Now that 2007 is upon us, the Deficit Reduction Act of 2006 is bearing its tainted fruit. Providers of outpatient imaging services are painfully aware of the DRA cuts to Medicare payments that began last month for the technical component of imaging services performed in physician offices and independent diagnostic testing facilities (IDTFs). Congressional conferees who crafted the DRA essentially pulled out their axe to impose a budget cut by limiting imaging payments made under the Medicare physician fee schedule to an amount no greater than that to be paid under Medicare's Hospital Outpatient Prospective Payment System.
Unless Congress intervenes soon, countless imaging centers that provide services to Medicare beneficiaries may be forced to shut their doors, depriving patients of access to high-quality imaging services. Simultaneously, the Centers for Medicare & Medicaid Services (CMS) should follow up quickly on several regulatory initiatives that could go a long way to ameliorate problems caused by self-referred imaging.
When its recent lame-duck session ended, Congress appropriately intervened—as it has done for the past four years—to prevent an overall 5 percent payment cut under the Medicare Physician Fee Schedule slated for 2007. However, Congress failed to address the DRA's deep cut in technical payments for office-based imaging services.
The fact that imaging expenditures were targeted wasn't surprising. In the past five years, imaging services have increased more than any other component of the Medicare Physician Fee Schedule. In a March 2005 report to Congress, the Medicare Payment Advisory Commission (MedPAC) documented this growth. Between 1999 and 2003, while all physician services increased at a rate of 22 percent, imaging services experienced a 45 percent hike in payments. And big-ticket procedures—magnetic resonance imaging (MRI), nuclear medicine and computed tomography (CT)grew at twice that pace. The volume of imaging services provided to Medicare patients has increased by an average of 9 percent per year, compared with less than 2 percent for evaluation and management services, and just over 4 percent for other medical procedures, according to MedPAC.
Similarly, data compiled by the Blue Cross and Blue Shield Association demonstrates that between 1999 and 2001, its member plans experienced remarkable growth in outpatient diagnostic imaging costs (per member per month). The BCBSA estimates that health plan costs for outpatient X-ray services jumped by 18 percent, while costs for CT and MRI services reportedly rose a staggering 45 and 47 percent, respectively, during a two-year period.
Given the precipitant nature of the DRA's imaging provisions, legislation was introduced in the last Congress to impose a two-year delay of these medical imaging payment cuts. However, Congress adjourned without adopting the moratorium, allowing the across-the-board cuts to go into effect.
The 110th Congress should move quickly to impose a moratorium. And CMS also should act expediently. Last August, it described possible revisions to its reassignment rule that could help curtail incentives for self-referred imaging. In the proposed 2007 Medicare Physician Fee Schedule rule, CMS stated that it's considering an amendment to the reassignment rule to clarify how requirements of the purchased diagnostic test rule and purchased interpretation rule could apply when an independent contractor physician performs professional interpretation services and permits another individual or entity to bill for those services.
Under the purchased diagnostic test rule, the physician billing for a purchased test can't mark up the charge for the test's technical component beyond what the physician paid to the entity that performed the test. Suppose, for example, that a physician referred his Medicare patients to an imaging center across town for plain film X-rays but wasn't otherwise involved in performing or supervising the testand was permitted by the center to bill for the X-rays' technical component under the referring physician's own supplier number in exchange for a $10-per-X-ray payment. That physician would be prohibited from marking it up and billing Medicare more than $10 for the technical component of the X-rays.
CMS has expressed interest in placing a similar anti-markup restriction on purchased or reassigned interpretation services. Additionally, it's considering further amending its billing rules to incorporate and apply all of the requirements of the purchased interpretation rule to any contractual arrangement between a physician or medical group and another physician or medical group to perform professional interpretations of diagnostic tests pursuant to a reassignment. If CMS were to adopt that approach, most self-referring orthopedic, cardiology or other group practices that own diagnostic imaging equipment could no longer bill globally for both the test's technical and professional components; instead, they would bill the technical component only. As a collateral impact, unless the referring physicians interpreted the studies, they also would have to enroll and operate as IDTFs and be subject to quality standards imposed on IDTFs that are more rigorous than those in effect when providing imaging ancillary to their physician practice status.
When applied to self-referring medical groups, the proposed change to the reassignment rule could bring about a welcome change to the referring physician practice/radiology group dynamic. It would affect the ability of referring physician practices to bill globally for professional interpretations performed pursuant to a contractual reassignment. If the rule was amended to require that the entity performing the test and billing for the professional component be independent from the physician/entity that ordered the test, here's what would happen: A practice that performs and bills for imaging services via the in-office ancillary services exception to the Stark Law wouldn't be able to bill for the professional component of services performed by an independent contractor radiologist. The reason: The billing practice would be ordering and performing the test's technical component.
In effect, any physician practice that orders, performs and bills for the technical component would either need to perform professional interpretations through an employed physician or permit the independent contractor radiologist to perform the interpretations and bill separately for those services under the independent contractor's own supplier number. This inability to bill globally to include the radiologist's services could dampen the enthusiasm of referring physician groups that seek to own or lease their own imaging equipment.
CMS hasn't yet formally proposed to amend the reassignment rule to include the contemplated purchased interpretation requirements. It has published the final 2007 Medicare Physician Fee Schedule rule without adopting any of the changes it had considered regarding interpretation services and reassignment.
There's no denying the need to develop a policy that addresses increased expenditures for diagnostic imaging services. But Congress chose not to develop a nuanced approach to this aspect of Medicare spending, opting instead to hack spending for nonhospital imaging.
Just as Congress is obligated to remedy its ill-advised decision, CMS must now curtail the growth of in-office imaging by referring physicians via a revision of the important—but often overlooked—regulatory requirements for the reassignment of professional component radiology services.