and provider qualifications.
Since 2000, nonradiologists have been the main players responsible for the rise of outpatient imaging, according to David C. Levin, M.D., of Philadelphia, who has studied the utilization issue extensively and reported corroborative findings at RSNA 2007. The former radiology chair at Thomas Jefferson University, Dr. Levin found that from 1999 to 2002, radiologists experienced a 12 percent growth rate in imaging, while nonradiologists accounted for twice that amount.
“Imaging was growing at a rate that [the Medicare Payment Advisory Commission, or MedPac] felt was unsustainable,” said William T. Thorwarth Jr., M.D., of Catawba Radiological Associates in Hickory, N.C., past-chair of the ACR Commission on Economics and ACR past-president. “That put imaging in the crosshairs of MedPac and Congress.” Dr. Thorwarth is a member of the RSNA Research & Education Foundation Board of Trustees.
Washington-based healthcare consultants The Moran Company reported in 2007 that the DRA would slash Medicare outpatient reimbursement by an average 18 percent, depending on specialty, practice and location. Moran found that 87 percent of affected services would be paid at rates less than cost, principally targeting a limited number of high-volume procedures used by Medicare patients. Senior access to the latest technologies and clinic viability became serious concerns, according to Moran.
Northern California PET Imaging Center in Sacramento has been particularly hard hit by the DRA. “We are weathering a $700 per scan decrease this year—I think that’s unprecedented for any other modality,” said CEO Ruth Tesar. “It’s a killer. It’s going to be extremely difficult and I don’t know how a lot of centers are going to make it.”
“The wild card is still what private payers do, as most centers do a significant portion of their business with private payers,” said Buckhalter. “We have clients who saw some of their private payers reduce contract rates soon after the DRA took effect.”
Arnold Vinstein, M.D., president of Tower Imaging Medical Group in Los Angeles, said he believes the DRA was inevitable. “It was a knee-jerk reaction,” Dr. Vinstein said. “Everybody was getting into the imaging business because they saw it as ‘easy money.’ They were thinking, ‘My God, What kind of business recovers its capital costs in the first year?’ That was the red flag.”
More Challenges Lie Ahead
2008 will be another rough year, said Dr. Vinstein, predicting that fewer physicians will apply for radiology residencies—the litmus test that conditions have struck bottom.
In Dallas-Fort Worth, Radiology Associates of Tarrant County experienced a $2.5 million cut due to DRA in its first year, said Chairman and President Richard Jensen, M.D. Dr. Jensen said his organization has more than offset the cut from volume growth, but the impact has led the practice to delay expansion, postpone equipment replacement and consider any future ventures much more carefully. He said he foresees an era when imaging is not a standalone venture but involves new approaches, possibly combined with pain management or other multispecialty centers.
A recent market analysis, “U.S. Markets for PACS 2007,” noted that while picture archiving and communication systems (PACS) can improve operational efficiency at imaging facilities, smaller clinics find them out of reach due to DRA-related cuts. PACS vendors are responding with new models tailored to these smaller facilities, the report noted.
Amid the general gloom, some see useful market changes and even distant advantages. “Tighter margins will allow imaging centers to focus on efficiency—smarter business people know how to run companies on tighter margins—coupled with quality care,” said Paul Duck, CEO of Florida Radiology Imaging in Orlando.
On Capitol Hill, “radiology is still in play for additional cuts,” said Cynthia Moran, ACR assistant executive director of government relations. She added, however, that there is also broad-based support for utilization control and Congress may soon adopt language for mandatory accreditation of advanced diagnostic imaging services.
“These are technologies that everyone wants access to and the technology is going to get better and better—more affordable and more effective,” Moran said. “It will be tragic if Congress goes at it with a meat axe,” taking the incentive for innovation out of the new technology, she added.
“There is receptivity in government to utilization tools that can provide some method to the madness out there, but I think we’re going to be on the hot seat for a while to come,” Moran said.
