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Assess the DRA's impact on your hospital now

Radiology Administrator's Compliance and Reimbursement Insider, September 1, 2007

If you think the Deficit Reduction Act of 2005 (DRA) affects only independent diagnostic testing facilities (IDTF), think again, said Robert A. Maier, CEO of Regents Health Resources, in Brentwood, TN.

“It’s going to get worse for hospitals,” he said. “Hospital radiology administrators don’t understand the impact. [Imaging] supports a lot of other things that go on in the hospital that otherwise couldn’t be supported.”

In July, Maier spoke to a packed auditorium at the American Healthcare Radiology Administrator’s annual meeting in Orlando, warning hospital radiology administrators and freestanding imaging directors alike about the financial fears associated with the DRA.

Battleworn

The politically savvy have battled the DRA since its first appearance back in 2005 with arguably minimal success. When President George W. Bush signed the bill into law in February 2006, the act included cuts on everything from college loans to child welfare. It affected healthcare by implementing new rules for Medicaid compliance and cutting Medicare radiology reimbursement, as well as creating many other changes.

Specifically, the DRA cuts reimbursement for the technical component for several high-cost scans. The American College of Radiology (ACR) estimated the reductions would cost the imaging industry nearly $1 billion. Although imaging associations continue to lobby Congress for some form of mitigation, they aren’t optimistic.

The cuts apply primarily to services performed in IDTFs and physician offices and were made in order to rein in exponential growth in reimbursement costs.

But “these [cuts] are going to hit hospitals, too,” said Maier, who outlined a number of reasons why hospital radiology managers need to pay attention to the DRA.

Consolidation game

Many hospital radiology departments include some mix of joint ventures, either with a radiology physician practice group or with an IDTF. Consider the impact of these arrangements as they pertain to the overall reimbursement returns, and evaluate the equity structure of such arrangements, Maier said.

For example, because the DRA reduces payments on particular procedures, it might make more sense to bring PET scans back onto your hospital campus.

Many hospitals own an IDTF outright. If this pertains to you, “check your payer mix,” said Maier. If your system owns an IDTF, but Medicare is your primary payer, consider liquidating the freestanding facility and bringing equipment and exams back into the hospital.

“IDTF regulations are onerous, and they are becoming more difficult all the time,” said Maier.

More and more freestanding and physician practice–owned facilities will partner with hospital radiology departments to offset their own losses. Hospitals often have greater pull with payers and can thus help everyone involved in the joint venture ameliorate the spectre of private payer cuts that loom in the DRA’s wake. If your hospital retains imaging center partnerships, use this leverage to negotiate greater imaging reimbursement.

Further, with block leasing and per-click arrangements dying a slow death, it makes sense to reevaluate any hospital imaging joint venture agreements, said Maier.

“The DRA presents an opportunity to consolidate. It used to make all the sense in the world to open an IDTF. That time is over,” he said.

“Sure, five years ago, it was better to have an imaging center. And we got five years of good reimbursement. But that’s drying up,” Maier said. “The industry as a whole needs to be aware of how these changes will affect everyone.”

Money matters

Hospitals charge more and receive better reimbursement than freestanding radiology facilities, but that tradition may change now that CMS and other payers have hospitals in their sights.

Third-party payers see the difference in reimbursement between hospitals and freestanding facilities. Soon these payers will start to examine the reasons for those discrepancies. Hospitals should prepare to justify their costs.

Overworked and underpaid

Expect your radiologists to look to offset their own reimbursement hits through hospital negotiations. “Your radiologists suffer from reduced reimbursement and increased scrutiny, too. You can expect them to lay those losses at the hospital doorstep,” Maier said. He said you can expect the following: