Policy Implications of the Computed

Tomography (CT) Scanner

November 1978

NTIS order #PB81-163917
Library of Congress Catalog Card Number 78-600078

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402

ii
FOREWORD

This study, Policy Implications of the Computed Tomography (CT) Scanner, was

requested by the Senate Committee on Finance and the Senate Committee on Human

Resources. It examines the CT scanner, an expensive, new diagnostic device that combines X-ray and computer equipment. The CT scanner has been rapidly and enthusiastically accepted by the medical community in this country since its introduction in 1973. It

is a medical technology whose development and use illustrate many important issues of

health policy.

The Senate Committee on Finance requested the Office of Technology Assessment

(OTA) to consider such aspects of the CT scanner as “its usefulness, its costs, its effect on

medical care delivery patterns, and ways to improve planning affecting such devices. ”

The Senate Committee on Human Resources requested OTA “to examine current

Federal policies and current medical practices to determine whether a reasonable amount

of justification should be provided before costly new medical technologies and procedures are put into general use. ” The Committee specifically asked that issues of efficacy

and safety be addressed: “Before new drugs can be used, proof of efficacy and safety

must be provided. However, no such legal requirement applies to other new

technologies. ”

The study was conducted by staff of the OTA Health Program with the assistance of

the OTA Health Program Advisory Committee. The resulting report is a synthesis and

does not necessarily reflect the position of any individual.

In accordance with its mandate to provide unbiased information to Congress, OTA

has attempted in this report to present information accurately and to analyze that information objectively. The report contains no recommendations, but instead identifies a

range of alternative policies for consideration by Congress. The views expressed in this

report are not necessarily those of the OTA Board, the OTA Advisory Council, or their

individual members.

RUSSELL W. PETERSON

Director

Office of Technology Assessment

. . .

111
—

OTA HEALTH PROGRAM STAFF

H. David Banta, Study Director (until December 1977)

Jane Sisk Willems, Study Director (from May 1978)

Other Research Staff

Clyde J. Behney, Theresa A. Lukas, Joshua R. Sanes

Administrative Staff

Debra Datcher, Patricia Gomer, Ellen Harwood,

Laurence S. Kirsch, Elizabeth Price

Carole Stevenson, Cheryl Sullivan

Carl A. Taylor, Program Manager (until May 1978)

Gretchen Kolsrud, Acting Program Manager

OTA PUBLISHING STAFF

John C. Holmes, Publishing Officer

Kathie S. Boss Joanne Heming
OTA HEALTH PROGRAM ADVISORY COMMITTEE

Frederick C. Robbins, Chairman

Dean, School of Medicine, Case Western Reserve University

Stuart H. Altman

Dean

Florence Heller School

Brandeis University

Robert M. Ball

Senior Scholar

Institute of Medicine

National Academy of Sciences

Bernard Barber

Professor

Department of Sociology

Barnard College

Columbia University

Rashi Fein

Professor of the Economics of Medicine

Center for Community Health and

Medical Care

Harvard Medical School

Melvin A. Glasser

Director

Social Security Department

United Auto Workers

Judith R. Lave

Associate Professor

School of Urban and Public Affairs

Carnegie-Mellon University

Sidney S. Lee

Associate Dean

Community Medicine

McGill University

C. Frederick Mosteller

Professor

Department of Statistics

Harvard University

Helen Ewing Nelson

Director

Center for Consumer Affairs

University of Wisconsin-Extension

Anthony Robbins

Executive Director

Department of Health

State of Colorado

Charles A. Sanders

General Director

Massachusetts General Hospital

Kerr L. White

Chairman

U.S. National Committee on Vital and

Health Statistics
CONTENTS

Chapter

1.

2,

3.

4.

5.

6.

7.

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy Problems Identified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scope of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Organization of the Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Principles of CT Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operation of the CT Scanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Development of the CT Scanner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EFFICACY AND SAFETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Issue of Efficacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evidence of Efficacy of CT Scanners. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Safety of CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Policies Concerning Efficacy and Safety. . . . . . . . . . . . . . . . . . . .

Shortcomings of Efficacy and Safety Policies . . . . . . . . . . . . . . . . . . . . . .

NUMBER AND DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Experience With CT Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Governmental and Nongovernmental Policies . . . . . . . . . . . . . . . . . . . . .

Federal Policies in Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shortcomings of Planning PoIicies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PATTERNS OF USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Experience With CT Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Federal Policies Concerning Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shortcomings of Utilization Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REIMBURSEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Experience With CT Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Governmental and Nongovernmental Reimbursement Policies . . . . . . . .

Shortcomings of Reimbursement Policies. . . . . . . . . . . . . . . . . . . . . . . . .

POLICY ALTERNATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

l. Information inefficacy and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Government Regulatory Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Financing Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

3

6

9

10

11

12

15

15

16

19

27

27

29

38

39

42

47

47

54

59

62

67

68

75

77

81

81

93

100

105

106

110

117

vii
APPENDIXES

I. LOCATION OF CT SCANNERS INSTALLED IN THE

UNITED STATES, MAY 1977. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

II. THEORETICAL CAPACITY AND ACTUAL OUTPUT OF A

CT SCANNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

III. INTERIM PLANNING GUIDELINES FOR COMPUTERIZED

TRANSAXIAL TOMOGRAPHY (CTT) . . . . . . . . . . . . . . . . . . . . . . . . . 139

IV. ESTIMATES OF

CT SCANNER.

v. CALCULATION

1976. . . . . . . . . .

ANNUAL EXPENSES OF OPERATING A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

OF NET EXPENDITURES FOR CT SCANNING,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

VI. FEDERAL DEPARTMENTS AND AGENCIES WITH DIRECT

INVOLVEMENT IN CT SCANNING . . . . . . . . . . . . . . . . . . . . . . . . . . 147

VII. INTERNATIONAL VIGNETTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

VIII. METHOD OF THE STUDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

LIST OF TABLES

Table

Number

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

Characteristics of CT Scanners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diagnostic Accuracy of Head Scanning: Summary of Published Studies. .

Comparison of CT Head Scanning With Other Neurodiagnostic

Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diagnostic Accuracy of Body Scanning: Summary of Initial Results. . . . .

Radiation Exposures From Use of Some Common Neurodiagnostic

Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Type and Manufacturer of CT Scanners in Use, May 1977 . . . . . . . . . . . .

Coordinates of Diffusion Curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distribution of CT Scanners by State, Region, and Population. . . . . . . . .

Distribution of CT Scanners by Type of Facility. . . . . . . . . . . . . . . . . . . .

States With Certificate-of-Need Legislation, Section 1122 Agreements,

or CT Planning Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Criteria Used by Health Planning Agencies in Reviewing Applications for

CT Head Scanners, August 1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Some Diseases That Can Be Diagnosed by CT Scanning. . . . . . . . . . . . . .

Major Diagnostic Uses of Head Scanning . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated Types of Patients Diagnosed or Referred Annually Who Are

Potential Cases for CT Head Scanning . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated Annual Expenses of Operating a CT Scanner . . . . . . . . . . . . . .

Prices of EMI Scanners, 1973-77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated Average Cost of a CT Examination at Different Rates of

output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

31

34

37

39

48

50

51

53

56

61

69

70

73

82

84

85

. . . Vlll
Table

Number

18. Fees Charged for CT Examinations,

Page

1976 . . . . . . . . . . . . . . . . . . . . . . . . . 87

19. Reported Charges and Estimated Expenses of a CT Head Examination . . . 89

20. Estimated Average Annual Profits From a CT Head Scanner, 1976. . . . . . 89

21. Estimated Expenditures for CT Scanning, 1976. . . . . . . . . . . . . . . . . . . . . 91

22. Federal Departments and Agencies With Direct Involvement in CT

Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

23. Numbers of Cerebral Angiographic and Pneumoencephalographic

Examinations inVariousSwedish Hospital Categories . . . . . . . . . . . . . 158

LIST OF FIGURES

Figure

Number Page

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Computed Tomography (CT) Head Scanner . . . . . . . . . . . . . . . . . . . . . . 4

Computed Tomography (CT) Body Scanner . . . . . . . . . . . . . . . . . . . . . . 5

Schematic Illustration of CT Scanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Normal Brain Cross-Section, CT Scan . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Examples of Graphically Reported CT Findings . . . . . . . . . . . . . . . . . . . . 18

Typical Computed Tomography Installation Involving Divided Rooms.. 19

Configuration of First and Second Generation CT Scanners With

Parallel-Beam Data Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Third Generation CT Scanner Configuration With Fan-Beam Data

Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Malignant Lymphoma in Right Frontal Region Before and

After Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Cumulative Number of CT Scanners in the United States by

Date of Installation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
m
1 ●

SUMMARY

The computed tomography (CT) scanner* is a revolutionary diagnostic device that

combines X-ray equipment with a computer and a cathode ray tube (television-like

device) to produce images of cross sections of the human body. The first machines were

“head scanners,” designed to produce images of abnormalities within the skull, such as

brain tumors (figure 1). More recently, “body scanners” have been marketed, which scan

the rest of the body as well as the head (figure 2).

CT scanning has been rapidly and enthusiastically accepted by the medical community. Developed in Britain in the late 1960’s, the CT scanner was quickly hailed as the

greatest advance in radiology since the discovery of X-rays. Head scanning has become a

standard part of the practice of neurology and neuroradiology, and physicians believe

that the potential of body scanning is great. Less than 4 years after the introduction of CT

scanning into the United States, at least 400 scanners had been installed at a cost of about

half-a-million dollars each. In 1976, about $300 million to $400 million were spent on CT

scanning, and that figure was only partially offset by reductions in other diagnostic procedures.

The rapid spread of CT scanners, the frequency of their use, and the expenditures

associated with them have combined to focus attention on the role of diagnostic medical

technologies in the increase of medical care expenditures during recent years.** This concern over expenditures has caused decisionmakers to examine policies regarding the use

of diagnostic technologies.

Physicians generally make a diagnosis by taking a medical history, conducting a

physical examination, and, as appropriate, ordering diagnostic tests. During the physical

examination, the physician may utilize instruments such as the stethoscope and blood

pressure cuff. And for some years, diagnostic tests involving X-ray and clinical laboratory procedures have been available.

During the past three decades, a virtual explosion has occurred in the development

and use of diagnostic technologies. A wide array of new devices has been developed,

greatly extending the ability to diagnose medical problems. The list of technologies now

*In this report, the term computed tomography (CT) scanner refers to a transmission scanner.

Other terms used for this device are CAT scanner (computerized axial tomography), CTT scanner

(computerized transverse or transaxial tomography), and EMI scanner (for the company, EMI,

Ltd., which developed the first scanner). Emission computed tomography scanners have also been

developed.

**It should be noted that the contribution of the CT scanner to the overall problem of rising

health care costs is relatively small.

3
4 ● Ch. l—Summary

Figure 1 .—Computed Tomography (CT) Head Scanner

Photo Courtesy of Clinical Center < National Institutes of Health

includes such items as automated clinical laboratory equipment, electronic fetal monitoring, amniocentesis, electrocardiography (EKG), electroencephalograph (EEG), fiberoptic endoscopy of the upper and lower gastrointestinal tracts, ultrasound, mammography, and, of course, computed tomography. Each year the list grows longer.

Diagnoses of some medical problems can be definitive and conclusive rather than ambiguous and inconclusive as they were just a few years ago. These technologies can

sometimes guide physicians to appropriate treatments, preventing death and disability

and relieving pain and suffering.

