Gerard Durney plans a New Years toast to Medicare rule changes that, at first glance, appear to level the playing field for hospitals to compete with physician practices that have invested in imaging equipment.
Durney, administrative director of the radiology department at 531-bed Lenox Hill Hospital, New York, expects the changes to increase service volume and decrease competition for hospitals. Those changes include banning self-referrals for nuclear medicine services and making physician office imaging reimbursements align with hospital outpatient imaging reimbursement. The rules seem to make it less attractive for physicians to offer imaging services and curtail new competition for hospitals.
Durney doesnt expect immediate volume increases, but at some point it could start sending more business our way.
Even the slightest uptick in volume could pay large dividends for hospitals in the high-stakes battle with physician offices and free-standing imaging centers. New technology and growing patient demand for the services are fueling growth of the multibillion-dollar industry.
David Zimba, vice president of corporate contracting at the West Penn Allegheny Health System, Pittsburgh, says the system recently opened an imaging center to meet patient demand. He adds that, traditionally, imaging hasnt been a large revenue-generator for hospitals, but it does produce healthy margins.
Those gains are adding up.
The Advisory Board Co., a Washington, consulting firm, has been tracking the largest profitmakers for hospital outpatient services since 2001 and says last year marked the first time that imaging topped the list. The Advisory Board says imaging netted hospitals $20.9 billion, compared with $19.3 billion for surgery and other procedures.
To hospitals dismay, physicians have been able to capture more of that spending in recent years.
For Medicare alone, the spending on imaging services paid to physicians increased to $10.9 billion in 2004 from $5.7 billion in 1999, according to a June report from the Medicare Payment Advisory Commission. MedPAC advises Congress on Medicare issues and suggested that a way to control Medicare spending would be to prohibit physicians from self-referring patients for nuclear medicine services such as positron emission tomography, or PET, scans.
The Ethics in Patient Referrals Act of 1989, known as the Stark law, prohibits self-referrals for Medicare patients for certain designated health services. Many imaging tests have been included on the list of designated health services, but the CMS previous interpretation excluded nuclear medicine services.
The CMS interpretation has changed, and it has decided to institute a ban on self-referrals for nuclear medicine services starting Jan. 1, 2007the same day physician reimbursement cuts are scheduled to take effect.