Effects of the Most Recent Reimbursement Cuts to Diagnostic Imaging

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 - Eric Heath
Eric Heath, Senior Analyst, VMG Health

The ever changing landscape of outpatient diagnostic imaging is compelling operators to have a keen understanding of market conditions in order to appropriately assess the potential return on investment on capital investments to upgrade or replace major imaging equipment.

The American Taxpayer Relief Act of 2012 (ATRA) was passed by the United States Congress on January 1, 2013, and signed into law on January 2, 2013, by President Barack Obama. ATRA was passed by Congress in order to avoid the fiscal cliff by addressing the expiration of certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. A component of the ATRA addresses reimbursement in outpatient imaging services and increases the equipment utilization rate for assets costing over $1 million from 75 percent to 90 percent (namely CT and MRI). The equipment utilization rate—defined as the amount of time equipment is utilized during a 50 hour work week—is part of the formula that calculates expenses reimbursed under Medicare: The higher the equipment utilization rate, the lower the technical component of Medicare reimbursement, as overhead costs are spread across hours of utilization.

Imaging services are composed of a technical component and a professional component. The global rate is the combination of the technical and professional components. The technical component is related to reimbursement for the imaging equipment and the technician performing the scan. The professional component is related to the reimbursement for the interpretation of the results of the scan. Imaging centers may elect to either bill globally for imaging services and the remit payment for professional reads or bill the technical component and allow the radiologists to bill the professional component separately.

The equipment utilization rate increase went into effect on January 1, 2014. The equipment utilization rate update only applies to providers paid under the Medicare Physician Fee Schedule, which includes physician in-office imaging equipment and freestanding imaging centers.

In order to estimate the impact on Medicare reimbursement in 2014, we utilized the top current procedural terminology (CPT) codes based on our experience for Magnetic Resonance Imaging (MRI), Computed Tomography (CT), Mammography, Dual-energy X-Ray Absorptiometry (DEXA), Diagnostic X-Ray and Ultrasound. We then calculated the average percentage change from the 2013 National Medicare Physician Fee Schedule to the 2014 National Medicare Physician Fee Schedule as shown in the table below:

While the actual impact of the 2014 MPFS will vary for providers based on differing procedure mixes and locality specific Medicare Physician Fee Schedules, the table provides a high level view of what providers might expect in 2014. As previously mentioned, MRI and CT reimbursement is expected to be the most negatively impacted as a result of the change in the equipment utilization rate from 75 percent in 2013 to 90 percent in 2014. The professional component of the global rate for each modality received an increase in Medicare reimbursement on average while with the exception of Ultrasound; the technical component received a decrease.

Please see the top ten most utilized CPT codes for MRI based on our experience detailed in the table below:

Utilizing the top ten MRI CPT codes, the median percentage change for the global rate is (29.9) percent while the median percentage change for the technical and professional components are (37.3) percent and 5.3 percent, respectively. The impact varies depend on the CPT code. Based on the sample above, CPT code 70551 (MRI Brain w/o dye) was the most affected by the increase in the equipment utilization rate in the 2014 National Medicare Physician Fee Schedule with a (49.1) percent change from the 2013 National Medicare Physician Fee Schedule.

Utilizing the top ten CPT CPT codes, the median percentage change for the global rate is (11.6) percent while the median percentage changes for the technical and professional components are (16.2) percent and 5.3 percent respectively. The impact varies depend on the CPT code. Based on the sample above, CPT code 70450 (CT head/brain w/o dye) was the most affected by the increase in the equipment utilization rate in the 2014 National Medicare Physician Fee Schedule with a (35.2) percent change from the 2013 National Medicare Physician Fee Schedule.

Based on our