The incentives for physicians to make greater use of diagnostic tests are very powerful. Both patients and physicians desire accurate and precise diagnoses. During their

medical education, physicians are taught to use diagnostic tests extensively so that

medical problems will not be overlooked. The recent increase in malpractice litigation

has also made physicians more cautious about diagnosing accurately and avoiding errors. Other incentives arise from fee-for-service payment, which provides fees for each
Ch. l—Summary ● 5

Figure 2.—Computed Tomography (CT) Body Scanner

“~ ‘

Photo Courtesy of Clinical Center, Nafional Institutes of Health

additional diagnostic test performed. Moreover, reimbursement by third parties insulates

patients from a considerable part of the expenditures and provides payment at rates

largely determined by physicians and hospitals.

Both the availability of a wide variety of diagnostic tests and the strong incentives to

use them have enormously increased their utilization during the past few years. In fact,

there appears to be virtually no upper limit on the number and kind of diagnostic tests

that a cautious and caring physician can order. Frequently, additional tests may provide

little new information. And while sometimes new technologies actually replace older

ones, they usually are just added on.

The increase in diagnostic testing has made a sizable contribution to the increase in

total medical care costs during the past 10 years. New technologies require specialized

personnel, supplies, or facilities, each contributing to total operating costs. Some technologies, such as the CT scanner, are depreciated over a short period of time. When fees
—. —.

6 ● Ch. 1—Summary

for tests exceed costs, creating wide profit margins, an additional incentive for proliferation of equipment exists. Other technologies such as clinical laboratory tests have both

low unit costs and fees, but are produced in large numbers and result in high aggregate

expenditures.

In recent years, concern about the rapid increase in costs of medical care has led the

Federal Government, some State governments, and some private insurance companies to

develop policies setting limits on the use of medical technologies. Policymakers have proceeded cautiously, not wanting to sacrifice quality of medical care in an attempt to lower

costs. The CT scanner provides an instructive case study of policies regarding diffusion

and use of medical technologies. The evaluation of such policies does not necessarily entail passing judgment on the rate at which CT scanners were adopted or on their value for

patient care. It does, however, reveal certain shortcomings that apply not only to CT

scanners, but to many other medical technologies as well.

FINDINGS

Efficacy and Safety of CT Scanners

● Well-designed studies of efficacy of CT scanners were not conducted before

widespread diffusion occurred. * Information is still incomplete on benefits, individuals and populations who can benefit, diseases that can be diagnosed, and

appropriate conditions of use. However, the efficacy of CT scanning has been

more thoroughly studied than that of most other medical devices at a similar stage

of diffusion.

● Those studies that had been done by mid-1977 showed that CT head scanners perform reliably and provide accurate diagnoses of nearly all abnormalities in or

near the brain for 80 to 100 percent of patients. Greater than 90 percent accuracy

was found for nearly two-thirds of patient groups studied. Although the information for body scanning was more limited than for head scanning, studies showed

approximately 80 to 100 percent accuracy in diagnosing abnormalities of the abdomen.

● CT scanning is replacing other diagnostic procedures. In particular, the use of CT

head scanning has reduced the use of pneumoencephalography, and in some settings cerebral arteriography and radionuclide brain scans as well. However, many

more CT scans were being performed than would be necessitated by simple

replacement of other diagnostic procedures. CT head scanning has produced a

considerable net increase in the total number of procedures performed.

● Little information was available about the impact of CT scanning on either the

planning of therapy or patient health.

● Contrast enhancement, which is frequently used with CT scanning, adds to the

cost and risk of scanning. Lesions within the skull are often seen better after contrast injection. However, only a small number of lesions not visible on regular CT

*The National Institutes of Health initiated a trial in 1973. However, diffusion of scanners occurred at the same time that data were being accumulated.
Ch. l—Summary

head scans are made visible by contrast enhancement. Contrast enhancement in

CT body scanning has been studied very little.

● CT scanning appears to be a relatively safe technology. It does expose patients to

significant doses of ionizing radiation, and an additional small risk also arises if

contrast material is injected. The risk from CT head scanning appears to be lower

than that of the diagnostic procedures

are definitely lower in many cases.

Number and Distribution of CT Scanners

it is replacing, and the-pain and discomfort

●

●

●

●

●

●

●

●

As of May 1977, 401 CT scanners were known to be in use in the United States.

Nearly three-fifths of these machines were head scanners; the rest were full-body

scanners. Most new purchases were of body scanners. *

Of the CT scanners known to be installed in May 1977, 325 or 81 percent were in

hospitals. The remaining 76 scanners were located in private offices and clinics.

Data on the ownership of CT scanners were incomplete. The scanners known to

be in private offices and clinics were either privately owned or leased. Of those

located in hospitals, less was known about ownership. One survey reported that

at least 10 percent of operational CT scanners identified in June 1977 were owned

or leased by physicians but located in hospitals.**

Most hospitals with CT scanners in May 1977 were not-for-profit community

hospitals with general medical services. Six Federal hospitals also had CT scanners.

Compared to all community hospitals, those with CT scanners in May 1977 were

among the largest: 5 percent of all community hospitals have 500 beds or more,

but 44 percent of all community hospitals with a CT scanner had 500 beds or

more.

Of the Nation’s 113 accredited medical schools, 89 or 79 percent had a major affiliation with a hospital that had a scanner in May 1977.

Of the companies producing machines for sale in the United States in May 1977,

three—EMI, Pfizer, and Ohio Nuclear—had manufactured 99 percent of the CT

scanners known to be in use.

The rate of installation of CT scanners in the United States has increased steadily

over time. Complete data exist for three time periods:

—From June 1973 to October 1974, less thans scanners per month were installed;

—From October 1974 through June 1975, less than 10 per month were installed;

and

—From July 1975 through September 1976, an average of 19 scanners per month

were installed.

*Manufacturers reported 921 scanners operational at the end of 1977, 85 percent in hospitals.

**This survey found 637 operational scanners. See chapter 4.

)5-703 o - 78 - 2
Ch. I—Summary

●

●

●

●

●

Installation rates might have been higher from 1973 to 1976 if manufacturers had

been able to produce more machines. For example, in 1975, twice as many scanners were ordered as shipped. EMI’s 1976 year-end backlog of unfilled orders exceeded 250 machines.

In response to the demand for CT scanners through 1976, the two largest

manufacturers, EMI and Ohio Nuclear, prepared to increase their production;

EMI increased its plant capacity as well. In 1977, at least six other companies were

planning to enter the market.

Data from the end of 1977 indicated a national ratio of about 4 scanners per

million population. The District of Columbia had the highest ratio of scanners to

population, and South Carolina the lowest. All States had at least one scanner installed or approved.

Differences in the number of CT scanners among States cannot be explained by

the existence of certificate-of-need laws or section 1122 agreements or by the

distribution of physicians.

Future trends in the rates of orders and installation are not yet clear. New orders

for scanners declined in the first half of 1977. One report predicted 200 new orders

for 1977 compared to more than 400 in 1976. Orders during 1975 and 1976 may

have been abnormally high in anticipation of Federal and State regulations on

purchases. Therefore, the experience of 1977 may have represented a period of adjustment to a more stable growth rate for sales.

uses or CT scanners

● CT head scanners can be used to scan only the head. CT body scanners are used

for scanning primarily the head. When scanning the body, body scanners are used

mostly for suspected abdominal problems, such as pancreatic tumors, abscesses,

or jaundice.

● Although uses of CT head scanning have varied from institution to institution, the

most common diagnoses made were mass lesions (mostly tumors), cerebrovascular disease (including stroke, hemorrhage, and aneurysm), and diseases with

enlargements of the ventricular space of the brain (hydrocephalus and cerebral

atrophy).

● One study of several institutions found so percent of head scans were negative,

with some institutions running as high as 80 to 90 percent negative. A higher

percentage of negative scans indicates use of CT scanning as a primary diagnostic

or screening tool. Studies have found that CT head scanning is often performed

because of headache. In the absence of other findings from the physical examination, these scans find few abnormalities.

● Frequently, patients are scanned, have contrast injected in their bloodstreams and

then are scanned again. Overall, more than 50 percent of patients were scanned

after injection of contrast material. This figure has been increasing over the past

several years.

● At least 89 percent of all CT scanners were in hospitals or radiological offices in

May 1977. In these settings radiologists typically perform CT scans at the request
Ch. l—Summary ● 9

of referring clinicians. Self-referral, where the physician who orders a scan also

receives payment for it, characterized at most 11 percent of all CT scanners.

● CT scanning can be used for inpatients or outpatients. The American Hospital

Association found in a survey of 41 hospitals that an average of 51 percent of

scans were performed on inpatients, with a range of 23 to 90 percent. The waiting

time for scans was 1.6 days for inpatients in 1976, compared to 11.5 days for outpatients. Waiting time apparently dropped during 1977.

Reimbursement for CT Scanning

●

●

●

●

●

●

In 1976, the price of a typical EMI head scanner was $410,000 and an EMI body

scanner $475,000. EMI price increases reported in 1974 and 1976 were less than increases in the Wholesale Price Index.

The price of a CT scanner is not fixed. After soliciting bids, the Veterans Administration ordered CT body scanners for $375,000 each that usually sold for

$475,000, illustrating that price can be reduced by bidding. Recently, several companies have begun to market head scanners for around $100,000.

Estimates of total annual expenses of operating a CT scanner in 1975 and 1976

ranged from $259,000 to $379,000. These expenses can be divided into technical

expenses, $59 to $130 per exam, and professional expenses, $20 to $43 per exam.

In 1976, a CT scanner averaged about 3,000 examinations per year. The estimated

average cost of a CT examination was lower when a scanner was operated for two

shifts daily. CT scanners were typically depreciated over 5 years, although the

standard method of depreciating equipment uses 8 years.

Average fees reported for CT head examinations ranged from $240 to $260 including professional and technical components. These averages took into account

the use of contrast for head examinations. The average total fee was $228 for a

basic CT body scan without contrast material and $278 for a CT body examination with and without contrast. Evidence suggests that fees have increased over

time.

Estimated annual profits (revenue minus expenses) from operating a CT scanner

in 1976 ranged from $51,000 to $291,000. For a scanner priced at $450,000, annual profits represented 11 to 65 percent of the original purchase price.

Estimated expenditures related to CT scanning are increased by expenditures for

patients who were hospitalized while waiting for scans, but decreased by reductions in other tests and associated hospital days brought about by CT scanning.

Calculated in this way, estimated net expenditures ranged from $180 million to

$388 million for 1976.

—

POLICY PROBLEMS IDENTIFIED

This study of CT scanners highlights a number of policy problems in medical care

that relate to new and old, expensive and inexpensive technologies alike. As is typical for

medical technologies, well-designed, prospective studies of the efficacy of CT scanners
10 ● Ch. I—Summary

were not conducted prior to diffusion. No formal process, public or private, has existed

to ensure that studies on efficacy of most technologies are conducted and that data are

collected and analyzed. Information about efficacy is not disseminated to the many

organizations and agencies to whom it is essential, such as planning agencies, Professional Standards Review Organizations (PSROs), third-party payers, and the practicing

community. Instead, physicians gather information as best they can from practices, colleagues, publications, and manufacturers. Clinical experience, rather than scientifically

developed information about efficacy, then becomes the guide for further use. Planning

agencies, PSROs, and third-party payers have inadequate information for determining

need for additional machines, appropriate standards of use, and appropriate services for

reimbursement, respectively. Further, various Federal programs do not use a common

definition of efficacy, making their decisions more difficult to defend or to enforce.

