Finger in the Wind

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Physicians are in a real bind as fee-for-service reimbursement falls under attack and alternative payment methods (such as bundling and capitation) gain traction in Washington, DC. As of June 18, Medicare Part B claims were being processed with the 21.3% cut mandated by the sustainable growth rate’s formula, and House Democrats demanded legislation on jobs before they would pass the Senate bill to reverse the cut.

This is not a transitory issue. There is no better finger in the wind for assessing sentiment inside the Beltway than the semiannual June report1 of the Medicare Payment Advisory Commission (MedPAC) to Congress. The report focuses entirely on ways to align the incentives of health-care providers and payors through changes in payment policy. The final chapter focuses exclusively on ways to address growth in ancillary services in physicians’ offices. My recommendation: Read it now.

Previous MedPAC reports sowed the seeds of the imaging cuts seen in the DRA and in the Patient Protection and Affordable Care Act of 2010. This year’s report contains proposals that could have even more dramatic consequences for imaging, and they are not entirely negative.

The Upside

The good news is that for the first time, MedPAC clearly distinguishes between imaging performed in physicians’ offices and imaging performed by radiologists. Noting that nonradiologists accounted for 69% of imaging services performed outside hospitals, while radiologists and IDTFs accounted for 31%, MedPAC recognizes self-referral as a significant factor in the growth of imaging services over the past decade.

One of the prevailing arguments for the provision of imaging and other in-office ancillary services (IOAS) by self-referring physicians is that it enables physicians to make rapid diagnoses, therefore improving patient care.

Using Medicare claims data to examine how often IOAS were provided on the day of an office visit, MedPAC looked into the mouth of that gift horse and found that IOAS are not performed on the same day as a related office visit most of the time. Just 10% of advanced imaging procedures were performed on the same day.

Several ideas were proposed to address the growth of ancillary services. First, limit the types of services or physician groups covered by the IOAS exception (Stark law) to exclude outpatient therapy and radiation therapy, to limit the exception to physician practices that are clinically integrated, and to exclude diagnostic tests that are not usually provided during an office visit (such as advanced imaging).

Second, implement payment tools to mitigate self-interest incentives by reducing payment rates for diagnostic tests performed by self-referring physicians and by imposing discounts that reflect the efficiencies of providing IOAS during the visit. MedPAC proposes using both empirical and clinical approaches to determine which studies should be covered by the IOAS exception.

With the empirical approach, CMS would set a threshold for the percentage of certain tests provided on the same day and would refuse to pay for any test that is not provided at least that often; for example, if the threshold is 50%, tests would not be paid for if performed on the same day only 40% of the time. MedPAC suggests resetting the threshold every few years to allow for changes in practice patterns.

Using a clinical approach, experts would determine which tests required patient preparation (prior fasting, for instance). Those tests could not be performed under the IOAS exception.

MedPAC also suggests swinging the hatchet for across-the-board reductions in payment for studies billed under the IOAS exception (a kind of DRA for self-referrers). The amount of the reimbursement cuts would be determined by the average percentage of the increase in imaging utilization associated with physicians who own imaging technology. MedPAC cites its own analysis, which found that spending for imaging by self-referring physicians was 68% higher than spending by physicians who do not own imaging equipment.

Other suggestions include making cuts based on the evaluation/management efficiencies obtained when the ordering physician is the interpreting physician and requiring self-referring physicians to participate in a prior-authorization program for advanced diagnostic imaging.

The Red Flag

The most troubling aspect of the report is the suggestion that CMS review the professional component because “many procedures have never