Imaging restrictions paint controversial picture

December 1, 2006

Imaging services represented some 14 percent of 2005 spending that is considered in the formula used to calculate Medicare rates, and 27 percent of the total spending increase between 2004 and 2005.

The Centers for Medicare and Medicaid Services (CMS) is finalizing proposed new rules that would place more restrictions on the ability of physicians to refer patients to facilities in their own offices, or facilities shared with other doctors, for imaging scans. They would come on top of reimbursement reductions imposed by the Deficit Reduction Act of 2005 (DRA).

The big picture

Those provisions take effect for 2007, at the same time that an overall average 5.1 percent cut in payment rates for all physician-related services under Medicare is scheduled to be implemented - unless Congress acts as it did in 2006 when reductions were also ordered by CMS.

The American Academy of Dermatology Association (AADA), working through the Alliance of Specialty Medicine, has been fighting those cuts, urging the elimination of the Sustainable Growth Rate (SGR) formula used to calculate Medicare payment updates.

"If the SGR formula is not fixed, physicians will receive negative updates (cuts) of approximately five percent each year from 2007 until 2015," declared Dirk Michael Elston, M.D., director of the department of dermatology at Geisinger Medical Center, Danville, Pa., in testimony given in late September before the House Energy and Commerce Health Subcommittee.

"These reductions may prompt a number of physicians to reconsider their participation in the Medicare program, to limit services to Medicare beneficiaries, or to restrict the number of new Medicare patients they are able to accommodate in their practice."

Referral regulations

But besides imposing the scheduled overall Medicare rate cuts and implementing the imaging fee changes imposed by the DRA, CMS is also planning to amend existing self-referral regulations to further limit in-office imaging.

The plan, according to a CMS press release, is "to place restrictions on what types of space ownership or leasing arrangements will qualify for purposes of the in-office ancillary services exception or the physician services exception."

Under current rules, group practices may self-refer for diagnostic tests provided in their own offices, or in a location leased for this purpose. However, physicians are not supposed to make a profit on those tests by charging Medicare more than what the services cost.

One provision of the proposed rule would prohibit group practices with their own in-office imaging services from billing Medicare for the work of a part-time radiologist they might hire to interpret the scans. The radiologist would, instead, bill Medicare directly for his or her services.

In addition, the rules would seek to limit "condo" or "pod" laboratories that are shared by several practices in the same location, which together cover overhead costs and are able to profit from those services.

The Access to Medical Imaging Coalition (AMIC), which represents a group of imaging industry companies and organizations, is fighting the proposed restrictions and fee reductions.

"It is now incumbent upon Congress to do the right thing and delay the drastic reimbursement cuts for this life-saving technology," declares Andy Whitman, J.D., vice president for medical products at the National Electrical Manufacturers Association (NEMA).

According to a study by The Moran Company for AMIC, nearly 90 percent of the medical imaging procedures whose Medicare reimbursement rates would drop under the DRA provisions would be paid less than the estimated costs of performing the procedures in physician offices and independent imaging centers.

The study said that under the DRA requirements, aggregate Medicare payment for imaging services in physician offices and imaging centers would fall 16 percent to 18 percent below aggregate payment for similar services provided in hospital outpatient departments.