Changes to practice-expense RVU component could spell ‘detrimental consequences’ for radiology

Changes to the practice-expense component of the relative value unit (RVU) could have an outsized impact on imaging, according to a new review article published in JACR.

Practice expenses are one of three parts of the total RVU, used to calculate physician payments. Across the entire Medicare Physician Fee Schedule, PE accounts for almost 50% of the RVU, but in radiology that figure is 70%. 

The discussion comes after the American Medical Association recently finalized results from its Physician Practice Information Survey, conducted to ensure Medicare calculates pay based on accurate cost estimates. Physician advocates hope Congress will consider this information to mitigate annual Medicare cuts, including a 2.8% conversion factor reduction implemented Jan. 1. 

“Changes to practice expense can have detrimental consequences to our field and affect access to quality imaging if payments are insufficient to cover practices’ costs,” Guilherme Dabus, MD, MBA, co-director of interventional neuroradiology at Baptist Health South Florida in Miami, and co-authors concluded. “It is paramount that, as a specialty that is particularly sensitive to PE adjustments, evidence about the impact of reimbursement on patient access to quality radiologic care inform payment policy and reform.” 

The AMA has calculated new practice-expense-per-physician-hour rates as part of its survey process. Diagnostic radiology’s figure is roughly $134.84 total PE/hour, while interventional radiology is at $101.55. But it will ultimately be up to CMS to decide how to use this information, experts reported earlier this month.  

Practice expenses account for a higher portion of the RVU due to the capital-intensive nature of office-based radiology practice, Dabus and co-authors noted. The Medicare Physician Fee Schedule must remain budget-neutral each year, which means increasing RVUs for any one physician service requires devaluation of another. For instance, in 2021 when there was a sizable upturn for office-based evaluation and management codes, specialties such as radiology that do not bill for E/M “bore the full brunt” of the reductions. 

“Practice expense” pertains to the resources used to furnish a physician service, typically in the office setting. PE includes all costs besides physician work and malpractice liability—the other components of the RVU. PE is broken into “direct” costs including clinical staff labor, disposable medical supplies and equipment. Meanwhile, the second “indirect” component includes other expenses not directly related to the procedure, such as administrative labor, rent, coding and billing, call centers and energy. 

The recent AMA survey indicated that, in diagnostic radiology, indirect costs account for about 70% of the total practice expense RVU, the authors noted. Conversely, 30% relates to direct expenses. In the case of a two-view chest X-ray, indirect expenses would amount to $56.86, with total PE reimbursement of $81.23. But applying budget neutrality would drag this figure down to $25, the authors noted. 

This math doesn’t make sense for the specialty and underlines the need for advocacy on the physician fee schedule, the authors emphasized. Physician lobbying groups such as the AMA are fighting for an automatic annual Medicare pay hike tied to inflation. But Dabus and co-authors warn this is likely not enough for some imaging services. 

“The payment reductions from budget neutrality have created anomalies throughout the fee schedule,” Dabus and co-authors write. “There are dozens of codes where the total practice expense payment fails to cover the cost of the supplies. For some codes, the total payment fails to cover even one high-cost supply. There is no inflationary adjustment that would intercept the downward trajectory of practice expense payments. Even the [AMA’s Physician Practice Information Survey], which will update the survey results, may primarily be used to redistribute practice expense money between specialties, but not necessarily the total amount of money available. The power to lift budget neutrality adjustments largely resides with the U.S. Congress, since updates will have to be statutory.”

Read the rest in the Journal of the American College of Radiology here (log in required). The review is co-authored by Michael Booker, MD, MBA, the ACR’s alternate advisor on the RVS Update Committee, which guides Medicare on how to value physicians’ work. He also recently published a column for ACR’s Bulletin, offering insights from the AMA survey.