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CMS Cuts Worse Than Deficit Reduction Act for Clinics, Physicians

by Brendon Nafziger, DOTmed News Associate Editor | October 08, 2009

CMS plans to change their reimbursements to reflect 90 percent utilization of expensive equipment, like MRIs. That is, they assume, given a 50-hour work week, clinics with imaging equipment are using their machines around 90 percent of the time (or 45 hours a week), up from the 50 percent utilization (25 hours a week) currently expected. Higher utilization rates, means CMS will fork out less per unit of service.

"In determining how to value the expenses associated with equipment used in furnishing the service, CMS has to make certain assumptions about utilization to allocate the costs of equipment across the services furnished," Ellen Griffith, a spokesperson for CMS, explains to DOTmed News. "If actual utilization is above the assumed utilization, the payment for the service will be too high. On the other hand, if actual utilization is below the assumed utilization, the payment will be too low. The proposed change in the equipment utilization assumption is intended to improve the accuracy of payment by aligning the assumed utilization more closely with the actual utilization."

But Geise questions that accuracy. "90 percent is probably at the really high end," he says. "What we see anecdotally is closer to 75 or 80 percent."

Geise speculates that CMS could be overshooting the utilization rates, so when a compromise is reached in November, when the final rules are due, the number will be closer to 75 percent, which perhaps is what they wanted in the first place. The 75 percent utilization rate is also the one health care reform bills passing through Congress are expected to call for.

Nonetheless, 3d Health says even this reduced utilization rate translates into a 19 percent cut in payments for many clinics.

Reason for changes

"The primary driver [for change] is that the costs for imaging have just skyrocketed," Geise says, "especially in the freestanding setting."

One reason for the rising costs -- and one of the presumed targets of the CMS cuts -- is self-referral abuse on the part of doctors. When the DRA cut the payments per procedure for imaging services, some physicians apparently responded by simply ordering more procedures.

Evidence for this comes from a study conducted this summer, published in the Journal of the American College of Radiology, which found that when DRA cut the payments for each imaging service, volumes of cases rose among non-radiologist physicians (who can self-refer) but not among radiologists (who can't).

Pulling through

Hospitals, as with DRA, are mostly unaffected by the changes.