As anyone who has been around medical imaging for any amount of time can tell you, the latest headwind is the same as it’s seemingly always been: reimbursement cuts. While this comes as no surprise, the magnitude of cuts and actual effect it will have on the imaging industry in the foreseeable future is the subject of much debate within the industry. To be sure, 2014 promises to be another year of soul searching as imaging operators, especially those more susceptible to Medicare reimbursement risks, struggle to offset fairly drastic cuts in reimbursement that are happening in 2014.
Figure 1 includes a small sample of common CPT codes with corresponding 2013 and 2014 Medicare Physician Fee Schedule (“MPFS”) reimbursement, as reported by the American College of Radiology. This data reflects the technical component only, and includes all the known impacts to reimbursement. Based on our review of this information, approximately 483 CPT codes are receiving less technical reimbursement in 2014 than in 2013, while 64 CPT codes are receiving a higher level of reimbursement.
Medicare reimbursement under the Hospital Outpatient Prospective Payment System (“HOPPS”) in 2014 continues to be impacted as well, as shown in Figure 2 (source: The Advisory Board company). Many HOPPS payments had already been reduced in prior years (e.g. 25% reimbursement decrease for APC 0331 in 2013).
Declining HOPPS imaging reimbursement should come as no surprise, as the Medicare Payment Advisory Commission (“MedPac”) has repeatedly recommended to Congress that reimbursement for outpatient services should be aligned or equalized across the various outpatient settings. The declining HOPPS payment trend, and it’s impact, will be interesting to follow, as overall imaging equipment reinvestment has been waning in recent years. Continued decreases in reimbursement should be an additional disincentive for hospitals to reinvest and replace expensive imaging equipment, unless imaging equipment prices come down.
The rationale behind the continued declines in reimbursement from Medicare is believed to be a reaction to the phenomenal growth in imaging services since 2000. Figure 3 presents the growth in volume of physician fee-schedule services from 2000 to 2011, and was taken from MedPac’s Data Book published June 2013.
Based on this information, imaging volume increased 85% from 2000 to 2009. Evaluation and management volumes increased 32% over this same period. From 2009 to 2011, imaging volumes declined 4% annually on average. In addition, Medicare spending growth for advanced imaging services declined on a compounded annual basis from 2005 to 2007 and 2007 to 2011 by 3.4% and 2.2%, respectively [i]. Per beneficiary, Medicare payments to physicians for imaging services decreased 10.3% from $319 in 2008 to $286 in 2010 [ii]. Clearly, the past several years of pressure on imaging services has begun to impact imaging volumes and Medicare expenditures for those services.
Medicare is only part of the story. Other commercial and managed care payers maintain their own fee schedules, some of which are tied to Medicare rates, whether current or from prior years. The downstream effect of Medicare reimbursement changes today may or may not have implications for any particular imaging center over the next several years.
The question remains, how will the industry be impacted by these trends? Depending on who is asking, the answer to that may be positive or negative. The imaging industry is comprised of a wide array of centers and operators (physicians, hospitals, and management companies), ranging from limited-modality, single-site centers to larger multi-site chains with a broad modality mix. While the implication for Medicare reimbursement to the industry is clear, opinions regarding the impact to individual industry participants is not. A look back at the industry growth over the past several years is helpful. Figure 4 presents the total number of freestanding imaging centers versus affiliated imaging centers, as published by the Radiology Business Journal, as