United States: MedPAC Votes to Recommend Changes in Medicare Policies for Imaging Services

On January 12, 2005, the Medicare Payment Advisory Commission ("MedPAC"), an independent Congressional advisory panel, voted to recommend that Congress adopt a series of policy changes to promote more effective use of imaging services covered by the Medicare program. The recommendations range from the establishment of federal standards for providers who bill Medicare for performing or interpreting diagnostic imaging services, to an expansion of the "Stark" physician selfreferral restrictions for certain imaging services.

The MedPAC recommendations will be included in a March 2005 report to Congress. While the recommendations are not binding on the Congress or the Secretary of Health and Human Services ("Secretary"), policymakers can be expected to consider the recommendations as they look for ways to improve quality while achieving Medicare program cost savings.

MedPAC has been concerned about rising imaging service utilization in the Medicare program. The panel has been exploring strategies used by private insurance plans to manage the use and quality of imaging services, and has examined how feasible it would be for fee-for-service Medicare to implement these approaches. These reviews culminated in the following series of recommendations pertaining to imaging services under the Medicare program adopted by MedPAC at a meeting on January 12, 2005.

Under the first recommendation, Congress would direct the Secretary to use Medicare claims data to measure fee-for-service physician resource use. The Secretary would share the results with physicians on a confidential basis to educate them on how they compare with peer benchmarks or clinical guidelines. According to MedPAC staff, the goal of this provision is to encourage physicians who order more tests than the average to reconsider their practice patterns.

Second, MedPAC recommends that the Secretary improve Medicare’s coding edits that detect unbundled diagnostic imaging services. Moreover, the Secretary is urged to reduce the technical component payment for multiple imaging services performed on contiguous body parts.

MedPAC staff expect that better coding edits will help Medicare pay more accurately for imaging services, thereby helping to control rapid spending growth and reducing beneficiary copayments. MedPAC cites private insurers’ experience with such edits, which have reduced imaging spending by about 5 percent in certain commercial plans.

MedPAC adopted related recommendations on standards for certain imaging personnel. First, MedPAC recommends that Congress direct the Secretary to set standards for all providers who bill Medicare for performing diagnostic imaging services. The Secretary would select private organizations to administer the standards.

According to MedPAC staff, such national standards should improve the quality of imaging services, thereby increasing diagnostic accuracy and reducing the need for repeat tests (although they were unable to quantify associated savings). There was debate at the meeting regarding whether the recommendations should specify that such standards should cover the imaging equipment, nonphysician staff, image quality, supervising physicians, and patient safety. In order to be less prescriptive, however, MedPAC decided against including recommendations for individual components of the standards. Nevertheless, this recommendation represents an unusual attempt to involve the federal government in establishing standards for individual practitioners, a task that traditionally has been left to certifying or licensing boards, but which MedPAC believes is justified in this case due to rising imaging utilization.

Likewise, MedPAC recommends that Congress direct the Secretary to set standards for physicians who bill Medicare for interpreting diagnostic imaging studies. Again, the Secretary would select private organizations to administer the standards. MedPAC staff note that there is evidence of variations in the quality of physician interpretations of imaging reports, and inaccurate interpretations or incomplete reports could lead to improper treatment. Moreover, MedPAC seeks to apply these standards to physicians who use teleradiology to interpret imaging studies performed in a different location. As in the discussion of standards for personnel who perform the tests, MedPAC stripped from the interpreting physician recommendation more prescriptive language that would have required the interpreting physician standard to be based on the training, education, and experience required to properly interpret studies.

The fifth imaging recommendation addresses the Stark physician self-referral statute. Under Stark, a physician who has a direct or indirect ownership interest, investment interest or compensation arrangement with an entity (or who has an immediate family member with such a financial interest) generally is prohibited from referring patients to that entity to receive "designated health services" that are reimbursable by the Medicare program. Designated health services ("DHS") currently include x-ray, ultrasound, MRI, CT, radiation therapy, and certain other radiology services. As a result, Stark generally prohibits a physician from ordering and subsequently providing radiology services to Medicare patients through his or her own practice unless the physician can demonstrate compliance with an exception to Stark. However, the Centers for Medicare & Medicaid Services has determined that nuclear medicine and positron emission tomography ("PET") procedures are not considered to be DHS under the Stark statute.

