The Diagnostic Imaging and Medicare Onion

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Christine Hughes - 24.92 Kb
Christine M. Hughes, an economist on the GE Healthcare Economics Team.
It comes as no surprise that diagnostic imaging has yet again attracted the attention of policymakers in Washington. Imaging has enjoyed exciting technological advances with corresponding breakthrough applications every decade since the 1970s. The ability to diagnose disease without invasive procedures is now a standard of care expected of physicians and their patients. And the value of imaging in the patient care chain is understood and acknowledged by physicians, but rarely quantified or articulated.

In an era of unprecedented budgetary pressures, Medicare is looking to “bend the cost curve” and imaging is on the short list for cost-cutting. Escalation of imaging expenditures is often cited by radiology benefit managers (RBMs) in their pursuit of Medicare contracts.

It comes as no surprise that diagnostic imaging has yet again attracted the attention of policymakers in Washington. Imaging has enjoyed exciting technological advances with corresponding breakthrough applications every decade since the 1970s. The ability to diagnosis disease without invasive procedures is now a standard of care expected of physicians and their patients. And the value of imaging in the patient care chain is understood and acknowledged by physicians, but rarely quantified or articulated.

In an era of unprecedented budgetary pressures, Medicare is looking to “bend the cost curve” and imaging is on the short list for cost-cutting. Escalation of imaging expenditures is often cited by radiology benefit managers (RBMs) in their pursuit of Medicare contracts.

A sophisticated and precise analysis of any Medicare expenditures category would consider the impact of baby boomers entering the Medicare program and analyze expenditures on a per Medicare beneficiary basis rather than on a lump sum basis. Another layer of the Imaging and Medicare Onion is the impact of the 2005 Deficit Reduction Act (DRA) on imaging expenditures by Medicare. By decreasing the reimbursement rates in imaging, the net effect is to reduce expenditures. 

However, a significant portion of the early (2000 to 2005) increases in Medicare charges ascribed to imaging could be due to the uptick in ways to use imaging that naturally occur during the early adoption phase of innovative imaging technologies, and subsequently level off as the use of the innovation stabilizes.

GE-Fig-1 - 29.56 Kb

Due to the impact of reimbursement reductions incorporated in the DRA, and current status of imaging technologies, it seems to be more reasonable to utilize the timeframe of 2005 to either 2009 or 2010 as a base period for any thoughtful analysis of imaging and Medicare expenditures shifts. Exhibit 1 illustrates the impact of the above-cited factors on Medicare imaging numbers. Between 2000 and 2005, advanced imaging grew at an annual rate of 14.3 percent.  However, since 2005, growth rates have declined steadily every year and across all advanced imaging modalities (Figure 1). And between 2008 and 2009, the volume of advanced imaging charges grew by only 1.4 percent on a per-capita basis in the Medicare program.

GE-Fig-1 - 29.56 Kb

This downward trajectory is particularly significant in the advanced imaging modalities of CT and MR when looking at changes in Medicare charges from 2009 to 2010. The annual growth rate for CT on a per capita basis is now -5.6 percent (Figure 2). MR per capita growth rates in Medicare charges parallel CT percentages at a -3.1 percent rate versus the 17.2 percent growth rate from 2000 to 2005. PET and nuclear medicine numbers cannot be adequately compared for the 2009 to 2010 period due to bundling of procedures by Medicare which would reflect an artificially more negative pattern in the PET and nuclear medicine modalities.

GE-Fig-1 - 29.56 Kb

Advanced imaging utilization in employer-provided health insurance mirrors the slowdowns seen in Medicare. In the most recent years, when data are available (2008 to 2009), the use of advanced imaging grew by only 1.3 percent (Figure 3). This reflects the slowdown in the use of advanced imaging that began in 2005, which validates the premise that advanced imaging may have leveled out on the technology adoption curve. Utilization of advanced imaging grew at an annual rate of 9.2 percent between 2002 and 2005, compared to only 1.3 percent per year over the 2008 to 2009 period. Usage of PET and nuclear medicine imaging dropped substantially from a 7.1 percent compounded growth rate in the 2002 to 2005 period to a -6.2 percent rate from 2008 to 2009.

Conclusion

Market corrections have already occurred in the diagnostic imaging sector and continue to occur. It is clear that the imaging boom being targeted in Washington is over. And further reductions in reimbursement could lead to access issues and create artificial barriers to quality care for patients. To present a true picture of diagnostic imaging’s impact in the debate in Washington, D.C., any analysis of Medicare expenditures should utilize a more sophisticated comparator of per beneficiary charges rather than gross charges and be based on the most recent data available.

This article is the first of a series. Ms. Hughes is an economist on the GE Healthcare Economics Team. She may be reached at christine.hughes@ge.com with questions or comments.