The New Economics of Contrast

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Contrast is the number-one consumable in the radiology department, and its use is being driven by efficiency, safety, and reimbursement concerns

Not too long ago, prices for contrast media could get a radiology director’s pulse racing. Now, that pulse is fairly steady, even though the flow of contrast is building all the time. Contrast, in fact, has become a billion-dollar market. It’s not a market in which there are big price swings, but that doesn’t mean that there are no savings to be had.

Mervyn D. Cohen, MD, a pediatric radiologist at the Riley Hospital for Children in Indianapolis, recalls that price differentials were much greater a decade ago. “Economics is not a big issue with contrast at the moment,” he says. “It was 10 or 15 years ago when the nonionics came out; the newer agents were universally agreed to be safer, but they were a lot more expensive—5 or 10 times more. The problem was, do you switch? Every hospital tried to separate out the risk to patients and establish protocols for the new generation of nonionic agents.”

Nonionic agents are almost universally used for CT today, and, as Cohen notes, “They are much cheaper, as the manufacturers have recouped their costs.” In addition to more cost-effective manufacturing, a second development over the past decade, which has driven the cost of both iodine-based CT agents and gadolinium-based MRI agents much lower, has been the proliferation of the group purchasing organization (GPO). By some estimates, GPOs were able, in the mid 1990s, to negotiate price drops for contrast to about half of the then-prevailing rates.

Now, it is only the very large institutions and health networks that negotiate contrast-media prices directly with manufacturers. Most hospitals and clinics—small, medium, and large—purchase with the help of one or more GPOs. Cohen, who is also a professor of radiology at Indiana University Medical School and a member of the ACR’s contrast committee, says that, with the obsolescence of film, contrast has become “probably the biggest expense for consumable items” that a radiology department faces.

Kathleen Holton, BSRT, who is director of medical imaging for St. Vincent’s Hospital in Indianapolis, agrees. She estimates that her hospital spends over $1 million per year on contrast. “Besides labor, it’s probably the highest spending category of anything that I buy,” she says.

In fact, a market analysis¹ by Bio-Tech Systems, Inc (BTSI), Las Vegas, estimated 2006 contrast sales in the United States at $1.6 billion, with that figure expected to grow to $2.9 billion by 2013. Of the 2006 sales, about $1 billion represented iodine-based CT contrast, with gadolinium-based MRI contrast accounting for $364 million, according to BTSI. Despite the price drops, contrast is big business for manufacturers. Holton estimates that her hospital does about 300 CT exams per day, with 60% done with contrast. For MRI, she estimates 50 exams per day, again with 60% using contrast.

Bundling The bad news is that while prices for contrast have come down in relative dollars, compared with prices a decade ago, changes on the reimbursement side have probably offset any budgetary gains from the price drops. Under the Hospital Outpatient Prospective Payment System, Medicare now treats most contrast use as ancillary and supportive of diagnostic exams, bundling the reimbursement for contrast into the payment for the imaging exam. It does the same thing on the inpatient side. Private payors have followed Medicare’s lead, so it is now customary for radiology providers to look at contrast as part of the imaging expense, much as film was prior to the digital revolution.

“Most managed care companies include the contrast in the fee schedule. Although we charge for it, there is no revenue associated with the contrast, per se,” Gerard Durney, MBA, vice president for clinical services at Lenox Hill Hospital, New York City, reports. “From my point of view, contrast has become more or less a commodity, so you look to get the best price you can.”

That doesn’t mean that contrast expenses per patient are not tracked. They are, Durney says, for two reasons. For some payors, reimbursements are based on percent-of-charge formulas in which a charge for contrast does add to the total reimbursement, so Lenox Hill does bill for contrast as a line item on all its imaging bills. “We send the same bill to all payors, but most would ignore the contrast line item,” Durney says.

The other reason