While long-term forecasts are always subject to error in a changing climate, today’s market trends can provide strong, reliable indications of what to expect in the future. For outpatient imaging over the coming five years, ten ongoing trends, in particular, can be predicted based on the changes being seen in imaging now.
Trend one: Demand for outpatient imaging, and the resulting procedural volumes, will continue to increase.
Medicare outpatient imaging has increased for all modalities, exhibiting growth of more than 60% in some areas. CT and MRI volume growth have been exceptional, increasing at a rate of about 200% over the past 10 years. Economic factors have played a central role in imaging growth, with radiologists hoping to create a new revenue stream in the technical component, specialists attempting to augment their practices, and entrepreneurs trying to secure a historically strong return on investment.
Other influences have driven growth in imaging as well. They include new technology and expanding applications for it, the aging of the population, reimbursement expansion, increased consumerism, and the practice of defensive medicine.
Outpatient volumes will continue to increase as new applications add to demand. Among the volume-increasing applications and technologies are CT angiography, fusion imaging, 4D ultrasound, breast MRI, 3T MRI, functional imaging, molecular imaging, stand-up MRI, and dual-source CT.
Trend two: Payors (both governmental and private) will become more organized in managing imaging costs aggressively.
Health plan costs for imaging are rising 18% to 20% annually, and imaging now accounts for 10% of the total health care dollar. Advanced modalities are driving disproportionate cost increases. In response, CMS launched an imaging utilization management pilot program in November 2007 in an effort to control costs.
Some commercial payors are banking on radiology benefit management companies to control their costs, while other payors are focusing on network management. For example, one major insurer will soon restrict its outpatient imaging provider network to accredited facilities; another now limits its provider network to facilities that offer at least five modalities, have an on-site radiologist, and offer extended hours.
Trend three: Medicare will maintain a level playing field across all sites of service.
Favorable Medicare reimbursement contributed to rapid growth in freestanding centers, with over 85% of the increase in facilities occurring between 1997 and 2008. Growth in new centers has slowed in recent years, however. One major reason for the slowdown is that many markets have become saturated. For example, the US median is 1.6 centers per 100,000 people, but some cities (such as Punta Gorda, Fla, and Ocean City, NJ) have more than seven centers per 100,000 people.
The Deficit Reduction Act (DRA) has eliminated the favorable Medicare reimbursement environment for freestanding centers, creating major payment reductions from 2006 to 2007 (including a 35% reduction in technical-component payments for some IDTFs). For 2008, Medicare payments are equivalent for all imaging settings.
At the same time, hospitals have become more savvy competitors in outpatient imaging and have acted to limit market opportunities for IDTFs. Some have opened competing provider-based freestanding centers, and others have partnered with radiology groups to offer a freestanding option.
Trend four: Hospital provider-based centers will become more common in the short term.
Hospital commercial contracts typically yield higher reimbursement. To date, only a handful of commercial payors have followed Medicare’s lead in reducing reimbursement for freestanding centers; nonetheless, hospitals often have the market clout needed to negotiate preferred reimbursement rates for outpatient imaging.
In some cases, HMO/PPO provider-based payments can be made at as much as twice the per-procedure rate paid to IDTFs. Since all-payor weighted reimbursement is higher at most hospitals, imaging center operators will naturally try to tap into these better rates.
Trend five: Eventually, the gap between provider-based and freestanding reimbursement will close.
Commercial payors will not continue to pay a premium for provider-based imaging services that are operated exactly like freestanding centers. With increasing demand for outpatient imaging, cost pressure on payors will force them to revisit payment