Radiology practices must step up their cost-accounting game as CMS places price pressure on CT, MRI
With recent rulemaking out of CMS, radiology practices will need to step up their cost-accounting game as the agency places increasing price pressure on CT and MRI exams.
Radiological services are “widely considered” a shoppable service, with outpatient imaging centers “a prime target of price transparency and the aims of consumerism,” according to a new analysis. And the latest Hospital Outpatient Prospective Payment System proposed rule from the feds is only intensifying these concerns in the specialty, Vizient noted in a report released Thursday.
“To strategically address this shifting focus on this price-cost relationship, radiology leaders must get actively involved in the cost-accounting process at their organization, work to establish costing methods that create value, and ensure the strategy sticks for the long term,” the Texas-based healthcare improvement organization noted Oct. 22.
The Centers for Medicare and Medicaid Services several years ago started requiring imaging providers to report MRI and CT under separate cost centers. This was done in order to calculate the separate cost-to-charge ratios used to determine payment amounts for such services. However, data was found to be “highly varied” depending on providers’ accounting systems, Vizient noted in its report. For instance, some have spread the cost of a pricey MRI machine across all facilities to share the expense.
To begin addressing this variation, CMS has been transitioning to a more direct-costing method that leaves out any radiology providers who use the aforementioned square-footage method. Starting on Jan. 1, 2021, the agency will fully move to this switch.
“Unless providers move to more direct-costing methods for CT and MRI cost centers, CMS reimbursement for these services will likely take another hit on top of already shrinking reimbursement,” Vizient noted in the report.
The American College of Radiology raised concerns about this issue in comments submitted to Administrator Seema Verma on Oct. 1. Instead of fully implementing CT and MR cost data regardless of the allocation method, the ACR wants a change. It’s pushing CMS to, instead, set weights based on a single diagnostic radiology cost-to-charge ratio—as the agency had done before splitting up the exams in 2011.
They're worried this new method will lead to underestimation of costs in setting payment, “pulling rates for CT and MRI procedures down below their actual costs and further eroding payment accuracy.”
“Using the CT and MR cost centers is fraught with problems,” ACR CEO William Thorwarth Jr., MD, wrote. “The ACR is concerned that the adverse impact of the implementation of flawed CT and MRI cost centers will extend beyond the scope of the [Hospital Outpatient Prospective Payment System],” he added.
Absent the feds heeding the college’s advice, Vizient is urging its member health systems to get started on radiology costing initiatives today. These demands will only increase as providers grapple with aging imaging equipment, shrinking capital budgets, and demands to demonstrate value.
A jump-off point is asking your team: “How is cost being measured for our cost center and how is it reported?” From there, practices should work to establish cost-accounting systems, shifting to meet CMS’ new requirements while “optimizing the value chain.” Some experts, the report noted, are recommending time-driven, activity-based costing, which can prove to be complicated, they noted.
Practice leaders must also stay “highly engaged” with this endeavor and allot the necessary resources to make sure these efforts succeed.
“The benefits of measuring and optimizing radiology costs may not be apparent overnight, but those providers who are early adopters of cost accounting strategies could enjoy an early-mover advantage over competitors in their region,” Vizient concluded. “Regardless, critically examining costing methods in radiology could help mitigate looming reimbursement cuts for radiology services and help promote the value of radiology services in the continuum of care.”
You can read much more on this and other imaging topics in Vizient’s 42-page “Diagnostic Imaging Tech Watch” report here. And the ACR has a detailed summary of the 2021 HOPPS rule here.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.