By Greg Schneider

This is the first installment of a regular series on policy topics from Siemens Healthcare.

Within imaging circles, the reimbursement cuts associated with the Deficit Reduction Act (DRA) are referenced in hushed tones. Those cuts may have been made in the middle of the last decade, but they still reverberate throughout the imaging community — a testament to their magnitude and the shock they induced. You may be surprised, then, to learn that even more significant changes to imaging reimbursement occurred at the beginning of 2014.
For example, the Medicare national average reimbursement rate for CT in the hospital outpatient setting fell approximately 20 percent, while hospital outpatient MR rates dipped 12 percent from their 2013 levels. CT and MR reimbursement in physician offices and imaging centers also experienced double-digit drops. At the same time, reimbursement for other imaging modalities in the hospital setting rose dramatically (in some cases, for example, singe-photon emission CT — aka SPECT — increased by 70 percent).

Why the seismic shifts — and why now? The changes in the physician office are straightforward. The Utilization Rate contained in the physician payment formula increased by law to 90% in early 2013 for implementation in 2014.

The changes in the hospital outpatient setting are more complicated, however. The Centers for Medicare and Medicaid Services (CMS) requires hospitals to assign their costs to "Cost Centers" and report those costs each year. Several years ago, CMS created new CT and MR Cost Centers (in addition to the traditional Radiology Cost Center) and encouraged hospitals to assign their CT and MR costs to these new Cost Centers. This year, CMS opted to utilize the new data it received concerning CT and MR costs to calculate payment rates for the technical component of imaging procedures in the hospital outpatient setting. The goal of this policy is to achieve greater transparency for CT and MR cost reporting.

However, whether this methodology is more accurate isn't clear. Some believe that the true costs of CT and MR are not reflected in the CT and MR Cost Centers, undervaluing these services. For example, has CMS been overpaying for CT and MR for years and underpaying all other modalities? Does a methodology that reimburses a head CT at virtually the same rate as a skull X-ray better reflect actual costs?

To limit some of the extreme payment changes created by this new methodology, CMS implemented a four-year transition period that excludes data from hospitals that reported costs using less precise methodologies such as the "square feet" methodology. (According to CMS, about half of all hospitals use one of CMS' preferred accounting methods - either the "direct assignment" or "dollar value" method).

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