The intent of laws requiring review of capital expenditures is not reflected in practice. The laws do not relate “need” to indications for use, so an important basis for

evaluating need may not be used. Planners are not required to consider whether existing

equipment is operating near capacity when determining need for additional equipment.

Nor is it mandatory to consider the implications of additional equipment on national

medical expenditures. Furthermore, certificate-of-need provisions of the National Planning and Resources Development Act (P. L. 93-641) and section 1122 of the Social Security Act exempt from review purchases of CT scanners by private physicians, including

those scanners purchased by private physicians and placed in hospitals. These provisions

and potential profits from scanning encourage acquisitions of CT scanners by private

physicians.

Use of diagnostic technologies is not based on efficacy. PSRO standards are established by practicing physicians and based on accepted patterns of use rather than scientifically developed information about efficacy. No PSRO standards are known to have

been developed for CT scanning. In any case, PSRO standards apply only to expenditures covered by Federal financing programs, less than one-third of all personal medical

expenditures.

In some instances third-party payers have made reimbursement for CT scanning

dependent on planning agency approval and on prior determination of efficacy. These

policies have the potential to affect expenditures. However, as a result of gaps in State

certificate-of-need laws and section 1122, many services are not covered by these planning policies. Even when such policies apply, their effect has been diluted by poorly defined standards and inadequate information on efficacy.

By its reimbursement methods, the Federal Government in effect has assumed an

open-ended commitment to finance services. Reimbursement mechanisms exert little

pressure to perform services such as CT scans efficiently; indeed, they have the opposite

effect. Furthermore, in the context of prevailing financing methods, there is little incentive to choose among alternative technologies. Present methods promote the additional

use of technologies, even if the results are duplicative.

POLICY ALTERNATIVES

The policy alternatives in chapter 7 are grouped into three sections, each representing an area of governmental policy that affects the use of technologies such as CT scanning. Section 1 containing alternatives 1 and 2 considers the development of information
Ch. l—Summary ● 1 1

on efficacy and safety; Section 2 with alternatives 3, 4, and 5 concerns changes in

regulatory policies; and Section 3 including alternatives 6 and 7 addresses alternative

financing methods. These alternatives are not mutually exclusive; several mechanisms

may be needed to deal with the problems identified in current policy.

Alternative 1: Establish a formal process to identify medical technologies that

should be assessed for efficacy and safety; conduct the necessary evaluations; synthesize

the results from the evaluations and from relevant clinical experience; and d

the resulting information to appropriate parties.

Alternative 2: As part of alternative 1, establish a formal process for mak

judgments about the efficacy and safety of medical technologies.

isseminate

ing official

Alternative 3: Authorize a Federal regulatory agency, such as the Food and Drug

Administration, to restrict the use of medical technologies to the conditions of use

specified in the FDA-approved labeling.

Alternative 4: Link Medicare reimbursement to the information and judgments

about a technology’s efficacy and safety that would result from alternatives 1 and 2.

Alternative 5: Expand regulation of capital expenditures to cover purchases of

medical equipment regardless of setting or ownership.

Alternative 6: For services paid by Medicare and Medicaid, establish rates of payment that are based on efficiency.

Alternative 7: Fundamentally restructure the payment system to encourage providers to perform and use medical services efficiently.

SCOPE OF THE STUDY

The purpose of this study was to examine policies concerning the development and

use of medical technologies such as the CT scanner. The study did not attempt to

evaluate CT scanners per se or to make judgments about CT scanning. The study was

limited to policies, both public and private. It attempted to determine the effects of

policies on development, diffusion, use, and reimbursement concerning CT scanners. It

identified problems being experienced in implementing those policies.

Public and private policies include incentives and sanctions that influence behavior.

The assumption was made that individuals and organizations act in their own best interests within the framework provided by those policies. The study particularly attempted

to identify those aspects of policies that influence behavior contradictory to the intent of

the policies.

The study attempted neither to identify individuals or organizations in conflict with

policies nor to investigate fraud and abuse. The study focused on problems of policy, not

ethics.

Nor did the study attempt to evaluate the efficacy and safety of CT scanners.

Although the report discusses many other studies of safety and efficacy of CT scanners,

its purpose is to inform Congress of the kinds of studies being conducted, their methods

and timing, and the information being obtained.
12 ● Ch l—Summar y

The study did not attempt to evaluate organizations responsible for implementing

various policies, such as Health Systems Agencies or Professional Standards Review

Organizations. The report does discuss some of the problems that these organizations are

experiencing as a result of current policies. Only policies and actions related to planning,

regulation, and use of expensive medical technologies are discussed in relation to these

organizations.

Although deficiencies in reimbursement policies both governmental and nongovernmental, have been shown to exist, this study was limited to those policies only as they

apply to medical technologies, such as CT scanners. No attempt was made to examine

the entire reimbursement system to identify all problems.

ORGANIZATION OF THE REPORT

The report is organized according to the policies examined in the study—efficacy

and safety, regulation of diffusion and distribution, regulation of use, and reimbursement. Each of these chapters presents information about CT scanning and then discusses

the information in relation to policy, identifying shortcomings when they exist.

Chapter 2 is a background chapter that describes the principles and operation of CT

scanners as well as their development and improvement.

Chapter 3 discusses the efficacy and safety of CT scanning. It considers the concept

of efficacy and then explains the difficulty of defining efficacy for diagnostic

technologies. Studies of the efficacy of both body and head scanning are reviewed, a

discussion that includes the impact of CT scanning on other neurodiagnostic procedures.

Data on the safety of CT scanners are examined. Federal policies concerning efficacy and

safety are discussed, and important gaps in policy are identified.

Chapter 4 examines the rate at which CT scanners were installed, the number of

scanners, and their geographical and institutional distribution. It describes policies

designed to control the rate and distribution of expensive technologies such as CT scanners. The intent of these policies is compared to actual practice, leading to identification

of their shortcomings.

Chapter 5 reports patterns of use of CT scanners, including the medical problems for

which CT scanning has been used and the institutional setting for CT scanning. The importance of indications for use, as determined by studies of efficacy, is analyzed both for

the practicing community and for the federally mandated program for quality assurance.

Chapter 6 reviews available data on the expenses, charges, and profits of CT scanning. Estimates of gross and net national expenditures are calculated. Public and private

reimbursement policies and their shortcomings are examined in light of the data on CT

scanning.

Chapter 7 presents policy alternatives for consideration by Congress. These alternatives address problems identified in current Federal policies concerning information on

efficacy and safety, regulatory policies, and financing methods.
2 ●

BACKGROUND
BACKGROUND

PRINCIPLES OF CT SCANNIN G

CT scanning builds on the principles of conventional X-ray films: structures are

differentiated by their ability to absorb energy from X-rays. The denser* a structure

is, the more energy it will absorb. Thus, less energy will reach the film or other

receptor, and the image of that structure will be lighter. Bone or metal, which are

dense, appear white on the X-ray film; air or gas, which are much less dense, appear

black. Structures with intermediate densities appear as shades of gray.

CT scanners use these principles in a new way (184,236,237,245,331,408). Each

CT scanner has four basic elements (figure 3):

●

●

●

●

A source, or X-ray tube, which emits a beam of X-rays.

A detector, which collects energy from the X-ray beam after it has passed

through the body. It then determines how much energy is still present in the

beam.

A computer, which collects, stores, and processes information from the

detector.

An imaging device (a cathode-ray tube**), which has a television-like screen

on which the reconstruction produced by the computer can be displayed.

Except in the more recent models of CT scanners, the source and detector are

mounted on a gantry (frame) as a single unit, attached to a table for the patient.

When activated, the gantry moves around the patient’s head or body in many small

steps. At each position, the source emits a beam of X-rays which passes through the

patient and is collected by the detector. The energy reading at each position and the

beam’s geometrical coordinates are stored by the computer. Depending on the

model, 30,000 to 300,000 readings per scan are taken and stored. Each reading

indicates how much energy was lost by the beam of the X-rays through the body.

The computer then uses the complete set of readings to determine the density of the

material or tissue through which X-rays passed (195,196). An image of a thin cross

section (or slice) through the body is then displayed on the screen of the cathode-ray

tube. Sample images are shown in figures 4 and 5:

* Technically, radiation absorption is a complex function associated with the energy spectrum and

the atomic number as well as density.

** The picture tube of a television set is a cathode-ray tube.

15
16 ● Ch. 2—Background

Figure 3.—Schematic Illustration of CT Scanner

I

3.Computer

4.Image display

The source and detector are mounted on a single frame and move around the body together in a large

number of small steps. X-rays emitted by the source pass through the body and are collected by the detector. Information from the detector is fed into a computer, which reconstructs and displays an image of a

cross section of the body.

Source. Off Ice of Technology Assessment

CT scanning overcomes two shortcomings of conventional X-rays. First, in

conventional X-rays, various organs overlap on the film and obscure each other. By

rotating the beam and producing cross-sectional images, the CT scanner eliminates

this problem. Second, conventional X-rays do not always differentiate between

adjacent structures of similar density. A radiologist may be unable to distinguish

among the shades of gray on the film. By using many exposures from different

angles to produce one image, CT scanning can make slight differences in density

apparent (441 ). CT scanning resolves (distinguishes) densities that are one-tenth as

great as can be seen with conventional methods. These two advantages make CT

scanning especially useful for visualizing soft, low-density tissues as in the brain.

The brain’s tissue is not “washed out” by the overlapping image of the skull, and

subtle differences of density within the brain can be detected.

OPERATION OF THE CT SCANNER

A typical CT installation fills two rooms (figure 6). The scanning unit, consisting

of the gantry, source, detector, and patient table, is in one room. The computer,

display equipment, and control unit are in the other. During a CT examination, the

patient is positioned on the table, and the scanner is activated. The patient must
Ch. 2—Background ● 1 7

Figure 4.–Normal Brain Cross Section (left), CT Scan (right)

1

2

3

4

5

6

7

1 = Falx cerebri

2 = Cornu anterius ventriculi lateral is (tip)

3 = N. caudatus, caput

4 = Putamen

5 = Insula and lateral cistern

6 = Ventriculus tertius

7 = Corpus mamillare and fossa interpeduncularis

8 = Hippocampus and cornu inferius

9 = Aquaeductus cerebri and quadrigeminal cistern

10= Tentorium cerebelli (cut)

11 = Vermis superior cerebelli

12= Eminentia cruciata

Source. Reproduced with permission from Cranial Computerized Tomography © , Springer-Verlag, Berlin Heidelberg New York,

1976, p 39

remain still while the gantry is moving. Motion is not a problem for most patients,

but sedation, anesthesia (3), or immobilization devices (387) are sometimes required

for children, patients in severe pain, or agitated patients. In early machines, each scan

took about 5 minutes, but the newest models take only 5 seconds (see below). After

the gantry has completed its rotation around the head or body, the computer may

require u p to 21⁄2 additional minutes to process the information and to display the

image. It appears on the screen of the cathode ray tube for immediate inspection, and

it can be photographed for later examination. The computer can also make permanent records on tape, paper, or magnetic discs.

Because each CT cross section is quite narrow (usually about) centimeter) the

procedure is often repeated at several places to cover the area of interest. A complete
18 ● Ch. 2—Background

Figure 5.— Examples of Graphically Reported CT Findings

(a) Basal Ganglia Hematoma With Ventricular Perforation. (b) Subarachnoid Hemorrhage.

(c) Olgodendroglioma. (d) Chronic Subdural Hematoma. (e) Occlusive Hydrocephalus.

