Congress Blindsides Radiology, Votes to Cap PFS Technical Reimbursement at HOPPS Rates

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WASHINGTON, DC — Taking the imaging world by complete surprise, the Senate voted with the House on Wednesday, December 21, to equalize technical component reimbursement rates paid under the Physician Fee Schedule with those paid for under the Hospital Outpatient Prospective Payment System beginning in 2007, dealing the freestanding imaging center world an estimated $8.1 billion blow over 10 years. That figure includes the previously announced cuts for MRI and CT contiguous body part imaging: 25% in 2006 and a proposed additional 25% in 2007. The bill now returns to the House for a final vote because of a procedural change in the Senate The Senate was so evenly divided on the bill that Vice President Dick Cheney had to cast the deciding vote, 51-50, to pass the Deficit Reduction Act of 2005 devised behind closed doors over the weekend and passed by the House shortly after 6 AM Monday morning. “It ensures that payment rates for imaging services delivered in physician offices [and freestanding imaging centers] do not exceed the payment rate for identical services delivered in a hospital outpatient department,” said Ron Geigle, spokesman for the National Electrical Manufacturers Association, Rosslyn, Va. NEMA was the first to sound the alarm to the radiology community after the House passed the bill on Monday. The development was so sudden that as of Wednesday night, legions of lawyers in the employ of organized radiology, including the American College of Radiology (ACR) and the National Coalition for Quality Diagnostic Imaging Services (NCQDIS), were still scrutinizing S.1932 to fully understand the implications of the legislation. Access, however, was an initial concern. “This one-size-fits-all approach will have a disastrous effect on patient care, particularly in rural communities that do not have large hospitals convenient to them and rely predominantly on in-office imaging care.” said James P. Borgstede, MD, chair of the ACR Board of Chancellors. “The ACR has worked closely with Congress and other governmental bodies to educate our elected officials on sensible alternatives that will help rein in costs and improve quality of care.” “We think this will create a real patient access issue,” noted NEMA spokesman Geigle. “There will be movement if this holds. In effect, when you see reimbursement drop 50%, you can expect that a physician or IDTF will ask: ‘Is it worth it?’” Geigle posed the example of ultrasound guidance for the minimally invasive alternative to surgical breast biopsy. Reimbursement for the technical component of CPT 76942, ultrasonic guidance for needle placement, is $110.66 in the freestanding setting, but $62.25 under HOPPS. Radiology bore the brunt of the total $28.1 billion in Medicare savings the Congressional Budget Office estimates the legislation will achieve. “The cuts to imaging represent almost a third of the sustained growth rate-related cuts,” noted NEMA spokesman David Shoultz, Arlington, Va. “It is astronomically disproportionate in a bad way.” The $8.1 billion in savings attributed to the imaging cuts incorporate the 25% discount for scans on contiguous body parts in 2006, and a proposed additional 25% cut in 2007. The ACR and NEMA both vowed to attempt to dissuade Congress from enacting the legislation. Dealing With the Body Part Debit Meanwhile, for owners of imaging centers the Medicare reduction to the technical component for multiple MR and CT scans on contiguous body parts will sting. Steve Duvoisin, CEO of Duvoisin and Associates, Spokane, Wash, a firm that manages primarily radiological practices in the Northwest, is preparing for the 25% cut—scheduled to go into effect January 1 for scans billed under the Physician Fee Schedule—by taking a careful look at the expenditures for new equipment in his 2006 budgets. The 25% cut in contiguous body parts currently is set to become 50% in 2007. Because the number of scans done per year theoretically will not decrease, reducing staff is not an option for Duvoisin’s centers. So future capital expenditure is the only place to make up the $500,000 per year he figures the contiguous body part debit may cost his practices. In the analysis of John Buckhalter, vice president of AGI Healthcare Group, San Ramon, Calif, the reduction for CT would impact an average radiology center with a 1.5-3% revenue reduction, dependent on the type of scans done, how they are being done, and what percentage are paid for by Medicare. “It is very hard to make a single pronouncement,” Buckhalter said. According to Buckhalter, it would not have enough of an effect on business