NEMA warns: Fed formula could cause misinterpretation of medical imaging growth

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NEMA (the National Electrical Manufacturers Association) today warned that data in the annual CMS estimate of increases in health expenditures under the federal government's Sustainable Growth Rate formula could be misinterpreted. The organization fears that it looks like overall Medicare spending on medical imaging is climbing at a rate faster than it actually is.

The problem stems from the SGR formula that calculates increases in imaging services done in physician offices and freestanding imaging centers. Yet, the formula does not take into account offsetting reductions when those services replace imaging or other medical procedures formerly done in the hospital outpatient setting, according to NEMA.

"The shift of imaging care from hospital outpatient departments to physician offices or freestanding imaging centers inflates SGR-covered spending, independent of the actual increase in total Medicare imaging spending," said Bob Britain, vice president of medical products, NEMA, in comments in reference to the April 7, 2006, letter from CMS Director of Medicare Management Herb Kuhn to MedPAC chairman Glenn Hackbarth.

"Therefore, if you look only at SGR-related imaging spending and ignore the shift of imaging out of the hospital, you get an artificially inflated picture of overall imaging growth in Medicare," added Britain.
 
Britain cited a 2005 NEMA study on SGR-related imaging spending in support of his position. The study found that imaging services grew 4.6 percent per year faster than other services that were included in the SGR mechanism. Yet, it concluded that at least 2.6 percent of that was due entirely to "site-of-service" shift in imaging services from hospital outpatient departments to physician offices and other non-hospital settings.  Considering this change, imaging services grew about 2 percent per year faster than other services covered by Medicare's SGR.

With regard to the latest data, Britain indicates that even if imaging were totally excluded from the SGR formula, the overall SGR picture and resulting cuts would not have changed at all. The reason is that overall spending growth – separate from imaging spending – is well beyond the SGR target. Therefore imaging could be totally eliminated from SGR and the automatic cutbacks in the formula would have happened regardless.

CMS' accounting of the use of imaging also fails to take into account any savings that the Medicare program may derive from the use of that imaging, said Britain. This is important because there are many instances in which the use of imaging is offsetting other costs, he said. 

As an example, ultrasound imaging in clinical practice allows breast surgeons to perform a minimally invasive breast biopsy rather than an open, hospital-based biopsy.  The clinical outcome is equally definitive and the minimally invasive approach less costly. If one simply counts the number of imaging studies performed, the substitution from open, hospital-based biopsy to minimally invasive, office-based biopsy looks like an increase of two imaging studies. However, if one looks at the total cost of care, this substitution provides a savings of approximately $1,000 per case, NEMA said.