Report: Proposed CMS adjustments could trigger bigger hit than DRA

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The Centers for Medicare & Medicaid Services (CMS) has proposed adjustments to its reimbursement formula for the technical component of procedures performed at freestanding imaging centers and private physician offices. An analysis from market research firm 3d Health said that these changes will have an even larger reduction than those experienced with the Deficit Reduction Act of 2005 (DRA).

As the firm noted, it has only been a few years since Medicare reimbursement for imaging studies performed outside hospitals (paid under the Medicare Physician Fee Schedule) was reduced by the DRA. While the DRA reduced imaging reimbursement on a per-unit-of-service basis, overall utilization has continued to climb, according to 3d, especially among physicians with imaging equipment in their offices.

Under the proposed 2010 Medicare Physician Fee Schedule, published July 13, technical component reimbursement to independent diagnostic testing facilities (IDTF) or physician offices is expected to be reduced by 26 percent overall; however, the impact varies by modality:

  • DEXA: 43 percent reduction;
  • CT: 38 percent reduction;
  • Nuclear cardiology: 32 percent reduction;
  • MRI: 31 percent reduction;
  • General radiology: 14 percent reduction;
  • Nuclear medicine: 8 percent reduction;
  • Mammography: 7 percent reduction; and
  • Ultrasound: 4 percent reduction.

Similar to the DRA, Medicare imaging reimbursement to hospitals has been left alone for 2010. As a result, “the gap between hospital-based and freestanding reimbursement will continue to widen if the proposed Medicare Physician Fee Schedule cuts become final. Equally worrisome for IDTFs and physician practices is whether the commercial payers will follow CMS' lead, as many did after the DRA,” the report noted.

The Chicago-based 3d said that the proposed 2010 Medicare reimbursement per unit would be:

  • DEXA: Hospital-based, $70/Freestanding, $33;
  • CT: Hospital-based, $238/Freestanding, $152;
  • Nuclear cardiology: Hospital-based, $266/Freestanding, $106;
  • MRI: Hospital-based, $391/Freestanding, $277;
  • General radiology: Hospital-based, $71/Freestanding, $23;
  • Nuclear medicine: Hospital-based, $268/Freestanding, $186;
  • Mammography: Hospital-based, $43/Freestanding, $43; and
  • Ultrasound: Hospital-based, $81/Freestanding, $78.

CMS also is proposing to adjust the underlying methodology for relative value units (RVU) for 2010. In past years, CMS has used an assumption that the equipment is operated 50 percent of the time the practice is open (or 25 hours a week). The agency is proposing to update this input to an assumed 90 percent utilization (or 45 hours a week) for equipment that costs more than $1 million.

As a result, the practice expense RVUs related to these equipment costs—and the related reimbursement amounts—are reduced significantly, according to 3d.

Traditionally, the malpractice RVU split between the professional and technical components of imaging services was 14 percent professional and 86 percent technical. Yet, in the 2010 update, CMS is proposing to make various changes to the malpractice RVU formulas, resulting in a reimbursement shift that favors the professional component, the report said. The new RVUs result in reimbursement that is split 96 percent professional and 4 percent technical, further reducing the total technical reimbursement.

The report authors wrote that it “remains to be seen whether CMS will meet freestanding imaging providers and physicians halfway and update the final rule to include a 75 percent equipment utilization factor. However, even with this utilization factor change, freestanding providers will still face a projected decline of 19 percent across all modalities.”