to warrant a change in strategy. But Duvoisin asserts that even a single-digit reduction in revenue can be of significant concern for a big radiology group. "For us even a 3 or 4% decrease can be significant with the amount of CT and MRI volume that we do," Duvoisin said. Fortunately for radiology groups, there appears to be little support for the proposed 4.4% reduction in physician reimbursement: the Deficit Reduction Act calls for a one-year freeze on Medicare physician reimbursement, and Rep Pete Stark (D-Calif) introduced legislation that would give physicians a 1.5% increase in 2006 and 2007. The proposal protects beneficiaries from any premium increases resulting from the reimbursement increase. The bill would also charge the Medicare Payment Advisory Commission (MedPAC) with devising an alternative to the sustainable growth rate formula that currently hamstrings physician reimbursement policy. While the cuts for scans on contiguous body parts were not good news, some were breathing a sigh of relief. The body part debit is mild in comparison to CMS proposals for across-the-board cuts. And by being straight with CMS about the fact that there are savings in multiple scans on contiguous body parts in the same session, the industry has hopefully bought some credibility and influence with Medicare administrators, said Cherrill Farnsworth, the executive director of the NCQDIS, which represents outpatient diagnostic imaging centers and departments throughout the United States. “We cannot ask CMS and MedPAC to listen to us on reimbursement issues that are so important to us, like no across-the-board cuts, without also offering what we know is fair,” Farnsworth said. When manufacturers promote devices that reduce the time needed for additional scans down to seconds and investors put their money into radiology, Medicare administrators notice, adds Farnsworth. “They don’t live in a vacuum and they are very aware of this technology,” Farnsworth says. While Medicare originally proposed to pay the technical component of one scan at 100% and any additional scans done at the same time at 50%, industry advocates, including the ACR, successfully lobbied for a 25% cut applicable only to scans paid under the physician fee schedule and not under the newer HOPPS. This buys time to examine if some of the possible savings are already accounted for in the system. This is particularly true for HOPPS, which is designed to base its payments upon a hospital’s costs and not a fixed fee schedule, said Pamela J. Kassing, senior director of economics and health policy for the ACR. “If there are economies, the hospitals should be adjusting their costs for lower costs when that happens,” she said. “So an additional reduction wouldn’t be fair.” Another question to answer is whether a 50% cut should apply equally to all families of diagnostic imaging services. For example should the cuts be greater for CT and CTA imaging of contiguous scans in the chest, abdomen and pelvis area than for MRI and MRA procedures in the same area? “I think there are some cost savings, but to arbitrarily say it is half, I challenge them to come up with any logical explanation for that,” said Fred Gaschen, MBA, CHE, executive vice president or the radiology group Radiological Associates of Sacramento in California. “Show me the numbers.” Equipment maintenance and wear and tear is the same if you do two scans in one session or two scans in two separate sessions, Gaschen notes. “In a MRI, you may be looking more at a 15-20% [cost saving] and CT might be 20-25%,” he said. “I am glad they took ultrasound out because if there are any savings in ultrasound it may be only 1 or 2%. The first year implementation of 25% is still too high. What effect the cuts will have will depend on the business models of individual imaging centers and will vary from one practice to the next. “The impact depends on how much of the practice’s volume is in MR and CT and ultrasound, and then how many of those are done in multiple ways in the same session,” Kassing said. “Most of the radiology practices diversify, so they tend to offer a full menu of radiology services, and in that case the impact is less. For other ownerships that are just MR centers or just CT centers the impact will obviously be bigger.” CMS has announced its intention to gather cost data in 2006 before increasing the reduction in reimbursement for scans on contiguous body parts to 50%. It has also stated that its 50% cut proposal was based on professionally accepted data and was not related to the fact that there is a 50% reduction on multiple surgical procedures. If passed as currently written, however, the Deficit Reduction Act of 2005 could make the cuts a foregone conclusion.