CHAMP, Sustainable Growth Rate Reform, and Other Potential Payment-reduction Vehicles

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Today’s imaging market is substantially different from that of earlier years; payment is less secure, coverage for new technology is more difficult to obtain, and government and private oversight are increasing. After years of uninhibited growth and development, the imaging sector now faces unprecedented scrutiny that will probably change the way that imaging technologies are covered, paid for, and regulated.

While policymakers on both sides of the aisle have committed to health-reform goals, including quality improvement, sustainable growth, and empowering consumers, the federal and state budgetary forecasts have prompted focused efforts on managing cost and utilization for all health services, including—if not especially—imaging. With other health care sectors, such as physician services, facing significant Medicare payment cuts, there’s yet another reason for the deepening scrutiny of imaging: as a source of savings to fund other provider sectors’ demands for higher payment. Identifying offsets or cost savings is essential as legislators wrestle with an impending physician Medicare payment cliff, budgetary reconciliation processes, and rising entitlement spending. The federal budgetary environment increasingly requires every dollar of new spending to be offset by a reduction elsewhere.

Many key congressional and Medicare policy officials have already zeroed in on imaging services, arguing that the industry’s dramatic growth suggests overuse of services and the potential for trimming payments. The Deficit Reduction Act of 2005 levied $13 billion in cuts to medical imaging over three years, causing changes that are just beginning to reverberate throughout the industry. Policymakers continue to pursue savings through imaging reform, including provider certification, more aggressive oversight by government bodies, stricter technology assessments, and efficiency measurement.

A Case Study: Possible Reform Legislation

Until the fall of 2007, changes to imaging payment policies tended to proceed in piecemeal fashion. Last July, the House of Representatives introduced the Children’s Health and Medicare Protection Act of 2007 (CHAMP), the first of several efforts to expand the State Children’s Health Insurance Program (SCHIP). To help fund the SCHIP expansion, among other initiatives, the House bill sought radically to alter the way in which all physicians were held accountable for Medicare spending, and introduced accreditation and certification requirements. All told, the changes outlined in CHAMP could have cost the imaging industry an additional $400 million in cuts over five years, according to the AMA.1

Most notably, the House proposed reforming physician payments by replacing the sustainable growth rate targets—a mainstay of Medicare physician-payment policy—with newly defined specialty-specific expenditure targets. The proposed legislation would have capped Medicare outlays for each family of physician specialties, including radiology. Beginning in 2010, each of these families of specialties would have faced payment cuts if spending exceeded its specific target. Outlined in a March 2007 Medicare Payment Advisory Commission (MedPAC) report, this sector-specific payment methodology raised several potential problems for the imaging sector.

First, MedPAC predicted that imaging services could face up to a 6.5% negative payment adjustment, in the absence of restrictions on the size of such adjustments. Clearly, the prospect of formulaic reductions would pose a challenge to innovators and clinicians alike.

MedPAC also noted a salient design flaw in the payment scheme exclusive to imaging services. Although the proposed sector-specific expenditure targets aimed to link future payment increases to past spending totals, the imaging sector is unique in that the scheme would not have aligned incentives with behavior. While clinicians who provide imaging services contribute to the sector’s growth, the dominant drivers of imaging utilization are the practice patterns of referring physicians. Using expenditure targets for imaging to influence the behavior of referrers fails to link behavior to consequence.

In addition to proposing a fundamental change in the reimbursement landscape for physician services—with a deep structural misalignment for the imaging sector—CHAMP would have imposed new accreditation requirements on the industry. As suggested by MedPAC, long an advocate of imaging accreditation, the House bill would