(f) Cortical Atrophy.

Source: Reproduced with permission from Cranial Con?wferlzed Tomography@,Springer-Veriag, Berlin. Heidelberg. New York, 1976, p. 77.
.—

Ch. 2—Background ● 1 9

Figure 6.—Typical Computed Tomography Installation Involving Divided Rooms

Photo: Courtesy of Clinical Center, National Institutes of Health

CT study usually includes images of at least six to eight sections. Most head scanners

produce images of two adjacent sections during each traverse; thus, three or four

scans are usually required. Most body scanners produce only a single section per

traverse, so more scans may be necessary. In addition, a patient is often scanned,

injected with contrast material, and then scanned again to get additional information. Thus, a full CT examination may take at least one-half hour to complete. In

many hospitals, a radiologist is present during the examination. In some institutions,

however, radiological technicians perform the examination, and a radiologist or

other physician interprets the images later (239). This approach can be less costly

than having a radiologist present; but if the scan is of poor technical quality or if the

radiologist decides that additional sections are needed, the patient may need to

return for another examination (14,15,50,125,161,382,383,388,389,397,4 60).

DEVELOPMENT OF THE CT SCANNER

The first CT scanner was developed in 1967 by Hounsfield, an engineer working

at EM I Ltd., in Britain. Earlier, in the United States, Oldendorf (395) and Cormack
20 ● Ch. 2—Background

(117), had independently constructed tomographic devices that used some of the

principles found later in the CT scanner. Both Oldendorf and Cormack realized the

diagnostic potential of their devices. Oldendorf, a neurologist, could interest neither

physicians nor corporations in developing his ideas (379,396). Cormack, a physicist,

published his results in a journal of applied physics, but the article apparently went

unnoticed by the medical community. Hounsfield, researching pattern recognition

devices, developed a theoretical basis for CT scanning in 1967 and built a device to test

his ideas. Using inanimate objects first and diseased brain tissue later, he showed that

his machine could produce images of sections difficult to visualize with conventional

radiological techniques (17,37,60).

The British Department of Health was interested in Hounsfield’s work, and in

1970 it supported the construction of a CT unit that could be used to examine patients

(60). A prototype was installed at Atkinson Morley’s Hospital in London in October

1971. Ambrose, a physician at that hospital, was soon successful in using the EMI

scanner to image lesions of the brain, including tumors (22). The EMI scanner was

shown publicly at professional meetings in 1972. In June 1973, the Mayo Clinic

installed the first commercial unit in the United States (47).

The early success of the EMI scanner encouraged a number of corporations to

develop CT scanners. Ledley, at Georgetown University Medical School, developed a

scanner that could image sections of the head and the entire body. Marketed as the

ACTA scanner, it was operational by February 1974 (315,316,317). Soon thereafter,

Ohio-Nuclear and Siemens also began to market scanners (Delta and Siretom

scanners, respectively). By the end of 1975, some 20 corporations had developed or

were developing CT scanners (37,79,161,290,402,583).

During the past 3 years, CT technology has not only extended scanning from the

head to the entire body, but also has continually decreased the time required to

complete a scan. Because motion by the patient during the scan can destroy the image,

decreased scanning time is important. The first scanners—EMI, ACTA, Delta, and

Siretom—required about 5 minutes to complete one scan. They used a single source

and detector per section and are referred to as first generation CT scanners (79,290).

The next generation was equipped with a single source producing either a fan

beam or multiple pencil beams and with multiple detectors. Such scanners gathered

more information at each position of the gantry’s traverse than did first generation

scanners. The gantry moved in larger steps, and scanning time was reduced to

between 20 seconds and 2 minutes per scan. Third generation scanners, which are

now being marketed, reduce scanning time still further. Rather than thin beams of Xrays, they use a fan-shaped beam aimed at a bank of up to several hundred detectors.

The gantry rotates, but unlike first and second generation scanners, no lateral motion

is required. A scan can be completed in only 5 seconds. Some of the principal features

of first, second, and third generation CT scanners are compared in table 1 and figures 7

and 8.

Increasing the speed of CT scanning is desirable to minimize problems associated

with patient motion and to permit imaging of motile organs such as the heart. But

scanning speed must be balanced against the other variables of radiation dose and

image quality (resolution). An ideal CT scanner would be one that produced high

quality images using small amounts of radiation (thus causing little risk to the patient)

in a short time period. A limiting factor in decreasing scanning time has been

movement of the source and detector on the gantry, a mechanical motion requiring
.—

GENERATION “

Time to Produce

One Section

X-ray Source

Detectors

Motion of Gantry

Operational ‘

Commercial

Models

Models not yet

installed b

Ch. 2—Background ● 2 1

Table l—Characteristics of CT Scanners

I

4-6 min.

single pencil beam

1

Source and detector

move together in

small lateral and

small rotational

steps

EM I Brain Scanner (H)’

Pfizer ACTA 0100 (B)c

Siemens Siretom (H)

General Electric -

Neuroscan CT/N (H)

II

20 sec. -2 min.

2 or more pencil

beams or single

fan beam

2 or more (up to

60)

Sources and detectors move together

in larger lateral

and rotational

steps than

Generation 1

EM I CT 1010 (H)

EM I CT 5005 (B)

Ohio-Nuclear

DELTA (H and B)

Syntex System

60 (H)

Syntex System

90 (B)

Phillips

Tomascan (B)

Ill

under 20 sec.

—

single fan beam

hundreds -

contiguous

Rotational

motion only. In

most models,

source and detectors move

together, but

in some, only

source moves

Artronix Neuroscanner 1100

or 1110 (H)

General Electric

CT/T (B)

Varian (B)

American Science & Engineering (B)

Searle Pho/

Trax (B)

Artroni x

Whole-Bod y

scanner 1120 (B)

a Nomenclature of Brownell (79).

b As of June 1, 1978.

c H = Head, B = Body.

several seconds. In order to overcome this problem, the latest models of CT scanners

will employ a large number of sources and- detectors, all of which can operate at the

same time. This approach will not only overcome problems of motion, thus increasing

image quality, but will make it theoretically possible to reduce radiation dose to very

low levels.

Improvements in technical capabilities may soon introduce new uses for CT

scanners. New computer programs can produce images in a variety of planes or even in

three dimensions from information now used to image cross sections, although at the

cost of a higher radiation dose (46,189,190,444). Other programing changes can

permit statistical analysis of data from scans to reveal differences in density or shape
22 ● Ch. 2—Background

Figure 7.—Configuration of First and Second Generation CT Scanners

With ParaIlel Beam Data Acquisition

First Generation

single-pencil beam

n shifts

n projections

Second Generation

multi-pencil beam

(m= 2)

n shifts

m. n projections

Source: Reproduced with permission from Crania/ Corrrpufer/zed Tomography c , Springer-Veriag, Berlln. Heidelberg, New

York, 1976, p, 22.

Figure 8.—Third Generation CT Scanner

Configuration With Fan-Beam Data Acquisition

Source: Reproduced with permission from Crarr/a/ Computerized

Tornograp/ry S, Springer-Veriag, Berlin. Heidelberg. New York, 1976, p,

23.
Ch. 2—Background ● 2 3

undetected by visual inspection (64,436). The computer can also subtract normal from

contrast-enhanced scans to reveal areas that have accumulated contrast material

(64,415). This capability might be particularly useful if contrast agents for specific

organs can be developed. Even without great reductions in scanning time, early

evidence indicates that exposures can be synchronized with rhythmic motions so that

organs that are now difficult to image, such as the heart, can be scanned (2,486).

Physicians also anticipate increased use of CT scanning in conjunction with other

techniques. For example, biopsy needles may be more accurately positioned with CT

scanning than with present methods (11,272,324). Also, CT units have been linked

with cobalt or other radiation sources to form an integrated system for radiation

therapy (96,244,272). Use of a calibrated head-holding device (a stereotaxic apparatus)

permits more accurate radiosurgery on lesions discovered by CT scanning (63).

Finally, periodic CT scans of some patients are being ordered to monitor responses of

tumors to chemotherapy or radiation therapy (272).

15-703 () - 78 - 3
3 ●

EFFICACY AND SAFETY
3 ●

EFFICACY AND SAFETY

THE ISSUE OF EFFICACY

Efficacy is defined as the potential benefit to individuals in a defined population

from a medical technology applied for a given medical problem under ideal conditions

of use. Efficacy is an abstract concept projecting the results that a technology might

achieve. According to this definition, the efficacy of a medical technology can be

determined only by examining information about four aspects of that technology:

27
28 ● Ch. 3—Efficacy and Safety

Technical capability—Does the device perform reliably and deliver accurate

information ?

Diagnostic accuracy—Does use of the device permit accurate diagnoses to be

made?

Diagnostic impact—Does use of the device replace other diagnostic procedures, including exploratory surgery and biopsy?

Therapeutic impact—Do results obtained from the device affect planning

and delivery of therapy?

Patient outcome-Does use of the device contribute to improved health of

(I) the

(2) the

(3) the

(4) the —

benefit individuals receive and the probability of benefit,

population benefiting from the technology,

medical problem affected, and

conditions of use under which the technology is found to be beneficial.

Technologies may be beneficial only when used in a certain manner. For example, dosages can affect the outcome of using drugs, and skill of the

surgeon is important in surgery. For diagnostic technologies, conditions of

use include findings from the history and physical examination indicating

that use of the technology is appropriate.

Thus, efficacy is more than a simple consideration of potential benefits. No

technology is beneficial in the absolute; it is beneficial only when used in an appropriate manner—for a defined population, for given medical problems, and under

certain conditions of use. Well-designed studies of efficacy consider all of these

factors.

The term benefit refers to the usefulness or value of the technology. For

preventive technologies, it refers to the potential for preventing disease. For

therapeutic technologies, it refers to the potential to improve the health of a patient.

But for diagnostic technologies, the situation is more complicated.

Defining the efficacy of a diagnostic technology, such as the CT scanner, is

particularly complex because the technology itself cannot directly affect the physical

health of patients. Questions arise about how to judge the efficacy of a diagnostic

technology. Is efficacy limited to considerations of the capability of the technology to

aid in diagnosis? Does efficacy depend on the ability of that technology to replace

another diagnostic technology? Does efficacy of a diagnostic technology depend on

whether the diagnosis led to appropriate treatment? In some instances, appropriate

treatment may be no treatment, such as for incurable medical problems or the

identification of no medical problem at all. Or does the efficacy of a diagnostic

technology depend on the availability of an efficacious therapy?

Several formulations of efficacy for diagnostic technologies have been developed. Fineberg and his coworkers have formulated efficacy of diagnostic technologies in terms of five levels (167):

(1)

(2)

(3)

(4)

(5)

the patient?

In a study sponsored by the American College of Radiology, an alternative

approach to the assessment of efficacy of diagnostic technologies has been proposed:
Ch. 3–Efficacy and Safety

Efficacy-l, the information content of the procedure; Efficacy-z, the use of

● 2 9

the

diagnostic information in prescribing treatment or in gathering more information;

and Efficacy-3, the expected value of diagnostic information to the health of the

patient (335, 336).

Assessment of the efficacy of diagnostic technologies is often limited to levels 1

and 2 of the Fineberg formulation as they are the easiest to perform. Levels 3 and 4

are more difficult to assess, but feasible. These four levels are primarily concerned

with medical care processes. Patient outcome (level 5) is much more difficult and

time-consuming to determine since followup of patients over time is required (33.5).

Present policy and current practice have emphasized assessment of the accuracy of

diagnosis, with little concern for effect upon therapy or outcome. Thus, few

diagnostic technologies have been evaluated from these

EVIDENCE OF EFFICACY OF CT SCANNERS*

points of view.

Efficacy cannot be measured directly, although evidence about it can be obtained

from controlled clinical trials or from clinical experience. Such evidence allows

judgments to be made about efficacy, judgments that may change as additional

evidence accumulates. Efficacy has been more thoroughly assessed for CT scanners

than for many other medical technologies at a similar stage of development and use.

The available evidence has not come from well-designed, prospective clinical trials,

but as is typical for medical technologies, it has been obtained from analyses of

clinical experience. The results of these clinical studies are presented without necessarily endorsing the manner in which they were obtained.

Head Scanning

Technical Capability

Engineers and medical personnel find that head scanners perform reliably and

deliver accurate i n formation (44,125,129,338,382,386,405,406). Most of the

technical problems and malfunctions that plagued early CT scanners have been

eliminated (129,405,406). New installations often experience considerable “downtime,” but most malfunctions can be corrected by hospital staff. Protocols and

equipment for evaluating both the technical capabilities and performance of CT

scanners have been designed (25,191,338).

While CT scanners usually function well and produce reliable images, their

technical capabilities do have limitations. Objects are not always resolved if smaller

than about 1 centimeter in diameter, or if their density differs only slightly from that

of surrounding tissue (16,129,247,40.5,406). Because of the arrangement t of sources

and detectors i n some machines, parts of sections being scanned m a y not be imaged

at all or may be dually imaged (193). As a result of limitations in the imaging

procedures, artifactual lines or patterns appear near areas of very high density or

* Conclusions in this section are based on a literature review carried (>ut during May 1977.

Acc~~rdln~ to recent reviews, however, the conclusions remain \ralid. The interested reader should refer

ti~ Abrams, H, and McNeil, B. “Medical Implications of Computed Tomography (’CT Scanning’)” NmI

EII,V, /. ,tf((i, 2~8:255 ,lnd 310, 1 ~78.
30 ● Ch. 3—Efficacy and Safety

contrast, such as implanted ventricular shunts or surgical clips, or the skull

(108,129,191,386,405,406). Any motion of the patient during scanning may also

cause artifacts (15,16,225,236,386,405,406), but this problem is more serious for

body than for head scanning.

Diagnostic Capability

(1) Diagnostic Accuracy. CT scanning has been used in diagnosing nearly all

neurological disorders associated with an abnormality in or near the brain (15-23, 39-

41, 44-53, 55-58, 62, 74-76, 83, 87-88, 90, 92-94, 97-101, 103, 108, 124-130, 138-143,

154-156, 160, 162, 170-171, 173, 183, 192, 202-204, 210-212, 223-225, 230-231, 239,

248-249, 251-252, 255, 267-269, 271, 274, 276, 278-279, 284-289, 291-294, 308, 310,

312, 314, 318, 320, 326-330, 333-334, 343, 347, 353-354, 356-361, 368-372, 385-386,

388, 393-394, 397, 400, 405-407, 410-412, 420, 426-429, 432, 439, 441-442, 447,451,

458-460, 472, 478, 482, 488-489, 492, 516-518, 520, 522, 536-537, 539-543). CT head

scanning can reveal lesions in the brain itself, in the meninges (lining that surrounds

the brain), and in the orbit (bony socket of the eye).

In a head scan, lesions are detected by abnormalities in the density or shape of

the brain (125,236,237,386). A decrease in density (that is, a decreased ability of some

part of the brain to absorb energy from X-rays) may indicate edema, an infarct, or a

fluid-filled cyst. An increase in density suggests a tumor, hemorrhage, fibrosis,

calcification or hemorrhagic infarct. An asymmetric image suggests mass lesions

such as tumors. Large changes in shape, such as enlarged ventricles and dilated

subarachnoid spaces, are suggestive of hydrocephalus or atrophy (see figure 5).

Many reports have attempted to assess the diagnostic accuracy of CT head

scanning. Some results of these studies are summarized in table 2. In most of the

studies, accurate diagnoses were obtained for 80 to 100 percent of the patients;

greater than 90-percent accuracy was reported for about two-thirds of the patient

groups.

(2) Contrast Enhancement and Diagnostic Capacity. In about 60 percent of CT head examinations, and in more than 50 percent of all CT examinations, patients have

contrast material injected into their bloodstreams. This percentage has increased

over time (240,241). These patients are usually scanned both before and after the

injection. The use of contrast material is often time consuming, adds sizably to the

cost and price of CT scanning (see chapter 6), and exposes the patient to some risk.

Although radiologists believe that these drawbacks are outweighed by the additional

diagnostic information obtained, the empirical evidence is less convincing. Many

lesions can be seen better on contrast-enhanced than on unenhanced scans, and

information is gained about the nature of the lesion (21,119,135,303,386) (figure 9).

On the other hand, in two large studies of the efficacy of contrast enhancement,

injection of contrast material revealed lesions invisible on unenhanced scans in only 2

to 5 percent of all patients (44,119).

(3) The Validity and Reliability of CT Diagnostic Capacity. The studies summarized in

table 2 and a variety of less systematic case reports lead to the conclusion that CT

scanning permits more accurate diagnosis of some types of lesions than others.

Tumors in or near the brain can be diagnosed and localized quite accurately, as can a

variety of cerebrovascular lesions. On the other hand, hairline fractures, small

tumors, and some new infarcts are difficult to image with CT scanning. Early
Ch. 3–Efficacy and Safety ● 3 1

Table 2.—Diagnostic Accuracy of Head Scanning: Summary of Published Studies

Diagnostic Category

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Unclassified Neurological Disorders . . . . . . . . . . . .

Cerebrovascular Lesions

hemorrhage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

hemorrhage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

hemorrhage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

hemorrhage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

nontraumatic hemorrhage . . . . . . . . . . . . . . . . . . .

nontraumatic hemorrhage . . . . . . . . . . . . . . . . . . .

nontraumatic hemorrhage . . . . . . . . . . . . . . . . . . .

acute cerebrovascular disease . . . . . . . . . . . . . . .

cerebrovascular disease . . . . . . . . . . . . . . . . . . . . .

cerebrovascular disease . . . . . . . . . . . . . . . . . . . . .

subdural hematoma . . . . . . . . . . . . . . . . . . . . . . . . .

angioma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

angioma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

infarct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

infarct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

infarct . . . . . . . . . . . . . . . . . . . . . ....00... . . . . . . . .

infarct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

infarct (middle cerebral artery) . . . . . . . . . . . . . . .

Tumor

intracranial tumors . . . . . . . 00 . . . . . . . . . . . . . . . . .

intracranial tumors . . . . . . . . . . . . . . . . . ........0

intracranial tumors . . . . . . . . . . . . . . . . . ........0

intracranial tumors . . . . . . . . . . . . . . . . . . . . . . . . . .

intracranial tumors . . . . . . . . . . . . . . . . 0 . . . . . . . . .

intracranial tumors . . . . . . . . . . . . . . . . . . . . . . . . . .

intracranial tumors (children) . . . . . . . . . . . . . . . .

intracranial tumors . . . . . . . . . . . . . . . . . . . . . . . . . .

intracranial tumors .. .. .. ... ... ... ..O.. . . . . . .

meningioma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

orbital Iesions -mostly tumor . . . . . . . . . . . . . . . .

juxtasellar lesions-mostly tumor . . . . . . . . . . . .

pituitary adenoma . . . . . . . . . . . . . . . . . . . . . . . . . . .

Atrophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Numberof

Patients

800

53

450

75

641

109

79

17

13

15

21

18

100

46

60

51

89

35

14

41

52

84

58

100

174

106

24

209

174

88

633

45

114

35

71

25

20

12

20

22

10

8

26

Percent

Accurate

Diagnosis

97

92

98

88

92

87

86

88

100

81

100

100

90

90

85

75

72

100

86

80

52

75

98

93

86

94

100

97

95

95

96

89

85

97

96

84

100

100

90

100

100

88

92

Reference

44

228

487

344

90

4

244

24

90

437

264

463

213

419

375

266

95

368

368

260

90

118

264

476

89

164

95

259

368

375

20

57

90

4

93

486

368

91

401

356

346

305

92
32 ● Ch. 3—Efficacy and Safety

Figure 9.—Malignant Lymphoma in Right Frontal

Region Before and After Enhancement

Source: Reproduced with permlsston from Crwr/a/ Computerized Torrrography ~ , Springer-Verlag, Berlin .Heldelberg, New York, 1976, p. 88,

observations indicated that aneurysms, subdural hematomas, and small masses very

near bone (such as tumors in the posterior fossa) were difficult to image

(15,16,108,129,202,405). Other physicians, however, have reported considerable

success in imaging such lesions (231,370,405,429,439).

Accuracy of CT scanning has been assessed by comparing diagnoses made

through its use with those made by methods of presumably assured validity.

Autopsy or surgery, which provide opportunities for rigorous confirmation, have

been used in some studies. Many studies, however, rely on less exacting confirmation, such as other diagnostic tests or the subsequent course of the disease.

In a study by Messina (355, cited in 382), for example, autopsies confirmed, to

some extent, diagnoses made by CT scanning in 88 percent of the patients. Only 55

percent of the diagnoses were confirmed completely, however. Partial agreement

between CT scanning and autopsy results was observed in the remaining 33 percent. Many patients had multiple lesions, and when each lesion was considered

separately, the accuracy of CT scanning was even lower. Only one-third of all lesions

seen on autopsy were imaged by CT scanning; another third were so small that they

could not possibly have been resolved; the final third, although large enough to

resolve, were not seen in the CT images. It should be noted that these lesions would

probably not be visualized by any other existing diagnostic technique.

Other diagnostic procedures may be more accurate than CT scanning for some

diseases. A complete study of this possibility would test each procedure on each

disease condition to compare true negatives, true positives, false negatives, and false

positives. Such information is not yet available because few such studies have been

undertaken.

Many studies include reports of early experience with CT scanners. Radiologists

point out that many diagnostic failures were the result of inexperience or early

equipment deficiencies. Thus the accuracy of CT scanning may be underestimated in

early studies.

Several of the studies compare the simple accuracy of CT scanning and other

diagnostic procedures. In general, CT scanning has been found to be more accurate
Ch. 3–Efficacy and Safety ● 3 3

for neurological lesions than radionuclide brain scans or conventional skull X-ray

films. It has been found to be at least as accurate as the risky and uncomfortable

procedures of arteriography and pneumoencephalography (see below).

Diagnostic Impact

The most common neurodiagnostic procedures used before the development of

CT scanning were cerebral arteriography, pneumoencephalography, radionuclide

brain scanning, and skull X-ray. Others included echoencephalography, and electroencephalograph (see table 3).

(1) Arteriography or Cerebral Angiography. During arteriography, contrast material is

injected into the patient’s bloodstream while conventional X-ray images the blood

vessels in the skull. Radiologists can recognize malformations of the blood vessels

and/or infer damage to the brain itself from distortions in the vascular pattern.

Arteriography requires 2 to 4 days of hospitalization (36) and exposes the patient to

more radiation than a set of CT scans (443,564). Comparisons of the two procedures

have found CT scanning to be at least as accurate as arteriography in revealing and

pinpointing neurological lesions (21,39,45,48,62,101,180,294,388,439).

After the introduction of CT scanning in several institutions, the number of

arteriograms performed decreased by 15 to 34 percent (46,157,296,382,443). While a

15 to 20 percen t decrease is the most frequently quoted range (36,46,48 ,

262,264,296,382,582), a O to 5 percent increase has also been recorded (45,80).

However, arteriograms were increasing in number in the late 1960’s and early

1970’s, and CT scanning may have halted this upward trend (45). CT scanning is

most often used as an alternative to arteriography in emergency situations and on

new admissions (261, 350,382,405,439). However, arteriography is still considered to

be superior to CT scanning for delineating the vascular structure of the brain

(38,45,264,41 2) and will continue to be used in some situations (264).

(2) Pneumonencephalography. In this procedure air is injected into the spinal canal

where it moves upward into the ventricles of the brain and shows up on conventional X-ray films. Distortions in the ventricular space indicate space-filling lesions in

the brain. Some risks of morbidity and a rare fatality are associated with this

procedure, especially for certain groups of patients, such as the elderly. In addition,

pneumoencephalography requires 4 to 10 days of hospitalization (36,264) and may

expose the patient to more radiation than CT scanning (564). Clinical studies have

shown that CT scanning and pneumoencephalography frequently provide diagnostic

information of approximately equal accuracy (21,44,48,180,181 ,439).

The use of pneumoencephalography decreased by 20 to 75 percent in several

institutions upon the introduction of CT scanning (36,45,50,82,138,140,157 ,

262,296,382,538,545,582). Because of its costliness in terms of resources and risks to

patients’ health, however, pneumoencephalography has never been a frequently

used procedure. In fact, its use started to decline even before CT scanning was an

available alternative (264,382). Although indispensable for identifying certain classes

of tumors (62), use of pneumoencephalography continues to decline. It will probably

become more restricted to neurological referral centers where medical personnel

with the proper expertise are available (264).

(3) Radionuclide Brain Scanning (RNS). Radioisotopic material is injected into the

bloodstream, and the head is scanned by a camera that can detect and record the
Procedure

CT Scanning

Arteriography

Pneumoencephalography

Radionuclide

scanning

Skull X-ray

Diagnostic

Accuracyb

High-generally

80-900/o

Similar to CT

Similar to CT

Inferior to CT

Used for purposes

different from CT;

inferior when

compared

Approximate Annual

Numbers of Procedures in United

States, 1976

855,400-987,000

1 00,000-350,000’

25,000-50,000’

2,000,000

4,000,000’

Safety

Compared

to CT

Scanning

Riskier

Riskier

Similar

Similar

Usable On

Outpatients

Yes

No

No

Yes

Yes

T

m~

n

n

Estimated Effect ~

of CT Scanning ~

on Utilization ma

x

G

-20% to 0d

-40% to -750/0’

-90% to +15%

Little or no

effect

“ Estimates of Office of Technology Assessment unless noted. the number of pneumoencephalograms performed, and estimates for 1976 are not

D Numbers given in this column are not strictly comparable. Arteriography is often available. Low figure is for 1975 (425). High figure is a national projection of a 1973

used after diagnosis of a brain tumor, for example, to demonstrate its extent and survey in southeastern Pennsylvania (582).

vascularity. Arteriography and pneumoencephalog raphy are seldom used with f Reference 47 reported -40 percent and reference 296 reported -75 percent.

stroke. Nonetheless, based on published studies, the comparisons are basically valid. g Reference 296 reported +15 percent and reference 383 reported -90 percent.

c Low figure IS from reference 425. High figure is from reference 265. h Figure is for 1970 (504). The number of diagnostic X-rays rose approximately 4

d Reference 47 reported -20 percent and reference 82 reported + 0.05 percent. percent a year from 1964 to 1970, so the number is probably larger now.

‘ Figures are for 1973 and 1975. In 1976, CT head scanning had a great impact on

I
Ch. 3–Efficacy and Safety ● 3 5

radioactivity. Areas with abnormal concentrations of radioactivity are presumed to

be diseased. RNS is not considered to be a dangerous diagnostic procedure and is performed on outpatients. CT scanning has been shown to be superior to RNS in several studies of diagnostic accuracy of specific conditions (4,21,39,44,48,103,140,

180,293,295,380,382,388,393,439). Other investigators, however, have found that

the two procedures produce anatomical information of approximately equivalent

accuracy. RNS also gives information on the functioning of the brain and its blood

supply (62,98,360).

Although a large study is underway (425) that attempts to determine the

comparability of the two procedures, the change in the use of RNS after the

introduction of CT scanning has varied substantially from one institution to

another. The highest range shows a decline in the use of RNS by 50 to 90 percent

(46,50,382,545,582). At the other extreme, the change in the use of RNS has ranged

from a 15-percent increase to a 35-percent decrease (82,157,264,295). While some

radiologists have stated a preference for CT scanning over RNS (48,140,141,380),

others believe that, since the two procedures may yield different types of information, they should be used in a complementary fashion (62,76,360,382,412).

(4) Echoencephalography. This procedure applies ultrasound technology to neurological diagnosis. Ultrasound waves are directed at the head, and their reflections are

detected and analyzed to find distortions in the shape of the brain. Echoencephalography is a safe and noninvasive procedure that can be performed on outpatients.

The accuracy of CT scanning and that of echoencephalography have not been

compared systematically. The two procedures are not designed to yield exactly the

same information. However, the Mayo Clinic, the only institution in this country to

publish observed changes in the use of echoencephalography after the introduction

of CT scanning, reported a decrease of 40 to 50 percent (50).

(5) Skull Films or Skull Series, A skull series involves a set of four or five

conventional X-ray films taken according to a standardized protocol. CT scanning

provides more accurate diagnostic information than a skull series for certain

conditions (180,343,439). Skull films, however, are often used to detect abnormalities of the bone, such as fractures, which are difficult to image with CT. Also, skull

films are accepted as a standard screening procedure for patients with general

neurological symptoms. Medicolegal factors reinforce this use (61). CT scanning has

had a small impact on the use of skull films because skull X-rays are usually performed prior to CT head scanning. Some radiologists have suggested that this

practice is unnecessary (270).

(6) Electroencephalography (EEG). Electroencephalograph records the electrical

activity of the brain through leads taped or pasted to the scalp. A noninvasive and

safe procedure, it is widely used in diagnosing epilepsy. Because EEG provides different diagnostic information from CT scanning, its use has been little affected by

CT scanning (39,30,296).

(7) Exploratory Surgery. One study examined the actual impact of CT scanning on

neurosurgical procedures following head trauma. Before CT scanning, exploratory

surgery often followed head injuries to ensure that life-threatening damage had not

occurred and to correct such damage if found. A London hospital found a sharp

reduction in the need for such surgery following introduction of CT scanning (21). In

the year before introduction of the CT scanner, 33 percent of patients had such
36 . Ch. 3–Efficacy and Safety

surgery; in the year following introduction of the CT scanner,

such surgery. However, no attempt was made to ensure that

patients were comparable.

Therapeutic Impact

only 2 percent had

the two groups of

To date, only one study has attempted to assess the impact of CT head scanning

on the planning of therapy. The study covered 194 patients; physicians were

interviewed before and after their patients were scanned. Treatment plans were

altered for 19 percent of the patients. This figure dropped to 15 percent when

counting only those for whom improvement in outcome was possible (i. e., those who

did not die soon). Changes included ordering new treatment, abandoning previous

therapy plans and increased precision of already planned therapy, such as surger y or

radiotherapy (167).

The only known study to examine the actual impact on neurosurgical

procedures is summarized in the section above under exploratory surgery (21). A

similar study examined groups of patients with stroke before and after introduction

of CT scanning. No differences in therapy were found (313).

Patient Outcome

Better diagnosis does not necessarily lead to improved treatment and improved

health. An extensive study of radionuclide scanning, for example, indicated that its

application has little or no effect on patient outcome in cases of neurological

abnormality (185). Nuclide scans are often used to diagnose diseases for which no

definitive therapy is available; the same situation also applies to CT scanning, as

discussed in chapter 5. In the one study of outcome, patients with head trauma who

entered a hospital before installation of a CT scanner were compared with those

admitted afterwards (21). No difference in mortality between the two groups was

observed. However, as noted above, no attempt was made to ensure that the two

groups of patients were comparable. More complete studies, or studies using less

drastic indicators of health (such as morbidit y or decreased worry, instead of

mortality), have not yet been reported. However, simpl y reducing the use of

dangerous diagnostic and therapeutic procedures can help improve the outcomes of

patients.

Body Scanning

Technical Capability

The technical capabilities and limitations of body scanners are generall y similar

to those of head scanners (see below), Changes in density or shape are used to

indicate abnormalities in both body and head scans, The major difference is that

patient motion poses particular problems for body scanning. The normal, rhythmic

motions of breathing, heartbeat, and intestinal contraction can all cause artifacts and

may result in images of unacceptable technical quality (9,10). For this reason, the

heart and intestine cannot be satisfactoril y imaged (157). Whether new, faster

machines will be able to overcome problems of motion is not yet fully known.
Ch. 3–Efficacy and Safety ● 3 7

Diagnostic Accuracy

Reports on the diagnostic accuracy of body scanning have recently been

published; their results are summarized in table 4. Evidence has been reported that

CT scanning can image tumors in the liver, pancreas, kidney, pelvic, and

retroperitoneal space that are invisible on conventional X-ray films

(6,8,9,95,159,217,465,474,477,526). CT scanning can also differentiate obstructive

from nonobstructive jaundice, a distinction that has important implications for

therapy planning (6,7,8,159), and it can reveal abscesses (215) and aortic aneurysms

(38). Although preliminary and limited in scope, these studies indicate that CT

scanning can accurately diagnose mass lesions and other conditions in several organs

of the abdomen. Diagnostic accuracy in other areas of the body such as the lung and

heart has not been demonstrated. -

Table 4.—Diagnostic Accuracy of Body Scanning:

Summary of Initial Results

Area Scanned (lesions detected)

Abdominal abscess . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aorta (aneurysms) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Bile duct (dilation, obstruction) . . . . . . . . . . . . . . . .

Bile duct (dilation, obstruction) . . . . . . . . . . . . . . . .

Extraperitoneum (mostly tumors) . . . . . . . . . . . . . .

Kidney (cyst and tumor) . . . . . . . . . . . . . . . . . . . . . . .

Liver (mostly tumors) . . . . . . . . . . . . . . . . . . . . . . . . . .

Liver (mostly tumors and cirrhosis) . . . . . . . . . . . . .

Pancreas (mostly tumors) . . . . . . . . . . . . . . . . . . . . .

Pancreas (tumors) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pancreas (tumors) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pelvis (mostly tumors) . . . . . . . . . . . . . . . . . . . . . . . . .

Spinal cord (syringomyelia) . . . . . . . . . . . . . . . . . . . .

22

32

8

17

13

18

31

61

37

25

26

14

9

90

100

88

100

100

94

94

74

83

92

84

100

78

Reference

215

38

8

474

474

474

474

8

474

216

321

474

134

Diagnostic Impact

Little information is available on the impact of CT body scanning on other

diagnostic procedures. Preliminary results from a study conducted at the

Massachusetts General Hospital indicate that when used in “high payoff areas” of

the body, such as the liver, pancreas, and kidneys, body scanning can have considerable impact on diagnostic methods used. In 94 patients, 27 percent were spared

surgery by the findings of CT scanners (533). No other studies of diagnostic impact

are yet available. With the large number of organ systems that can be evaluated and

the large number of alternative diagnostic tests that can be used, it will be some time

before this area is understood.

Therapeutic Impact

Radiologists have suggested several ways in which information obtained from

body scanning might be useful in the planning and delivery of therapy (157,
38 . Ch. 3–Efficacy and Safety

158,316,317,465,493). In patients with jaundice, for example, CT scanning may

reveal whether the bile ducts are obstructed. If so, surgery may be needed; unobstructed ducts suggest a diagnosis of hepatitis, which can be treated nonsurgically. In

cases of suspected tumor, CT scanning may reveal spread of the tumor, and thus differentiate patients who might benefit from surgery from those for whom it would be

futile.

As mentioned above, one study found surgery was averted for 27 percent of

patients. That study also found that treatment plans were changed for about 19 percent of patients scanned (533).

Patient Outcome

No analyses of available data examine the impact of body scans on improved

health of patients. But simply averting dangerous therapeutic or exploratory

procedures such as surgery can be expected to improve patient outcome.

SAFETY OF CT SCANNERS

The potential benefits of CT scanning must be weighed against its risks. Safety,

like efficacy, can be assessed by well-designed clinical trials or by studies of clinical

experience. Determinations of safety of a medical technology examine the four

factors specified above for efficacy: potential risk, population at risk, medical

problem, and conditions of use for minimum risk,

Like other radiological devices, CT scanners emit X-rays, a form of potentially

dangerous ionizing radiation that can cause cancer, leukemia, and genetic changes.

Early reports indicated that the EMI head scanner exposed a patient to about 1 to 2.5

roentgens (R), * less than other neurodiagnostic techniques using X-ray (see table 5)

(189,190,338,397,564). Recent articles, however, indicate a higher radiation exposure (521). Horsley and Peters examined the question of scattered radiation from

adjacent scans and found that with 3 scans, the peak exposure with the EMI head

scanner is 4 to 5 roentgens (240). Newer systems used in certain areas of the body

produce a higher exposure. The Bureau of Radiological Health of FDA has stated

that machines in use give a patient a dose of radiation as high as 30 rads (503). A

recently published article reported a dose as high as 31 rads from use of the Ohio

Nuclear prototype head scanner and 16 rads from the Ohio Nuclear production

model head scanner when used at slow speed (521). If scans were performed and

then repeated after contrast injection, these figures could double. The number of

sections scanned is proportional to dose and is variable depending on physician

judgment. Furthermore, higher radiation makes the image clearer, and on many

machines a radiologist can increase the radiation dose by a simple adjustment of a

switch. For example, at normal speed the dose to the back of the head from six “scan

pairs” with an Ohio Nuclear head scanner is 7.7 rads, which increases to 15 rads with

scanning at slow speed (521).

* A roentgen (R) is a quantity of radiation measured in air. A rad is the unit for absorbed dose of

radiation. A rem is the quantity of ionizing radiation such that the energy imparted to a biological

system has the same biological effectiveness as an absorbed dose of I rad of X-radiation. As the terms

are used in this paragraph, the amounts are essentially equal.
Ch. 3—Efficacy and Safety ● 3 9

Table 5.—Radiation Exposures From Use of

Some Common Neurodiagnostic Proceduresa

No. of Roentgens

CT Head Scan (EMI) (3 slices) . . . . . . . 1-4.5 R

Skull Series (4 films) . . . . . . . . . . . . . . . . 1.2 R

PneumoencephaIogram (8 films) . . . . . 2.8 R

Cerebral Angiogram (24 films) . . . . . . . 10.7 R

a Radiation exposure from CT scan derived from references

190,240,338, and 397, Other radiation exposures are based on the

1970 National X-ray Exposure Study (503). Numbers of films are for

typical community hospitals, Institutions that specialize in neurodiagnosis or that see more complicated problems often do two or

three times the number of films shown (135).

A specific risk cannot be attributed to these amounts of radiation because

systematic information on the effect of life-long, low-dose irradiation is simply not

available (373). The National Research Council estimated the risk as follows: “If such

rates (taken from studies of people with known exposure to radiation) . . . are

assumed to apply generally, then exposure of the U.S. population of about 2 00

million persons to an additional 0.1 rem during one year . . . could be expected

ultimately to cause 1,350 to 3,300 deaths annually, provided that the effect of a given

increment of dose did not persist beyond 25 years after exposure” (373). This kind of

reasoning has led to rather low limits of allowable exposure to radiation (260,375). A

prominent textbook sums up this way: “It is therefore prudent to adopt the working

principle that radiation exposure be kept to the lowest practical amount” (42).

Reaction to contrast material is another risk. In practice, mortality from such

injections ranges from 1 death in 13,000 examinations to 1 death in 50,000 examinations. This rate may be compared to a rate of approximately 1 in 1,500 cases in

angiographic examinations (5).

Another risk stems from general anesthesia. Although CT scanning usually can

be performed with the patient awake, some children and confused, uncooperative

patients often must be sedated or anesthetized to ensure an adequate scan (3,300).

Such anesthesia carries some risk (166).

FEDERAL POLICIES CONCERNING EFFICACY AND SAFETY

Developing information on efficacy and safety involves identifying technologies

to be studied; conducting the appropriate evaluations; and synthesizing the results of

those evaluations, clinical experience, and other relevant information. Synthesis may

be of many types . Examples of synthesis include informal collection and

interpretation of existing information, analyses of gaps in current information, and

policy judgments based on clinical knowledge but often extrapolating from that

knowledge. The judgments or other synthesized information may then be disseminated to the organizations and individuals in need of it.

95-703 0-78 - 4
40 ● Ch. 3—Efficacy and Safety

Food and Drug Administration (FDA)

Medical Devices Legislation

The Food and Drug Administration requires studies to be conducted by private

industry prior to marketing certain medical devices and also synthesizes the results

of such studies. The safety of medical devices first became subject to Federal

regulation in 1938. However, it was not until 1976 that the Medical Device

Amendments gave FDA the authority to require that manufacturers prove the

safety and effectiveness* of medical devices prior to marketing.

The Amendments require FDA to classify all existing medical devices into one of

three categories: Class I—General controls: medical devices for which general

controls are sufficient to provide that the device is safe and effective or that the

device is not used in the support or sustaining of human life, or for a use that is of

substantial importance in preventing impairment of human health and does not

present a potential unreasonable risk of illness or injury; Class II—Performance standards: devices for which Class I controls are not adequate and for which sufficient

information exists to set performance standards that will ensure safety and

effectiveness; and Class III—Premarket approval: devices for which Class I and Class

II controls are not adequate to ensure that the device is safe and effective, and which

are used in supporting or sustaining human life, or for a use which is of substantial

importance in preventing impairment of human health, and which present potential

unreasonable risk of illness or injury. New devices, or devices introduced into use

after May 28, 1976, that are not of the same type and are not substantially equivalent

to those on the market on May 28, 1976, will automatically be placed in premarket

approval category (Class III) and cannot be commercially marketed until either an

application is approved or the device is reclassified into performance standards (Class

II) or general controls (Class 1) categories.

According to the law, the safety and effectiveness of Class III devices are to be

determined:

(a) with respect to the persons for whose use the device is represented or intended,

(b) with respect to the conditions of use prescribed, recommended, or suggested in the

labeling of the device, and

(c) weighing any probable benefit to health from the use of the device against any

probable risk of injury or illness from such use.

The law continues

the effectiveness of a device is to be determined, in accordance with regulations promulgated by the Secretary (of HEW), on the basis of well-controlled

investigations, including clinical investigations where appropriate, by experts

qualified by training and experience to evaluate the effectiveness of the device,

from which investigations it can fairly and responsibly be concluded by qualified

experts that the device will have the effect it purports or is represented to have

under the conditions of use prescribed, recommended, or suggested in the labeling

of the device.

The Bureau of Medical Devices has begun implementing the Amendments by

* The language of the Act uses the term “effectiveness” instead of “efficacy. ”
Ch. 3–Efficacy and Safety ● 4 1

appointing advisory panels to make recommendations as to which class each device

belongs. The Neurology Panel and the Radiology Panel have recommended classifying existing CT scanners as Class II, but in September 1977, classification was not

completed. Such a classification means that the CT scanner will be subject to performance standards of a technical nature, a point further discussed below. (Such

panels are made up largely of the professionals who use the device in question, in this

case radiologists, and who may have some vested interest. ) New CT scanners that

FDA determines to be similar to existing ones will be placed in the same class (i. e.,

Class 11). Any development that represents a radical departure in nature or operation

from existing models could be placed in Class 111 requiring premarket approval.

Radiation Protection

The Food and Drug Administration also has statutory responsibility for

protecting the public from radiation exposure from electronic devices such as X-ray

machines. Its Bureau of Radiological Health develops and enforces standards to

ensure minimal radiation exposure from X-ray devices. CT scanners have been

subject to general radiation safety standards since the first one was installed. In

1974, specific guidelines were developed for their regulation.

Because the Bureau of Radiological Health has had experience with the CT

scanner already, it will have the responsibility for developing performance standards for both safety and efficacy. * The Bureau of Radiological Health and the

Bureau of Medical Devices have developed an inter-Bureau agreement to ensure

cooperation in this effort. The Bureau of Radiological Health established a CT task

force in 1970 that is presently considering the necessity for performance standards

concerning efficacy.

The National Institutes of Health (NIH)

NIH supports basic and applied research and technology development. Initial

human trials and then larger clinical trials are often stages in the research and

development process. A little more than 5 percent of the NIH budget is allocated to

clinical trials. The results of these investigations sometimes provide information

about the safety and efficacy of technologies. However, NIH has no statutory

mandate to conduct studies related to efficacy and safety.

NIH is using CT scanning in its intramural program and supporting extramural

research studies involving its use. Extramurally, about 100 NIH-funded projects

involve CT scanning, with the largest single group in cancer research. Several of

these studies will provide more definitive information than is now available on the

diagnostic accuracy of CT scanning. These studies are not, however, designed to examine efficacy in terms of its effect on therapy decisions or on the health of patients.

NIH has established a mechanism to develop and disseminate information on

efficacy and has titled this mechanism “evolution of a consensus. ” During 1976, NIH

applied this new process using outside experts to the problem of hypertension and its

treatment. In September 1977, the second consensus process considered screening

* The legislaticln uses the term “effectiveness,” but the Bureau of Medical Devices considers

eff ica~ y and effectiveness to be synonymous,
42 ● Ch. 3—Efficacy and Safety

for breast cancer. This mechanism may be a way of developing recommendations on

efficacy for the use of other Federal programs, the public, and medical practitioners.

SHORTCOMINGS OF EFFICACY AND SAFETY POLICIES

Shortcomings in Federal policies related to efficacy and safety information occur

in several areas: definition of efficacy, determination of efficacy and safety, dissemination of information, and use of the information. Use of information on efficacy

and safety will be addressed in subsequent chapters.

A definition of efficacy and a discussion of some of the difficulties in applying

any definition to diagnostic technologies were presented earlier in this chapter. Only

FDA has been given a statutory definition of efficacy. In the FDA statutes, however,

the term “effectiveness” is used rather than efficacy. According to the Food, Drug,

and Cosmetic Act a medical device or drug is to be considered effective if it “will have

the effect it purports or is represented to have under the conditions of use

prescribed, recommended, or suggested in the labeling.” This effect is largely

determined by the manufacturer and is not necessarily a demonstrable impact on

health outcome. This statutory language results in the FDA’s evaluating the efficacy

of diagnostic technologies on grounds other than patient outcome. Whether patient

outcome should be the standard of efficacy for diagnostic technologies is controversial. However, the lack of any generally accepted measure of “benefit” for such

technologies can lead to difficulties in assessing their efficacy,

Not only is FDA the only agency that has a statutory definition, no common definition has been developed for use by all Federal programs. Some Federal agencies develop information on efficacy and safety, others disseminate the information, and

still others use it to regulate various aspects of medical practice. Personnel in these

programs use the term “efficacy” in various ways, to mean different things. Lack of a

policy on the definition of efficacy can lead to confusion and difficulty in cooperation

and communication. Judgments by one agency of the efficacy of a technology may be

of little use to other agencies because different criteria are used to determine efficacy

by the various agencies.

