A Take on the Radiology Community

James Polfreman

On December 19, 2007, Congress passed the final version of the health care budget and spared medical imaging from any significant cuts for a further period of 6 months. The original bill called for a 10.1% reduction in Medicare physician reimbursement scheduled to start in 2008. The law, known as the Medicare, Medicaid, and State Children's Health Insurance Program (SCHIP) Extension Act of 2007, replaces the proposed physician pay cut with a lesser percentage of 0.5% for the first 6 months of 2008. The issue of cuts will continue to be addressed by Congress with the next cut proposed for July 1.

Medicare payments to physicians are modified annually using the SGR. Because of inherent flaws in its methodology, the SGR-mandated physician fee cuts in recent years have been averted by quick congressional intervention. However, absent long-term congressional action, the SGR will continue to mandate more fee cuts for the foreseeable future. It is estimated that payments are expected to drop by more than 40% by 2015.

Each year Congress steps in and overrides the system by instructing Medicare not to cut the reimbursement rates, and as a consequence of this action, the amount that doctors get paid remains constant or increases a little. Unfortunately, when Congress overrides the law, it doesn't address the fixes needed in the system or pay off the deficit, which is now so large it would require nearly $200 billion to pay off the backlog. According to the American College of Radiology (ACR), putting off the SGR cuts without reforming the system means that further cuts to the technical component of imaging will most likely be under consideration this year.

According to Pam Kassing, Senior Director of Economics and Health Policy for the ACR, Reston, Va, the 10.1% cut that was originally proposed was particularly high and highlights the increased use of medical imaging, as cuts are usually enforced when real growth outstrips projected growth. Over the past 5 years, the rate cuts have been trending around 4.5% to 5%. The total expenditures keep increasing as a consequence of providers performing increasing numbers of procedures in response to medical need.

This trend of imposing multiple cuts, while disturbing, highlights the government's attempt to stave off the inevitable. Medicare is going bust, and areas of medicine with rapid growth, like imaging, will continue to remain in the spotlight until such time as costs can be brought under control. Economics will prevail, and despite Congress' intervention, further cuts are inevitable. Furthermore, an aging, more educated population and technological advances in medical imaging will naturally cause the science to continue to outstrip many other areas of medicine.

It is interesting to note that cuts are continually targeting the nonhospital providers, namely physicians who provide the services in their offices and the privately held imaging centers usually classified as independent diagnostic testing facilities (IDTFs). The Deficit Reduction Act (DRA) of 2005, the House bill reducing the technical reimbursement for contiguous body parts, and the recently passed Medicare Physician Fee Schedule Act of 2005 (MPFS), which includes the anti-markup provision and prohibits leasing of shared time on IDTF scanners, all highlight this phenomenon. On the HOPPS side, CMS estimates that hospitals will receive an overall average increase of 3.8% in Medicare payments for outpatient services in calendar year 2008.

CMS has postponed making a final decision on whether to change the status quo for physician self-referral of imaging services in the Medicare Physician Fee Schedule. CMS has also decided to defer a finding on the so-called "in-office ancillary service exception" until finalization of the anti-self-referral Stark II law—this exception allows physicians to legally self-refer patients for imaging in their own offices and bill Medicare under their group practice number under certain restricted conditions. If the past is any indication of the future, expect to see this law being redefined in the near future.

We are likely to see further cuts (in the region of 5%) in Medicare physician reimbursement in July of this year, and there will be renewed focus on the self-referral laws. As Medicare rates are cut in imaging, managed care rates will follow suit, the net effect of which is that it will make it almost impossible for nonhospital providers to remain profitable even with increasing volumes. Free-standing providers will be looking to consolidate or partner with hospital providers in order to survive and take advantage of the higher reimbursements.

The only hope for delaying the trend in rate cuts is that this is an election year and lawmakers will be cautioned against potentially upsetting the electorate in what will likely be a tight race.

James Polfreman is CEO, outpatient imaging division, of Memorial Hermann Hospital System, Houston, and a member of the Imaging Economics editorial advisory board. For more information, contact .