Imaging Cuts in Deficit Reduction Act 2005 Will Harm Patients and Physicians

ISSUE: Severe, last minute payment cuts in medical imaging in the Medicare physician fee schedule included in the Deficit Reduction Omnibus Reconciliation Act of 2005 (DRA) will lead to a wide range of adverse, unintended consequences for Medicare beneficiaries and providers.

BACKGROUND: Section 5102 of the DRA directs severe reductions in payments for many imaging services under the Physician Fee Schedule (PFS). Under this provision, which went into effect on January 1, 2007, the payment for the technical component (e.g., equipment, non-physician personnel, supplies, and overhead) of an imaging service will be set at the Hospital Outpatient Department (HOPD) payment rate, if the PFS payment rate is higher.

CONCERNS: This change in Medicare payment policy raises a number of disturbing issues such as:

• Rushed and Inadequate Process — Neither Congress, nor MedPAC, nor any other public forum has held a public hearing or meeting on this proposal. This proposal has received no public comment or testimony.
• Disproportionately Large Cuts for Imaging — The cuts enacted for imaging by the DRA comprise roughly one-third of the total Medicare savings in the bill. Yet imaging only comprises roughly one-tenth of Medicare spending. Examples of these cuts include:
  • Ultrasound — Reimbursement for ultrasound guidance procedures, performed as part of a minimally invasive biopsy for the diagnosis of breast cancer (a biopsy method with projected Medicare savings of $88 million from 2001-2003), would be reduced by 35 percent.
  • PET / Nuclear Medicine — Reimbursement for PET/CT exams used to diagnose cancerous tumors and determine the effectiveness of cancer treatment would be reduced by upwards of 50 percent (an unprecedented cut for a new technology whose HCPCS code was just provided by CMS in April 2005).
  • DEXA — Reimbursement for bone densitometry studies necessary for the diagnosis of women at risk for osteoporosis (a recently enacted Medicare screening benefit) would be reduced by over 40%.
  • MRI — Reimbursement for MR angiography of the head used to detect the location of aneurysms would be reduced by 42%.
• A Failure to Recognize the Fundamental Differences between the costs associated with practicing medicine in a physician's office, and practicing medicine in a hospital outpatient department — The different payment formulas for each site of service are specifically designed by Congress to take into account the unique differences and costs of providing care in each setting. Linking reimbursement under the PFS system to the HOPD system ignores real-world costs in personnel, rent, and supplies that physicians in non-hospital settings must deal with daily.
• Limiting Beneficiary Access to Critical Imaging Services — These cuts have the very strong potential to drive imaging from the physician office and free-standing facilities back into hospital outpatient departments, thus limiting Medicare beneficiaries' access to nearby imaging services that allow for more timely diagnosis and initiation of treatment. 
• Reduced Access For Medicare Patients in Rural Areas — Beneficiaries may be forced to drive long distances for needed imaging services if providers reduce or eliminate imaging locally. Also physicians may choose not to invest in telemedicine equipment that allows specialists at distant locations to help interpret a patient's scan — again harming rural access.