Price Disparity + Price Transparency=Imaging-market Turmoil

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Buy a banana, and it will cost you less than a dollar per pound—unless you’re in a hotel, where it might cost you twice the grocery-store price. The prices of many items readily obtainable by the consumer usually fall within a well-defined range, according to supply and demand. This is not so in health care (in general) and in medical imaging (specifically), particularly for advanced imaging such as MRI and CT exams. According to Ana Perez, marketing director for American Imaging Management (AIM®), Deerfield, Illinois, the price variation in imaging can be so dramatic that an MRI exam that costs $300 from one provider might, from a different provider, cost as much as $3,000. This tenfold difference, Perez adds, is “for MRI facilities that are, by all claims, the same for quality.” AIM is a national radiology benefit management (RBM) company. The disparity in pricing for CT, MRI, and other imaging studies shows itself everywhere. Susan Cox, CPA, is vice president of financial operations at Outpatient Imaging Affiliates (OIA), LLC (Nashville, Tennessee), which operates 23 joint-venture outpatient centers in eight states. Cox says that within her network, depending on location and other factors, the same MRI exam’s cost can vary from $300 to $800. “The people in the $800 market don’t know they’re paying $300 in the other market,” Cox says. “You can’t compare state to state or city to city.” In a 2011 study1 on health-care costs, Martha Coakley, Massachusetts attorney general, found that not just radiology, but health care as a whole, was plagued by widespread pricing disparity. Insurers were paying some physician groups as much as 230% more than others for the same services, while same-service payments to hospitals varied by as much as 300%. Coakley termed the health-care market dysfunctional, later adding that costs were not based on factors such as quality or value, but instead on the leverage of providers. The Leverage Tool Leverage is at the heart of pricing in health care, and radiology is not excepted. Many imaging providers will charge what they can; many others will try to get by on the lower fees that circumstances force them to accept. The situation in Massachusetts isn’t much different than it is in other states, but single cities also exhibit the pricing disparity. In Boston, for instance, the leverage-based disparity has been well documented. Alexander M. Norbash, MD, MHCM, says, “Partners HealthCare (Boston) charges high rates for imaging because it has brand recognition.” The provider group was founded by Brigham and Women’s Hospital and Massachusetts General Hospital (MGH), both of Boston. Norbash adds, “It will make demands on insurance companies, and the patients want that brand. That puts Partners HealthCare in a strong negotiating position.” Norbash is chair of radiology and assistant dean for diversity at Boston Medical Center (BMC), a 508-bed inner-city hospital affiliated with the Boston University School of Medicine, where he is also a professor. He says that for high-profile hospitals with brand recognition, radiology departments are often operated as profit centers, and their income helps shore up less profitable departments. At BMC, Norbash says, the situation is just the opposite. “At the other end of the spectrum, we charge half what MGH charges. Our brand recognition may be seen as inferior. We can’t jack up our rates to hit the standard,” he says. “We are frozen in time, with maybe a gain of 2% to 3% from inflation, but we’re not making any money. At my hospital, we have to be underwritten.” Radiology has to be subsidized at BMC through the revenue streams from other departments. “We only have 25% of our patients underwritten by insurance,” Norbash says. “The others are free care, Medicare, and Medicaid. Medicare is fantastic; Medicaid, not so much; and free care is a problem.” The lack of revenue has a big impact on radiology at BMC. “Rather than radiology being what you use as much as possible, now, you try to minimize imaging as much as possible,” Norbash says. Some patients, such as sports-medicine patients who have access to suburban care, “may be encouraged to go elsewhere,” Norbash adds. At some luminary institutions in Boston, imaging contributes a tremendous amount of revenue. “That same potential is not the case here, and there’s not the same level of support from the other clinical services,” Norbash says. He continues, “If the profits are not there, then the loyalty is not clearly bound. The consequence is that obtaining new equipment gets to be more challenging. It’s a different set of concerns. We go from department to department and try to get them to support radiology.” Norbash says that so far, he hasn’t had radiologists leave, although he’s let some positions expire through attrition. “Expense reduction is not enjoyable,” he