2010 Medicare Reimbursement: What’s in It for Radiology?

The nation’s hospitals eluded a $1 billion pay cut on October 1, when the 2010 Inpatient Prospective Payment System (IPPS) went into effect, because CMS chose not to include a negative 1.9% update for payments to hospitals as originally proposed. On the other hand, imaging-technology owners in the freestanding outpatient and in-office settings are bracing for a new round of significant cuts, as described in the proposed rule. An increase in the assumed equipment-utilization rate from 50% to 90% and new, lower practice-expense data for radiology from the AMA would result in further cuts to CT and MRI payments, adding up to 30.7% and 26.5%, respectively (by some estimates), if implemented. The final rule is due within days and is being watched with keen attention by all stakeholders.

“In the very short term, we are going to see a further contraction of the imaging center business to the advantage of the hospitals.”

—Gerard Durney, Sr VP, Ancillary Services,Bon Secours Charity Health System, Suffern, NY

“Imaging centers are going to find it hard to get capital because of the financial marketplace, as will hospitals, but imaging centers will have a harder time doing that,” he continues. “I think you’ll see some hospitals absorbing or buying imaging centers.” IPPS Issues Instead of a pay cut, hospitals should expect an increase of 1.6% in operating payments (an estimated total of $1.73 billion) and a 1.9% increase in capital payments ($171 million) under the fiscal year (FY) 2010 rules, not taking into consideration any further change in admissions or case-mix intensity. The threatened negative update, however, was meant to correct an estimated 2.5% increase in payments made to hospitals in 2009 due to changes in documentation and coding under the Medicare Severity DRGs, and is likely to be revisited next year.
Pam Kassing CMS delayed the decision pending a retrospective evaluation of the changes in case mix for the complete FY 2009 claims data. Further, hospitals and organized radiology are keeping a close watch on the issue of charge compression, discussed in the rule, which would result in lower payments for higher-priced equipment and higher payments for lower-priced equipment, a no-win equation for specialties—like radiology—based on the use of advanced technology. Cost-to charge Ratios and Charge Compression In the 2010 IPPS, CMS continues its ongoing discussion of charge compression by recalculating cost-to-charge ratios (CCRs). The subject was initiated by a series of reports by Research Triangle Institute (RTI), issued in 2007 and 2008, laying out a set of formulas that would result in lower prices for higher-priced equipment and higher prices for lower-priced equipment. If implemented, this policy would have negative implications for payment levels for imaging-intensive DRGs such as trauma services. The consequences of charge compression for imaging paid under the Outpatient Prospective Payment System (OPPS) would further adversely affect reimbursement in the freestanding and in-office realms due to the DRA caps.
Gerard Durney, Sr VP The ACR® last commented on the reports in a letter dated June 13, 2008, calling RTI’s estimate of an 1,800% average markup on CT services over costs implausible. Harvey L. Neiman, MD, then executive director of the ACR, wrote, “This roughly five-fold differential in markup seems too large to be an accurate reflection of the typical hospital charging behavior and, accordingly, we believe the RTI CCRs are implausibly low and would result in substantial distortion of payments if used for calibrating Medicare results.” Pamela Kassing, ACR senior director of economics and health policy, notes, “For some studies, this would result in higher payments for x-ray than for CT.” Due to the interest expressed by CMS in the concepts of charge compression, value-based purchasing, and bundling, Kassing expects the ACR to give the annual IPPS rules closer scrutiny. In the final 2010 IPPS rule, CMS reaffirms its decision, made last year, to not use the adjusted CCRs, preferring instead to focus on more precise cost reporting as a strategy to improve the accuracy of cost weights. The issue, nonetheless, bears watching. Quality Reporting The final IPPS retains the 41 existing quality measures, combines two existing ones, and adds four new measures on which hospitals must report in order to receive the full annual update factor for FY 2011. This adds to the cost and complexity of hospital reporting to Medicare (but is, one hopes, the lesser evil, considering the 2% reduction in the update for hospitals that fail to report on the measures). Two new surgical care infection prevention measures were added—SCIP–Infection-9: Postoperative Urinary Catheter Removal on Postoperative Day, and SCIP–Infection-10: Perioperative Temperature Management. Signaling a move by CMS toward evidence-based care, hospitals will also be required to report on whether they are participating in two clinical registries: Participation in a Systematic Clinical Database Registry for Stroke Care and Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care. These participation measures are to be reported annually, via Web-based collection tool, beginning in July 2010. CMS also added three new hospital-acquired conditions (HACs) to its current list of eight, raising the economic stakes for hospitals in the fight against preventable conditions and infections:

• surgical-site infections following elective procedures, such as orthopedic and bariatric surgeries;
• failure to control blood-sugar levels in situations such as diabetic hyperosmolarity, ketoacidosis, and hypoglycemic coma; and
• deep-vein thrombosis or pulmonary embolism following knee and hip replacement.

Beginning October 1, Medicare will not pay the additional cost of hospitalization if the HAC is not present on admission or if there is insufficient evidence that the HAC is not present on admission, and the HAC is the only or major complication/comorbidity. Heightened attention to infection control in imaging suites has already begun. Hospital executives are eying the new accountability requirements and related policy discussions as having major potential impact on reimbursement, as well as hospital-physician strategy. “We have performance accountability with shared risk and pay-for-performance,” Durney notes. “Expanding pay-for-performance to physicians within hospitals is now being discussed, so that hospitals and physicians would be reimbursed together for performance. I think that is a good thing, because right now, with non-employed physicians, the way hospitals are reimbursed is diametrically opposed to the way physicians are being reimbursed. Hospitals today for the most part are reimbursed for inpatient business on a DRG or a case rate, and physicians are reimbursed on how many times they visit the patients. So physicians are not incented economically by the payors to discharge the patients quickly. “Hospitals are going to be targeted for lack of coordination. We will be targeted for readmissions, and payors will reduce the payment, they’ll ask for payback.” MPFS Issues There is no question that the 2010 MPFS, as proposed, would have a numbing effect on imaging in the freestanding outpatient and in-office settings, adding further incentive for hospitals to bill under OPPS for their OIC holdings when possible. A proposed 90% equipment-utilization formula and brand-new practice expense data provided by the AMA will deal outpatient imaging technical reimbursement a new round of cuts comparable to those contained in the DRA. In its comment letter to CMS, the RBMA estimates that the overall impact of these two changes could amount to a 25% reduction in the global fees paid under the rule. Ilyse Schuman, vice president of NEMA and managing director of the Medical Imaging & Technology Alliance, reports that their analysis indicates a 30.7% cut for CT and a 26.5% cut for MRI. Particularly troublesome for the sector is the new data collected by the AMA’s Physician Practice Information Survey (PPIS), which CMS will use to calculate practice-expense RVUs. One problem is that the radiology practice expense per hour does not distinguish between hospital-based and office-based physicians, where reported costs are significantly higher. In its comments to CMS, dated August 27, the ACR was highly critical of the quality of the PPIS data used to determine practice expense RVUs, zeroing in on the fact that two-thirds of the 56 respondents were hospital-based radiologists who bill for professional services only and have no indirect or direct practice expenses. In its comment letter, the ACR expressed concern that a survey with only 33% nonfacility billing is not representative of the true practice of radiology and that the survey is inappropriately biased to hospital-based physicians, causing the practice expense per hour to decrease. The college asked CMS to delay implementation of the data for one year while data quality is assessed.Cheryl Proval is editor of Radiology Business Journal and editorial director for Medical Imaging Review.