Congress Slashes Billions from Imaging Fees; Centers Plan for Cuts in Staff, Service, Acces

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WASHINGTON, DC — When the House narrowly approved the Senate version of the 2006 Federal budget on February 1, radiologists, radiation oncologists, and other physicians avoided the across-the-board 4.4% cut to Medicare fee schedules mandated by the sustainable growth rate formula built into the program. However, to help make up the $7.3 billion that not instituting this cut would cost, the Congressional budget bill also referred to as the Deficit Reduction Acthit the imaging industry with payment reductions that the Congressional Budget Office says will total around $2.8 billion over 5 years and the American College of Radiology (ACR) says will total around $6 billion over 5 years.

The cuts come primarily through a reduction in payments for each service to the lesser of either the Hospital Outpatient Prospective Payment System (HOPPS) or the Medicare Physician Fee Schedule (MPFS) rates and a reduction on payments of additional scans performed on contiguous body parts in the same session of 25% for 2006 and 50% for 2007 and beyond.

A small ray of hope was cast after it was discovered that the version of the budget President Bush signed into law on February 8 contained the wrong text for a provision about home oxygen. This meant that both the House and Senate would need to do a technical correction to avoid the law becoming invalid. The Senate acted but, as this column was being posted, Representatives opposed to the budget had an opportunity to block the House technical correction and thereby force another vote on the budget. Since the budget had passed by only two votes in the House, a new vote could overturn it.

'I don't want to predict [what the outcome of the House passing the budget will be], because I never would have predicted Congress would have done what it did, but we have commitments from the Republican Congresspersons in positions of responsibility with regard to this that they will work with us toward a better solution in achieving savings in imaging than that which is scheduled to go into effect next January," said Alan Kaye, MD, radiology chair of Bridgeport Hospital in Connecticut, and one of those who had worked hard to sway Republican representatives to join the Democrats in voting against the bill.

Finding extra dollars in Washington in 2006 will be challenging, however, The day after the House voted to approve the Deficit Reduction Act, the White House said it would seek about $120 billion in additional financing to pay for military operations in Iraq and Afghanistan through 2006 – more than three times what was saved in the deficit reduction act – and according to the New York Times, the Bush administration plans to cut $30 billion from Medicare in next year’s budget.

Early Effects

While radiology group owners and managers also caution that it is still somewhat premature to forecast what the final outcome of the payment reductions may be, most are already taking a cautious approach to expansion plans, new capital equipment expenditures, and even hiring in preparation for a sizable reduction in revenue. “We have sort of hit the pause button,” said Robert Baumgartner, CEO of Center for Diagnostic Imaging, a Minneapolis, Minn-based group of more than 30 freestanding outpatient imaging centers spread across eight states.

How the language in the bill is implemented and how the private insurance industry—widely predicted to follow Medicare’s lead and institute its own payment cuts—reacts will be key to the future outlook for outpatient imaging centers. However, Baumgartner tentatively predicted that it could lead to some industry consolidation as highly leveraged providers become unable to keep up with their debt and go under. This, in turn, may also lead to more competitive new equipment pricing as more quality used equipment enters the market. “We would probably not order any new equipment right now and see what happens to pricing,” he said.

Lower equipment pricing and a reduced demand for advanced equipment, such as 64-slice CT scanners, could also put a damper on research and development, cautions the ACR and some imaging center owners. Austin Radiological Associates, a radiology group that owns 14 imaging centers in the Austin, Tex, area, recently purchased $9 million worth of new equipment, including a 64-slice CT scanner and several 16-slice CT scanners to replace older 4-slice CT machines. But CEO Doyle Rabe says he would probably not have made that decision today.

“We have competitors