MedPAC has voted to recommend that the Secretary include nuclear medicine and PET procedures as DHS under the Stark physician self-referral law. In other words, physicians would be prohibited from owning nuclear medicine facilities to which they refer patients (although physicians still could provide these services in their own offices under the "in-office ancillary exception" to the Stark law self-referral restrictions). MedPAC staff note that physician investment in facilities that provide nuclear medicine services is associated with higher use, since physicians have a financial incentive to order additional services. Moreover, staff point out that physicians have an incentive to refer patients to facilities in which the physician is an investor, which could undermine fair competition.

Under the Stark law, physician ownership is restricted only if the entity actually submits claims to a federal health programs; physicians can own companies that lease equipment or services to providers without any restrictions if those companies do not submit claims. For instance, a physician can own a company that leases equipment or services to an imaging center, and the equipment company receives a fee from the imaging center every time it performs a procedure. According to MedPAC, the physician has a financial incentive to refer patients to the center, since the physician is able to indirectly share in the profits.

MedPAC has voted to recommend that the Secretary expand the definition of physician ownership under the Stark law to include interest in an entity that derives a substantial portion of its revenue from a provider of designated health services. In other words, physicians would be precluded from owning companies whose primary purpose is to provide services to facilities that are covered by the Stark prohibitions on self-referral. MedPAC staff warn, however, that "if HHS closes off this type of financial arrangement new ones will emerge that create similar incentives." To that end, MedPAC staff believe a long-term solution involves determining whether there is "mispricing" for imaging services.

The MedPAC recommendations stem from the commission’s findings that between the years 1999 and 2002, the volume of imaging services provided to Medicare patients grew by an average of 9 percent per year as compared to less than 2 percent for evaluation and management services and just over 4 percent for medical procedures. Similarly, the Blue Cross and Blue Shield Association ("BCBSA") reported in October of 2003 that between 1999 and 2001, its plans experienced remarkable levels of growth in outpatient diagnostic imaging costs (per member per month). BCBSA estimated that health plan costs for outpatient x-ray services increased by 18 percent while costs for CT and MRI services reportedly rose a staggering 45 percent and 47 percent respectively during a mere two year period.

In response to these and other industry reports of rapidly increasing costs and utilization of outpatient diagnostic imaging services, both physician groups and health plans are taking a second look at Stark and considering other methods for preventing overutilization of services and controlling health care costs. One method that will be actively promoted by the American College of Radiology will be a "designated physician imager" ("DPI") initiative. This approach will track with MedPAC’s recommendations for standards for those providers who perform or interpret imaging services. Such recommendations, if enacted by Congress, will impact primarily imaging services performed in physician offices, one of the main sources of the increase in utilization of imaging services. Quality measures are in place in acute care hospitals where credentialing largely ― albeit not totally ― assures the qualifications of those performing and interpreting imaging studies. Similarly, the qualifications of personnel in independent diagnostic testing facilities ("IDTF") are set by Medicare’s rules relating to IDTFs, leaving physician offices as the principal ground where MedPAC’s recommendations, if adopted, will most impact.

The recommendations regarding nuclear medicine’s designation under Stark is consistent with the Department of Health and Human Services notice in its semi-annual regulatory agenda on three occasions that the agency would propose a rule that would amend the definitions of "radiology and certain other imaging services" and "radiation therapy services and supplies" under the Stark rules to include diagnostic and therapeutic nuclear medicine services and supplies, respectively, as DHS subject to the rule’s referral prohibitions.

Finally, the recommendations regarding physician ownership of entities that provide services to facilities covered by Stark would impact the many leasing company arrangements in place, where referring physicians may not have a financial interest in an imaging center to which it refers patients, but rather have ownership in an entity that leases equipment and provides services to diagnostic imaging centers. 

This article is presented for informational purposes only and is not intended to constitute legal advice.