Imaging After the Recession

Elyas Bakhtiari, for HealthLeaders Magazine , February 4, 2010
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After freezing capital spending during the recession, hospitals are investing in imaging again. But reimbursement cuts and reform have changed the focus of the service line.

When the worst of the economic recession hit and the stock market crashed in late 2008, most hospitals and physician practices had a similar initial reaction: Freeze capital expenditures. Or at least limit them to immediately necessary purchases. For most, that meant a temporary armistice in the imaging arms race.

Nearly 80% of all hospitals reduced capital spending because of the economic crisis, and more than half decided not to move forward with projects that were planned but hadn't yet started, according to a survey by the American Hospital Association. "I think that, uniformly, people have not been making the capital investments," says Bibb Allen, MD, chair of the American College of Radiology's economics commission. "You couldn't find an observer anywhere who would say equipment purchases have been the same in the last year as they were the five preceding years."

But now that the healthcare economy seems to be on the upswing—even if the rest of the economy lags behind, reports suggest hospitals began recovering in 2009—hospitals and physicians are figuring out how to reposition themselves in a new imaging environment and may have to take different approaches than before.

Physicians in particular may be forced to have a new outlook on imaging purchases. The downward pressure on outpatient imaging reimbursement that began with the 2005 Deficit Reduction Act—which in 2007 began a five-year process of cutting outpatient payments by an estimated $2.6 billion over five years—continued in 2009 when CMS tweaked its physician payment formula in the 2010 Medicare Physician Fee Schedule.

CMS officials thought the agency had been overpaying physicians by underestimating how often physicians really use the equipment, so they changed the assumed utilization rate for imaging equipment from 50% to 90%. This stemmed in part from a MedPAC study in 2006 that found that MRI and CT machines were used at nearly twice the estimated rate, meaning CMS has been paying too much. Physicians who own imaging equipment receive payment via practice expense RVUs to offset some of their investment and maintenance costs, and the change will essentially lower reimbursement over several years.

It wasn't long ago that physicians had the upper hand in the imaging game and hospitals watched market share slowly erode away to physician offices and physician-owned imaging centers. But the cumulative effect of these reimbursement cuts has been a shift in imaging growth prospects.

"Now with these new changes the payments for MRI and CT for physicians are going to fall below the hospital payments, so one solution might be that physicians would look to partner with hospitals for imaging," says Allen.

The challenge for both is to develop partnerships that will ultimately make imaging safer and more efficient, as healthcare reform casts a spotlight on overutilization and rising costs.

Success Key No. 1: Cut clinical waste
One of the reasons for the federal scrutiny and reimbursement cuts has been imaging's contribution to rising healthcare costs. Medicare spending on imaging more than doubled between 2000 and 2006 to over $14 billion annually, and the spike has left lingering questions about the clinical necessity of some tests and procedures. How much of the cost is due to unnecessary, or unnecessarily expensive, imaging tests that don't actually improve the quality of care? Everyone from payers to administrators to President Obama wants an answer to that question.

At the national level, there are efforts to cut clinical waste through funding for comparative effectiveness research and other evidence-based standards for care. With better research about the efficacy of diagnostic procedures, the thinking goes, physicians can make better decisions about quality and cost.

That theory was tested last fall when the U.S. Preventive Services Task Force released new guidelines for breast cancer screenings based on a review of clinical research. Previous guidelines recommended annual mammograms for women over 40, but the task force found the benefits of annual testing insufficient and recommended against routine mammography for women 40 to 49 years old and suggested women 50 to 74 get a mammogram every two years.

However, after backlash from patients, physicians, and politicians, the USPSTF was forced to clarify its statements and assure the public that its guidelines were not mandatory. Although stakeholders in healthcare are in agreement about the need to reduce utilization, it may prove easier said than done when corralling various interest groups.

But the challenge of reducing utilization is also being taken up (perhaps with better success) at the hospital level. Hospital leaders are increasingly looking to cut waste from the clinical process after initial success reducing administrative waste with management strategies like Lean.

"Our big focus and one of my goals is to try to figure out utilization and if we can decrease any of it on the inpatient side," says Clare Rose, vice president of operations for The Methodist Hospital, a private teaching hospital in Houston.

The key to tackling utilization is protocols, she says. "For every CT and MRI ordered here we have a protocol."

But developing and disseminating protocols can be a challenge. Some private insurers use radiology benefit managers to preauthorize tests and control utilization, but they aren't a big hit with physicians, who have to call up the RBM for confirmation. In fact, they are becoming increasingly replaceable by electronic decision-support tools, according to Scott Cowsill, a cofounder of the Imaging e-Ordering Coalition, an organization of physicians and private companies that advocates for greater use of decision-support tools.

Success Key No. 2: Sell patients on quality
If patients are reluctant healthcare consumers and undiscerning when it comes to cost and quality in general, they are even more so when consuming imaging services. Hospitals can try to differentiate based on the equipment they have, but even then patients typically are more intrigued by what's new or cutting-edge, regardless of whether that necessarily means it is better.

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