Little Data, Big Deal

As July turns into August, I find myself with too many tomatoes and too little data. Neighbors and friends are the answer to summer’s abundance, but an accurate number of freestanding outpatient-imaging centers is nowhere to be found. Here’s why.

In our report on The 20 Largest Outpatient-imaging Center Chains, we do provide a count of outpatient imaging centers from the U.S. Census, circa 2013, and that is 6,740. We also report that 2,421 independent diagnostic testing facilities (IDTFs) billed Medicare for imaging services in 2013. That number, however, does not include those centers that bill as office-based imaging providers.

In some states (including California), where the practice of corporate medicine is forbidden, the only way an IDTF can operate and bill Medicare is if it is owned by a physician practice, a hospital, or both—unless, of course, it bills under the Hospital Outpatient Prospective Payment System (HOPPS), which provides a more generous technical fee for many imaging codes.

The number of freestanding outpatient imaging centers—those that bill under the Medicare Physician Fee Schedule (MPFS)—likely lies somewhere north of 2,421 and south of 6,740. U.S. Census counters are unlikely to have delved into the byzantine pricing structures governing the reimbursement of healthcare providers, so we believe that the 6,740 figure includes some outpatient imaging centers that bill under HOPPS

The distinction between HOPPS-billing and MPFS-billing imaging centers is important in order to compare like companies. The freestanding imaging-center market segment operates on less generous margins, so for purposes of this ranking, we think a distinction must be made.

As this year’s report demonstrates, independently owned imaging centers are disappearing as operators seek protection in joint ventures with hospitals. The regulatory and reimbursement systems that control how Medicare and Medicaid dollars are spent continue to have an undeniable effect on the market.

If the hospital premium goes away, as anticipated by some, the distinction between centers that bill under HOPPS and MPFS will no longer be necessary. How a site-neutral payment policy would impact hospitals and independently owned imaging center companies is hard to predict, but one result could be a unified voice to advocate a more rational payment policy for the entire outpatient-imaging sector.

The teeming, scheming market

Hospitals are beginning to see the value of having a community presence far enough from the mothership to surrender their HOPPS premium: Rational minds understand that the outpatient environment is a less-expensive setting in which to operate—and that’s where healthcare is going. That hospitals still are reluctant to migrate far enough from their campuses to swap HOPPS for MPFS also is easy to understand.

Opportunism, while less easy to defend on moral grounds, is another natural response to market discrepancies. Whether due to opportunism, consolidation (in the freestanding outpatient-imaging and hospital markets), or something else, trends identified in a new study(1) from the team at Thomas Jefferson University Hospitals suggest that the reimbursement differential is having an effect on where outpatient imaging services are delivered.

Overall, the utilization rates per 1,000 for advanced imaging in private offices rose from 478 in 2001 to 874 at their peak in 2008. They plummeted to 503 in 2011, attributed mainly to code bundling by Patel et al. The rates continued to decline in 2012 and 2013 (to 462 per 1,000), although no further code bundles were introduced.

Advanced imaging utilization rates per 1,000 in hospital outpatient departments (HOPDS) increased from 416 in 2001 to 523 in 2008. HOPDs also experienced a bundling-related decline to 418 per 1,000 in 2011. Since then, however, utilization rates per 1,000 of advanced imaging have increased from 418 to 447.

We’ve all seen the price disparity among  advanced imaging providers on consumer healthcare web sites. We understand that the shift of services to a more expensive setting has serious implications for patients who are paying a greater portion of the healthcare tab. It’s tempting to think about what might happen if everyone started to watch every Medicare dollar as if it were coming out of their pocket—because, really, it is. 

(1) Patel BP, Levin DC, Parker L, Rao VM. The shift in outpatient advanced imaging from private offices to hospital facilities. J Am Coll Radiol.