New CT and MRI Cost Centers Could Affect Us All

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 - New CT and MRI Cost Centers Could Affect Us All
Ezequiel Silva III, MD

CMS proposes paying hospitals the same amount for a head CT exam as for a skull radiograph in 2014. This is but one example of the payment anomalies that will occur when CMS applies data from the recently created CT and MRI cost centers to the determination of hospital payments. CMS has finalized the rule¹ using these data within the Inpatient Prospective Payment System, subjecting CT- and MRI-intensive DRGs to payment reductions. It has proposed² applying the same methodology to the Hospital Outpatient Prospective Payment System (HOPPS); this will have broader implications, since the DRA caps physician-office payment at the lower of the HOPPS or Medicare Physician Fee Schedule amount. Therefore, physician-office payments also will suffer concordant reductions in payment for CT and MRI services. The ACR® and others are appealing to CMS to abandon the use of CT- and MRI-specific cost centers and cost-to-charge ratios in the final HOPPS rule, which will be published in the Federal Register later this year. If CMS does not completely abandon the proposal, CMS should consider delaying its implementation or establishing minimum data-quality requirements. If all else fails, our last hope for maintaining appropriate payments is to improve our own cost reporting. The new CT and MRI cost centers were created in 2010, based on a 2007 study 3 of charge compression prepared for CMS by RTI International, LLC. RTI’s recommendation of the creation of new CT and MRI cost centers was somewhat puzzling, since the report itself pointed out, “Many facilities had very low cost ratios on these nonstandard lines . . . This raises questions about the relative accuracy of their cost finding. . . . [CT and MRI] services are very capital intensive, and accurate cost ratios will depend on providers’ being able to assign actual equipment depreciation and lease costs directly to the cost centers, rather than the traditional method of allocating average capital costs based on square footage.” 3 In fact, subsequent analysis has shown that the recently acquired CT and MRI data are flawed; are not reflective of the actual costs for CT and MRI services; and are, therefore, unworthy of application to actual payment amounts. The misallocation of CT and MRI costs is widespread, with a significant number of hospitals reporting little or no capital cost for CT and MRI. A recent internal analysis by Direct Research, LLC, estimated that of 4,380 hospitals reporting CT and MRI data, only 179 (4%) captured the appropriate cost data. Partly Our Fault In some ways, the inappropriately low charge information from the CT and MRI cost centers is the result of our own billing shortcomings. We are not properly allocating the appropriate costs to the CT and MRI cost centers. As the RTI International study and subsequent analyses have shown, cost reporting for CT and MRI is challenging for hospitals, given the capital-intensive nature of CT and MRI. This makes it difficult to capture all overhead costs related to equipment, labor, and overhead appropriately. Moreover, assigning costs related to equipment depreciation and leases is even more difficult. Therefore, many facilities use the long-standing method of allocating average capital costs based on square footage. In other words, the hospitals are treating CT and MRI systems as hospital fixtures (hospital overhead) instead of as equipment (a radiology-specific cost), resulting in significant cost allocations being lost. We can do better with our cost-center allocations. A new reclassification system is required to allocate these capital costs better, and this requires the engagement of radiologists, IT system administrators, hospital radiology-department directors, and finance officers. A direct-allocation method should be used (rather than the square-foot method whereby CT and MRI costs are allocated to other cost centers across the hospital). Ideally, CMS will recognize the payment anomalies created by the flawed data from the new CT and MRI cost centers—as well as the downstream effects on physician-office payments—and will abandon the HOPPS proposal altogether. In the meantime, radiology professionals should acknowledge and address the billing shortcomings exposed by the flawed data and take steps to improve our charges. The DRA has forever linked hospital and office payments, so this battle belongs to all of us to fight. Ezequiel Silva III, MD, is the director of interventional radiology and treasurer for South