says. “Creating new lines of business is enjoyable, and hiring faculty is fun, but we have to be realistic.” BMC is caught in an inner-city trap that even lowering prices won’t cure, Norbash says. Patients who don’t have to do so won’t struggle with parking problems and other inconveniences. They go elsewhere. “We are the lowest priced in the market, but we don’t attract business because we’re all in one location,” Norbash says. While leverage works against hospitals (such as BMC) that face high-profile competitors, it works in favor of those that are able to exert leverage. Of the 23 imaging centers operated by OIA, some are run in partnership with high-profile providers, while others are ordinary urban or rural stand-alone centers, Cox says. The prices charged at each site vary widely, despite the fact that they are all part of the OIA network. “I may be at six times the Medicare fee at one center, but at a center I own, I may be at two times Medicare,” Cox notes. She points out, however, that listed prices are not what end up getting collected. Some providers will give discounts, even to self-paying (uninsured) patients, but the patients have to ask. “If my hospital gives a 15% discount, I will do the same,” Cox says. “You really care about net global payment,” she says. “That’s a combination of what we negotiate in contracts, Medicare rates, and self-pay rates. All that goes into the calculation, and that varies significantly. Is my partner dominant in the market and somebody who will go to bat for the imaging center? If so, I have higher rates there.” Pricing Pressures Several factors other than leverage also are at work in determining imaging charges. One universal factor that often results in lower prices is the decreased reimbursement for imaging exams imposed by Medicare and by payors that follow Medicare’s lead. “From where we sit, the imaging-center rates have been cut, cut, and cut,” Cox says. Imaging centers still have the option of billing more than they know they will be paid for an exam, but that doesn’t look good on financial records. “You don’t want to charge $9,000 and write off $7,000; that sends the wrong message,” Cox says. Many imaging centers have suffered such high losses of income because of the cascade of recent cuts in reimbursement that they can’t survive. Some imaging-center owners abandon ship. “A lot of times, we have bought imaging centers where it looked like everybody just walked out,” Cox says. “I have an infrastructure and know how to run them more efficiently than a single imaging center can be run.” A different tactic—much better than walking away—is for imaging-center owners (particularly radiologists) to sell to, or establish joint ventures with, hospitals where the radiologists also interpret studies. In many cases, these reconfigured imaging centers, now operating under a hospital’s banner, can then bill for the technical component of Medicare reimbursement at higher hospital rates. This can be the difference between being profitable or unsustainable, for imaging-center operation. The trouble with this is that it forces higher hospital rates onto insurers—and the insurers are fighting this strategy. The difference in technical-component reimbursements between hospital-based and freestanding settings can be large. These more lucrative hospital payments have also been adopted by private insurers that follow Medicare in setting reimbursement levels. As a result of these more lucrative fees, hospitals have been buying or partnering with radiology practices at a rapid (and, some would say, alarming) rate. Why wouldn’t they, when attaching a hospital imprimatur to an exam means gaining more revenue? “At the 2011 annual meeting of the RBMA,” Cox says, “half the people I talked to had sold out to a hospital within the past year.” In Houston, Texas, she reports, the shifting of eight centers to hospital-based billing tripled insurance claims from those centers overnight. The reason that claims tripled was that insurers were suddenly being billed the higher hospital-based technical fees. Thus, a move ostensibly begun by Medicare to guide business to hospitals (which were assumed to have a broader accountable-care motive) has actually increased the reimbursements that insurers must make for advanced imaging at outpatient centers now affiliated with hospitals. Insurers don’t want to waste money, so there are continuing attempts to rectify this. As Cox puts it, “Insurers can’t survive at hospital rates.” What they do, Cox says, is cut nonhospital outpatient reimbursements to balance the increases in hospital outpatient rates. This leaves OIA scrambling after every dime. “Every dollar matters; you have to collect everything. Nothing can be left on the table,” Cox says. Recently, she says, OIA installed software that guides the front-desk employees in its centers in explaining to incoming patients exactly what their imaging exams will cost. There is then an attempt to collect the payment before the procedure. “The front desk is a paradigm shift,” Cox says. “If you go to the dentist, they’re great at that. Hospitals are now doing this more often, and we finally just said, ‘We’re going to have to do it, too.’” One reason getting paid has become more complicated is that in the past few years, the playing field for patients has become increasingly uneven, in terms of the resources that they must expend. Uninsured patients typically face the highest charges, but they also account for the highest portion of uncollected bills. Many patients who once didn’t worry about copayments or deductibles (because their health plans minimized them) are now facing higher charges because employers have cut back on coverage. “The patients are never prepared to think that the bills are going to them,” Cox says, “and they’re not paying the high deductibles. You can’t get them to pay. We try to collect up front so we don’t have to chase them down on the back end—or so, at least, they know what the charges will be.” Maryland’s All-payor System Jonathan S. Lewin, MD, FACR, is radiologist-in-chief at the Johns Hopkins Hospital (Baltimore, Maryland). He is also a professor and chair of the radiology department at the Johns Hopkins University School of Medicine. Lewin reports that Maryland is the only state in the nation that currently uses a system requiring all insurers to pay the same rate for a given hospital service, including hospital technical fees for imaging exams. The rates that insurers pay are determined by a state commission and can vary from hospital to hospital, but at every location, insurers pay the same rate for the same service. The all-payor system is an attempt by Maryland to stabilize health-care costs by preventing insurance companies from competitively bidding prices up or down, Lewin says. “The good news, from the insurance perspective, is that nobody has to worry about someone else cutting a special deal with a hospital, causing some payors to subsidize others. That can’t happen. The insurance companies know there is a level playing field,” Lewin says. Maryland, he adds, is also the only state to operate under a waiver of Medicare reimbursement rates from CMS. “We’re not paid based on the Medicare rates for hospital-based imaging,” Lewin explains. “Medicare pays the state a lump sum, and we have to show to Medicare that the lump sum (what they disperse) is less, in aggregate, than what Medicare would pay under its rate structure. In radiology, the technical rates for certain specific tests are higher than Medicare rates, and for certain tests, they’re lower—but in aggregate, they are less expensive than standard Medicare.” He says that the plus, for Johns Hopkins, from the all-payor system is that many insurance companies have stopped leaving hospital-based outpatient imaging out of contracts because they could find cheaper providers elsewhere. “That has fully reversed, as we’ve been able to show that our costs are not that different from the outpatient ambulatory world’s costs,” Lewin says. It hasn’t hurt, either, that there is strong demand from patients for service from the well-known hospital, or that many referring physicians complained when Johns Hopkins was not a contracted provider for their patients’ health plans. Referrers were unhappy when patients couldn’t go to Johns Hopkins because quality is high there, Lewin says. Low-quality CT or MRI exams equal higher expenses in the long run, he says, because tests must be repeated and treatments can be delayed or pursued in error. “It doesn’t take many unnecessary surgeries to make up for a whole lot of CT scans,” Lewin says. “That might be a message for other academic centers that see steerage away from them.” Lewin is careful to point out that the all-payor system, with regard to radiology, applies only to technical fees. On the professional-fee side, the payments that radiologists get for interpreting exams is still negotiable, and this still is an area where insurance companies compete, Lewin says. “On the professional side,” he says, “Maryland tends to be lower priced. We have to work to make sure we get rates that are competitive—high enough to pay salaries and low enough that the insurers want to contract with us.” Overall, the all-payor system, even though it has been controversial, has saved money for payors, Lewin says. “Maryland has beat the rest of the country in cost containment,” he notes. Consumer As King The continuing push to bring prices down for imaging services finally has looped the consumer into health care’s economic calculations. Because higher deductibles and higher copayments are now common, there is an effort to encourage consumers to shop around for the least expensive MRI or CT provider in their area. This is easier said than done, as Cox notes, because consumers referred for a CT or MRI exam are likely to be more worried about their health than about seeking the lowest-cost option for getting the exam. They also might not want to challenge their physicians by going to imaging sites other than those to which their physicians have referred them. Nonetheless, empowering the consumer to price shop for advanced imaging tests is a large wave that is building, even if it is not cresting. Mark S. Grossman is COO of ProScan Imaging (Cincinnati, Ohio). ProScan Imaging operates 24 outpatient centers in seven states, as well as a teleradiology business, all under the leadership of radiologist Stephen J. Pomeranz, MD. Its primary outpatient-imaging offering is MRI, although some locations provide CT, radiography, ultrasound, and women’s imaging services, Grossman says. It has about 20 radiologists in its network and performs and reads about 100,000 MRI exams per year, Grossman adds. Part of ProScan Imaging’s marketing effort is to work in tandem with Anthem BlueCross BlueShield of Ohio in what the insurance company calls its Radiology Imaging Shopper program. When a patient’s MRI exam has been scheduled and preauthorized, Grossman says, a representative from Anthem might call that patient and point out that he or she could reduce out-of-pocket expenses by scheduling the exam at another approved imaging site, such as ProScan Imaging, instead of at the higher-cost hospital-affiliated imaging provider to which the patient was originally referred. If the patient is willing to switch, Anthem will then—often, at that very moment—call the lower-cost provider and reschedule, Grossman says. “Many times, Anthem’s representative will ask the patient to stay on the line and conduct a three-way call with our patient-concierge team to reschedule the exam immediately at ProScan Imaging,” Grossman says. “We will then help the patient navigate obtaining the exam order from the referring physician and any prior relevant exam reports, to make the transition as seamless and easy as possible.” The savings in rescheduling can be considerable, Grossman adds. He uses examples of costs for self-pay patients to illustrate the differences. “For an MRI exam of the lumbar spine without contrast, the self-pay charge at hospital-affiliated Cincinnati facilities can range from $962 to $1,559, including the technical and professional components. The ProScan Imaging combined price is $565,” Grossman says. “The average saved is $782, making the scan 58% less expensive. For a CT exam of the abdomen and pelvis with and without contrast, the hospital charge range is $1,557 to $2,098; the ProScan Imaging price is $413.” Grossman acknowledges that patients are often hesitant to consider options other than where their referring physicians suggest that they undergo their exams, but he says that Anthem has expressed willingness to talk to referring physicians about the patient’s right to choose a provider. He calls the Anthem program a triple win: The patient’s employer wins because health-care costs are held down, the patient wins because he or she pays less out of pocket, and the insurance company wins because its reimbursement is less. “What’s causing the focus on prices, right now, is that employers are choosing to self-insure and going to consumer-directed high-deductible health plans that are forcing subscribers—the employees—to become involved in the health-care decisions that are being made,” Grossman says. “We need to educate consumers proactively so that when they’re put in the position of needing an advanced imaging test, they understand they have high-quality, lower-cost options.” Steerage for Less The irony, for insurance companies, is that by mirroring the CMS reimbursement cuts to imaging, they might have encouraged outpatient-imaging providers to join forces with hospitals, where higher technical rates continue to be paid. A further irony is that these same insurers are now paying RBMs to direct patients away from the higher-cost hospital outpatient setting and back to those low-cost outpatient providers that have managed to survive the rate cuts. Randy Hutchinson is senior vice president for strategic development and client management for AIM, a subsidiary of WellPoint—by its own description, one of the nation’s largest health-benefit companies, with 66 million participants served through its networks and health plans. WellPoint is the licensee for numerous Blue Cross Blue Shield plans—including those in Ohio, where the Radiology Imaging Shopper patient-routing program is being run. AIM is the actual entity running the Radiology Imaging Shopper program and is now expanding it, Hutchinson says. AIM provides RBM services not only to WellPoint entities, but to other insurers as well. “We provide RBM services to 32 million members,” Hutchinson says. “WellPoint is a little under half of that.” He says that the Radiology Imaging Shopper rollout now encompasses about 1.5 million insured members. Hutchinson says that AIM initially tried to steer patients to