Study: Under DRA, many imaging procedures would lose money

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Almost all of the imaging procedures (90 percent) targeted by the Deficit Reduction Act of 2005 (DRA) would be cut so severely that physicians and imaging centers would have to perform them at a loss, according to a study by The Moran Company. The study was commissioned by the Access to Medical Imaging Coalition (AMIC), a consortium of providers, physicians, patients, and manufacturers.

Under current law, Centers for Medicare & Medicaid Services (CMS) pays for diagnostic imaging procedures using two main settings outside inpatient services. One is free-standing imaging offices, and the other lies in outpatient hospital departments, said Don Moran, president, the Moran Company, who spoke Tuesday during a phone briefing regarding the study. These two settings have different payment methodologies and different payment rates for different procedures. The DRA adopts a policy that limited the reimbursement in the office to the lesser of the office payment rate or to the payment rate that would apply in the outpatient hospital. All in all, the DRA will have a concentrated impact on a subset of imaging procedures and results in a fairly substantial cut – not across-the-board cut – of 30 percent to 70 percent in a variety of individual procedures, said Moran.

Looking at 2004 payment rate data, Moran said, his group found that there has been no fundamental mismatch between the payment rates at the two different settings. “There is also no rationale for this policy in terms of cost disparities between what physicians get paid and what it costs for them to perform the procedures,” he added.

The end result of the policy, Moran stated, “is that rather than balancing payments between office setting and the outpatient hospital, once implemented we estimate that payments in the office setting will be between 16 percent and 18 percent lower than they are in a hospital setting.”

AMIC executive director Tim Trysla said that the report confirms many suspicions regarding the impact of the DRA. “These cuts are extreme, and they will unquestionably change how, where, and if Medicare patients get the imaging services they need,” Trysla said. “The DRA cuts overshoot the target and directly hit procedures that Medicare patients use all the time — for heart disease, back pain, tumors, and artery problems.”

“You cannot cut MRI of the brain by 49 percent, ultrasound for prostate cancer by 72 percent, or CT for abdominal aortic aneurysms by 52 percent without affecting patients,” added Trysla.

The Moran report used Medicare claims data and 2006 payment rates from CMS to make cross-site spending comparisons and to assess the DRA reductions in relation to the costs of performing the procedures.

The study made the following central discoveries:
  • As many as 126 (87 percent) imaging procedures affected by cuts would be paid below the estimated cost of performing the procedures in the physician office setting;
  • Aggregate Medicare payment for imaging services in physician offices and imaging centers would fall 16 percent to 18 percent below aggregate payment for comparable services at hospital outpatient facilities; and
  • Spending reductions brought about by the DRA would be concentrated on a limited number of high-volume procedures used widely by Medicare patients, such as MRIs, nuclear imaging for heart problems, ultrasound scans of leg arteries or bypass grafts, and bone density studies.
Not everyone is opposed to the DRA cuts. Some feel that the changes would go a long way to providing cost control that has been much needed as a result of unnecessary imaging procedures. In heated comments during DRA-related Congressional hearings in July, John Donahue, chief executive of radiology-benefits-management company National Imaging Associates, described what he called “entrepreneurial zeal, instead of clinical appropriateness” that was provoking an overall increase in costs.

However, following the hearings, legislation was put forward in August by U.S. Senators Gordon Smith (R-OR) and John D. Rockefeller (D-WV) called the Access to Medicare Imaging Act of 2006 bill (S 3795), which seeks to provide a two-year moratorium to delay the estimated $2.8 billion in Medicare cuts for the imaging services targeted by the DRA. The bill currently awaits review by the Senate Committee on Finance.

The complete Moran report is available at: