Prepare for the financial impact of the 2005 Deficit Reduction Act

The bill caps payments on imaging and computer-assisted imaging services. It limits reimbursement for the technical—as opposed to the professional, or interpretation—portion of the imaging service.

Under the new model, all physician office and independent diagnostic testing facility technical component payments fall to the lesser of Medicare physician fee schedule or into the ambulatory payment classification schedule for 2007, says RACRI advisor Thomas W. Greeson, Esq., of Reed Smith, LLP, in Falls Church, VA.

The caps apply to molecular and nuclear imaging, including PET, x-rays, ultrasounds, magnetic resonance imaging, CT, and fluoroscopy.

That's a long-winded way to say that just about every imaging sector can expect to see a drop in its reimbursement from the federal government.

The act will have a dramatic effect on the industry, says Greeson.

Choosing between payment systems and capping payments based on the lower rate "creates an illogical and punitive precedent—not only for imaging services but potentially for all medical services provided in physician offices," said James P. Borgstede, MD, chair of the American College of Radiology's (ACR) Board of Chancellors, in a January press release.

Broad-based cuts extend to 70% on certain services and penalize the imaging specialties because radiologists provide the vast majority of these services, said Borgstede.

These reimbursement cuts, made in conjunction with CMS cuts for scans to contiguous body parts, may prove disastrous to radiology, Borgstede says.

The reimbursement change enacted through the Deficit Reduction Act dramatically affects facilities' bottom lines, agrees Paul Streiber, vice president of investor relations for Dallas-based Radiologix.

It does so significantly enough that Radiologix cut its revenue estimates for both 2006 and 2007, citing the act as the primary cause for its financial straits.

The company estimates a $1.9 million drop in revenue for 2006 and a $13.3 million drop in revenue in 2007, according to a Reuters report.

Quality saves costs, but try convincing Congress

Farnsworth and Borgstede, among other imaging association members, have worked diligently with the Medicare Payment Advisory Commission (MedPAC) since 2004 on methods to reduce radiology costs by improving quality.

In March 2005, ACR and NCQDIS officials appeared before the House Ways and Means Committee on Health to discuss the growing financial effect of imaging procedures on the healthcare industry.

Diagnostic imaging alone represents a $100 billion industry and the fastest-growing type of physician service expenditure, according to MedPAC.

Many healthcare leaders see imaging as an important business investment and a way to augment their healthcare coffers.

On the flip side, overuse of imaging "lowers the quality of patient care, undermines patient safety, threatens the solvency of Medicare, and annually drains the American healthcare system of billions of dollars," Borgstede said during the Radiology Society of North America's June 2005 conference.

"It is about abuse versus proper payment," Greeson says.

The radiology compromise

The government wants to reign in costs and medical misuse. Radiologists want proper reimbursement for the work they perform. The two must reach a compromise somewhere in the middle, Greeson says.

At the conclusion of all discussion lies an elemental question, Greeson says: "Why is the utilization of diagnostic imaging services increasing so rapidly?"

Any number of factors contribute to the industry's growth, but most of the increase can be laid at the door of physician groups that self-refer.

Many in the industry believe that quality controls can reduce the costs of these problems.

However, "[this] bill fails to take into account quality and access-to-care issues," Farnsworth said in a memo. "The proposed cuts could have serious impact on access to needed diagnostic services for Medicare patients, particularly those in rural areas."

Rural areas bear pain from the financial pinch

ACR also suggested that the cuts contained in the Deficit Reduction Act will force physicians to stop offering needed imaging services.

The cuts may even push radiologists to relocate to more metropolitan areas.

"This hurts . . . particularly rural communities that do not have large hospitals convenient to them and rely predominantly on in-office imaging care," Borgstede said in a January release.

Traditionally, rural areas hold onto fewer healthcare dollars overall, says Farnsworth.

"If those [rural facilities] cut 25%, they're not cutting from a 25% profit margin. It's a cut to an already struggling establishment. In many cases, when the government cuts healthcare, rural America is hit hardest," she says.

And rural America received no exception with this latest round of cuts, she says.

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