low-cost imaging providers through OptiNet, its Internet portal for referring physicians, where referrers were encouraged to schedule patients at low-cost imaging centers. The referring physicians mostly ignored this, however, and continued to refer patients to sites where they had involvement or preference, Hutchinson says. “The reality is that a fair number of referring physicians are in large, integrated delivery systems geared to keeping those systems intact. Breaking that up is a less-than-compelling reason for them to switch,” Hutchinson says. Thus, for a fee, AIM has become proactive in actually telephoning patients once their advanced imaging exams have been preauthorized, pointing out to the patients that they can pay less elsewhere. “Many patients have no idea what they are paying and what sort of rates they can get,” Hutchinson says. “As the prevalence of high-deductible plans has spread, that information has been critical.” Perez says that when AIM representatives call patients, the patients are told where they can get their imaging done at a much lower cost. They are also told that if they want to switch, AIM will make the new appointment for them. “We have found, through member-satisfaction surveys, that this program has been really agreeable,” Perez says. She says that AIM screens its low-cost imaging providers for quality and directs patients only to high-quality sites. Hutchinson says that about 15% to 18% of patients contacted have switched to the recommended low-cost providers—enough to create a healthy return on investment for the program. “We’ve measured approximately 40 cents per member, per month, in savings,” Hutchinson says. “We cost about five cents to do that. Those savings opportunities are higher in the more populated areas. You can’t do that in Missoula, Montana, but in St. Louis, Missouri, it’s a sizable chunk of money.” Hutchinson adds that the speed with which patients are called and advised that they can switch imaging providers is often of the essence. “We are often placing calls within five minutes of preapproval and catching patients in the parking lot, before they leave the referrer’s office,” he says. “It sounds like an exaggeration, but it happens quickly. A key component to this is the degree to which the member wants to engage. If the patient declines, that doesn’t kill the preauthorization. It all processes as if he or she didn’t get the phone call.” Blue Book Variation in imaging prices is responsible for another notable trend. Internet entrepreneurs are designing websites to show patients how much they should pay—not only for imaging tests, but for surgeries, chronic-condition treatment, and general care. One of these websites is Healthcare Blue Book (www.healthcarebluebook.com). Healthcare Blue Book was founded and is operated by Jeffrey J. Rice, MD, JD, its CEO. Rice says that he started the company—modeled on the Kelley Blue Book, the vehicle price guide—after his son needed foot surgery. Told at the outset that surgery would cost $37,000 at a hospital, Rice says that he asked for a discount and was given a price of $15,000 to $25,000. He says that he kept investigating until he found an ambulatory-surgery center that would perform the procedure (with equal quality) for $1,500. “Things like that happen every day,” Rice says. Healthcare Blue Book sets prices for health-care procedures for every zip code in the country, Rice says. He uses his own staff of analysts to do so. For imaging, the technical and professional fees are bundled into a single recommended price, with a note to consumers that they ought to expect, at times, to receive a split bill from providers. “Our prices are based on what commercial insurers pay,” Rice says. “It’s midlevel pricing. We try to be fair.” For a CT exam of the abdomen and pelvis without contrast performed in Central Florida, the recommended price is $411. For Portland, Oregon, it’s $380; for the Bronx, New York, New York, it’s $489; and for Twin Falls, Idaho, it’s $371. “Imaging is pretty straightforward,” Rice says. “Relative to everything else in health care, imaging is pretty amenable to the patient understanding the services.” Rice says that Healthcare Blue Book sells advertising space to support its services and also works with self-insured employers directly to find optimal pricing. “When we work with employers, we’re looking at 4% to 12% savings through consumerism,” Rice says. “The average yearly expenditure per employee, for them, is now $10,000, so it’s a percentage of that.” He continues, “This has been a really good year for this whole transparency issue. Patients and employers are starting to understand pricing. That helps get providers on board.” Efforts to level the price playing field are a long way from finished, however. Imaging providers that must deal with wide swings in pricing remain wary. Cox says, “I have no idea where the whole system is going, but it can’t last like this.”