Diagnostics & Imaging Week Washington Editor

WASHINGTON – To some on Capitol Hill, the Deficit Reduction Act (DRA) of 2005 was a Trojan horse for cuts to Medicare spending on imaging services. The inclusion of those cuts in the DRA, added in a House-Senate conference move last year, has spurred bipartisan ire, as demonstrated by across-the-aisle support for a bill that would hang those reductions for two years.

However, unless proponents of H.R. 5704 (Diagnostics & Imaging Week, July 13, 2006) can find offsets for the proposed restored funding, the movement to restore those cuts may die before it reaches the House floor.

The chairman of the House Energy and Commerce Committee's health subcommittee, Nathan Deal (R-Georgia), opined at the beginning of last week's hearing that "this level [of spending] is clearly unsustainable." He said that among those who object to the cuts, "no one is offering an alternative to keep costs down," and he added that "I hope my colleagues will seriously consider" the recommendations offered by the Medicare Payments Advisory Commission (MedPAC) to stem increasing costs.

Rep. Frank Pallone Jr. (D-New Jersey) remarked that "over the past few years, we've seen an explosion in medical imaging services … and most has been attributed to use in physician's offices." He pointed out that Medicare Part B premiums and co-pays are up and that doctors might not be employing appropriate standards for prescribing scans. Pallone added that physician groups "remain skeptical" of such standards.

(The reduced outlays embodied in DRA address the so-called "technical" portion of reimbursement, those fees having to do with equipment and the corollary functions and personnel. Reimbursement made directly to providers is not affected by DRA.)

Deal and Pallone had little help among the remaining members of the committee. Charlie Norwood (R-Georgia) insisted that "wait times in hospital radiology departments are too long already," describing the moratorium proposed in H.R. 5704 as "responsible" and deeming as "irresponsible" any failure to delay the cuts until their impact is understood. In a preview of testimony by the first panel, the sponsor of H.R. 5704, Joe Pitts (R-Pennsylvania), said that he is "troubled by MedPAC's conclusion" that increased utilization has not decreased mortality."

Herb Kuhn, director of the Center for Medicare Management at the Center for Medicare & Medicaid Services (CMS; Baltimore), reminded the committee that "spending for imaging services paid under the physician fee schedule more than doubled" between 2000 and 2005, from $6.6 billion to $13.7 billion. He noted that CMS has discovered "extensive regional variation" in such utilization but that there "appears to be no evidence of improved outcomes."

"About 80% of the growth in the volume and intensity of these services is unrelated to a shift in setting," Kuhn said. The rapid growth in this area of Medicare outlays coupled with geographical variation – which demonstrate no correlation with outcomes – "raises questions about whether such growth is appropriate."

MedPAC chairman Glenn Hackbarth said that the proliferation of scanning equipment is due to equipment "falling in price and shrinking in size." He added that neither does mortality fall in tandem with increases in imaging, "nor do high imaging costs correlate with lower costs for other services."

Hackbarth also cited a Wall Street Journal article that reported "more magnetic resonance imaging scanners in the Pittsburgh area than in all of Canada."

MedPAC's recommendations include that physician utilization be measured and that financial incentives to order imaging services be limited.

Kuhn said that CMS's reimbursement plan for physicians is based on the assumption that scanning equipment in a doctor's office is under-utilized compared to that in hospital outpatient facilities. However, he insisted, "If we were to update [this information], you would see those comparative numbers align much more" toward the rate enjoyed by hospital outpatient facilities.

Private payers "are [also] seeing higher rates" of imaging, Hackbarth observed, and some payers are asking providers for anonymous feedback on the rationale to establish the drivers of this increase.

Hackenbarth saw "a rapidly increasing Part B premium," a large part of which "is attributable to imaging," and Kuhn added that this is a "real driver in the [growth of] the Part B premium," which will go up about 11%" CMS announced last September that premiums would increase from $78.20 to $88.50 for 2006.

In response to a question about the impact of defensive medicine on imaging technology use, Kuhn said that "the provider community says that yes, defensive medicine" is part of the increase.

Pitts sought to grill the CMS representative about the dollar value of the benefit of imaging, but Kuhn said that "under current authority, we cannot look at [the] cost effectiveness" of diagnostic or treatment modalities.

Leading off the second panel, Arl Van Moore, MD, who chairs the board of chancellors at the American College of Radiology (ACR; Reston, Virginia), said, "ACR fully understands Congress' need to make difficult budget decisions." But he termed it "hard to believe that the Congress and members of this subcommittee were aware that this policy would result in such dramatic cuts."

He added: "The policy arbitrarily replaces the long-established and validated Medicare physician fee payment schedule system with the non-validated hospital outpatient prospective payment system."

Moore also warned the committee that should the reduced-payment plan survive, physicians might "ramp up the volume" of scans deliberately to make up for lost income.

John Donohue, president and CEO of National Imaging Associates (Hackensack, New Jersey), a radiology benefits management firm, said that the national tab for outpatient diagnostic scanning "exceeds $100 billion and is growing at a rate in excess of 20%."

This scenario, he said, is fed by "a perfect storm" of new technology, a lack of clinical consensus on appropriate use, defensive medicine and patients with "a heightened sense of technological awareness, mixed with a smidgen of entitlement."

Donohue also described a "world of self-referral," calling for "a solution to this gaping hole in Stark legislation."

He recommended that the committee shift some of its attention away from delivery and payment and toward ordering, "which predominantly drives volume" and which has been, more "than any [other] factor . . . somewhat under-addressed."

After the hearing, Deal told Diagnostics & Imaging Week that he could not predict the fate of H.R. 5704, but said that passage would require offsets.

"Finding offsets is very difficult to do" in a tight budget environment, he noted.

Deal's press secretary, Todd Smith, said, "You would have to have offsets to get it out of the Commerce committee," a position he said both Deal and Commerce committee chair Joe Barton (R-Texas) hold.