No Federal policy sets out clear responsibilities for evaluating the efficacy and

safety of all classes of medical technologies—drugs, devices, and procedures. Evaluating efficacy and safety involves identifying the technologies to be studied, conducting the appropriate clinical trials, and synthesizing the results of those trials with

information from clinical experience. Such synthesis can include a formal or official

judgment of the efficacy and safety of a particular technology. Information on

efficacy is seldom collected, organized, and made available in such a way that it can be

helpful either to policy makers or medical practitioners. Presently, evaluations of

efficacy for devices and drugs are performed almost exclusively by the industry that

produces them, although FDA examines the design and the results of these studies

for validity.

No formal mechanism exists for determining which technologies warrant eval-
Ch. 3–Efficacy and Safety ● 4 3

uation. In particular, when the private sector has not conducted adequate studies on

efficacy, no mechanism exists to identify the inadequacies and to ensure that proper

studies are funded. Thus, pre-clinical and clinical studies and clinical experience are

not always evaluated, and no policy exists for developing tentative positions pending

availability of definitive information. Further, lack of a formal system to identify

technologies to be studied often results in the needs of users of efficacy and safety

information being excluded from the decision to study.

There is no formal policy, nor has any Federal agency been assigned a clear

mandate, for the conduct of evaluations of efficacy and safety. More than a dozen

Federal agencies conduct clinical trials, but none of the agencies do so as a result of an

explicit statutory mandate. Only NIH and to a lesser extent the Veterans Administration support a substantial number of trials. In fiscal year 1975, NIH spent about

$100 million dollars on approximately 750 trials. This expenditure represented about

5 percent of NIH’s budget. Trials of drugs and biologics predominated; trials of

devices and procedures represented only a small proportion of the total. Existing

technologies received far less attention than did new or emerging ones. No clear

Federal policies for identification of technologies warranting study and for conducting the appropriate evaluations exist. And no agency has been assigned the responsibility for carrying out these functions. It is also clear that the clinical trials currently

conducted are not fully satisfying the needs of health planners, third-party payers,

Professional Standards Review Organizations, and the practicing medical commu nit y.

Determining which technologies to study is only one contributor to the

situation. Current trials often do not develop information related to each of the four

factors specified by the definitions given above for efficacy and safety. Questions

have also been raised about the efficacy and safety of many more technologies than

can be studied with the available resources. And once the trials have been conducted,

no formal mechanism exists to collect and synthesize the results of the trials, along

with relevant clinical information. No agency has the responsibility (or resources) to

make formal judgments of the efficacy and safety of technologies, except FDA in the

case of new drugs and devices. * Medical and surgical procedures receive no

systematic scrutiny.

Once information is developed, no consistent policy or agency focus exists for

disseminating it to the organizations and individuals in need of it. NIH and FDA both

have major activities related to dissemination, but their efforts are hampered by a

number of factors. For example, FDA disseminates information related to its

evaluations of the efficacy and safety of drugs and devices, but the usefulness of that

data is diminished by definition-related problems. Also, NIH has been given only

moderate funding for the task, and historically lacks ties to the practicing medical

community and to other Federal programs, such as Medicare.

There are shortcomings in Federal policy at each of the stages in defining and

evaluating efficacy and safety and in disseminating the resultant information.

Moreover, the underlying problem is the absence of a consistent and explicit policy

that views these stages as part of a continuous process. Evaluation depends on

definition; dissemination depends on evaluation. Failure to recognize these dependencies can lead to fragmented policies relating to each of the parts.

● The FDA process is impacted by the definitional shortcomings mentioned here and from lack of

funds t[~ carry c~ut efficacy and safety tests independent of the sponsoring industries.
NUMBER AND DISTRIBUTION
4 ●

NUMBER AND DISTRIBUTION

EXPERIENCE WITH CT SCANNING

Number of CT Scanners

As of May 1977, 401 machines were known to be in use in the United States.**

Nearly three-fifths were head scanners; the rest were full-body scanners. However,

body scanners account for most new purchases (29). By 1978, more than half of the

operational scanners were body scanners.

EMI, Pfizer, and Ohio Nuclear manufactured 95 percent of the machines used in

the United States in May 1977 (table 6). The first CT scanners, and most of the

scanners used then, were sold by EMI. At that time, six companies were producing

machines for sale in the United States, and at least six more were developing

*A survey by J. Lloyd Johnson Associates reported 560 Operational scanners by April 1977, and 637

by lune 197’7 (263). Fineberg, et al. reported 567 operational scanners by April 1977 (168).

“’institutions with CT scanners are listed in appendix 1.

47
48 ● Ch. 4—Number and Distribution

Table 6.—Type and Manufacturer of CT Scanners in Use

May 1977a

I Type of CT Scanner

Manufacturer I Total I Head I Body

EM I Ltd. . . . . . . . . . . . . . . . .

Ohio Nuclear (Delta) . . . .

Pfizer (Acta) . . . . . . . . . . . .

General Electric . . . . . . . . .

Syntex . . . . . . . . . . . . . . . . .

Artronix . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . .

No.

232

109

40

8

9

3

401

Percent

58

27

10

2

2

1

100

No.

211

0 —

7

9

3

230

Percent

92

0

—

3

4

1

100

No.

21

109

40

1

0

0

171

Percent

12

64

23

1

0

0

100

a Since May 1977, informal reports indicate that American Science and Engineering has installed several

machines.

Source: Off ice of Technology Assessment.

scanners for future sales or were about to enter the market (147,377). By May 1978,

11 companies had commerial machines in operation.

The rate of installation of CT scanners in the United States has increased

steadily over time. The diffusion curve in figure 10 falls into three periods, each with

a higher rate of installation than the preceding one (table 7). The first period began

in June 1973, with the installation of the first head scanner at the Mayo Clinic. From

that date until October 1974, the rate of installation was less than 5 per month.

Between October 1974 and June 1975, the rate increased to just below 10 per month.

The third and most recent period for which the data are complete began in July 1975

and extended through September 1976; an average of 19 scanners per month was

installed during that period. Incomplete data for 1977 show an even more rapid

installation rate for that period.

The most recent rate might have been higher if manufacturers had been able to

produce more machines. For example, in 1975, twice as many scanners were ordered

as were shipped (402). EMI’s 1976 year-end backlog of unfilled orders exceeded 250

machines (362). In response to the demand throughout 1976, EMI and Ohio Nuclear

prepared to increase their 1977 production schedules of CT scanners (29). EMI is also

increasing its production capacity.

The rate of installation will probably continue at more than 19 per month in the

immediate future. Nationally, 330 scanners were either ordered from manufacturers

or approved by planning agencies, and 200 applications for scanners were awaiting

approval by State agencies as of August 1976 (266). Longer term rates of orders and

installations are not yet clear. The number of new orders in the first half of 1977 fell

from the high of 1976. One estimate predicted 200 new orders in 1977 compared to

more than 400 in 1976 (263). In fact, orders during 1975 and 1976 may have been

abnormally high in anticipation of State and Federal regulations on purchases.

Experience during 1977 may represent a temporary adjustment to a more stable

growth rate for sales.
Ch. 4—Number and Distribution ● 4 9

Figure 10.—Cumulative Number of CT Scanners in the

United States by Date of installation

Number of

scanners

400

360

320

280

240

200

160

120

80

40

0

1st scanner installed in United States

Source: Off Ice of Technology Assessment

Date (month and year)

Geographic Distribution of CT Scanners

The distribution of CT scanners by State and region of the country as of August

1976 is shown in table 8. At that time, 44 States and the District of Columbia each had

at least one scanner. Vermont, Delaware, Montana, Wyoming, and Alaska, which are

5 of the smallest States by population, as well as West Virginia, had no scanner.

California had 60 scanners, the largest number of any State. The Los Angeles area

alone had 29 scanners. Florida had the second highest number of machines, 2 7,

followed by Texas with 19, and Ohio with 16.
50 ● Ch. 4—Number and Distribution

Table 7.—Coordinates of Diffusion Curve

Date of Installation Number of CT Scanners

(Month and Year) (Cumulative)

1973

6 June . . . . . . . . . . . . . . . . . .

8 August . . . . . . . . . . . . . . .

9 September . . . . . . . . . . . .

10 October . . . . . . . . . . . . .

1974

1 January . . . . . . . . . . . . . . .

2 February . . . . . . . . . . . . . .

4 April . . . . . . . . . . . . . . . . . .

5 May . . . . . . . . . . . . . . . . . .

6 June . . . . . . . . . . . . . . . . . .

7July . . . . . . . . . . . . . . . . . .

8August . . . . . . . . . . . . . . .

9 September . . . . . . . . . . . .

IO October . . . . . . . . . . . . .

11 November . . . . . . . . . . .

12 December . . . . . . . . . . .

1975

1 January . . . . . . . . . . . . . . .

2 February . . . . . . . . . . . . . .

3March . . . . . . . . . . . . . . . .

4April . . . . . . . . . . . . . . . . . .

5May . . . . . . . . . . . . . . . . . .

6June . . . . . . . . . . . . . . . . . .

7July . . . . . . . . . . . . . . . . . .

8August . . . . . . . . . . . . . . .

9 September . . . . . . . . . . . .

IO October . . . . . . . . . . . . .

11 November . . . . . . . . . . .

12 December . . . . . . . . . . .

1976

1 January . . . . . . . . . . . . . . .

2 February . . . . . . . . . . . . . .

3March . . . . . . . . . . . . . . . .

4April . . . . . . . . . . . . . . . . . .

5May . . . . . . . . . . . . . . . . . .

6June . . . . . . . . . . . . . . . . . .

7July . . . . . . . . . . . . . . . . . .

8August . . . . . . . . . . . . . . .

9 September . . . . . . . . . . . .

1

2

5

6

9

12

13

15

18

21

23

26

31

39

45

47

55

60

67

83

92

109

123

142

167

183

196

216

236

258

285

304

327

343

363

379

Source: Office ofTechnology Assessment.
Ch. 4—Number and Distribution ● 51

Table 8.—Distribution of CT Scanners by State, Region, and Populationa

Region or State

New England . . . . . . . . . . . . . . . . . . . . . .

Maine . . . . . . . . . . . . . . . . . . . . . . . . . . .

New Hampshire . . . . . . . . . . . . . . . . .

Vermont . . . . . . . . . . . . . . . . . . . . . . . .

Massachusetts . . . . . . . . . . . . . . . . . . .

Rhode Island . . . . . . . . . . . . . . . . . . . .

Connecticut .. .. .. .. ... ... ...O...

Middle Atlantic . . . . . . . . . . . . . . . . . . . .

New York . . . . . . . . . . . . . . . . . . . . . . .

New Jersey . . . . . . . . . . . . . . . . . . . . . .

Pennsylvania .. .. .. ... ... ... ....O

East North Central. . . . . . . . . . . . . . . . . .

Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indiana . . . . . . . . . . . . . . . . . . . . . . . . .

Illinois . . . . . . . . . . . . . . . . . . . . . . . . . .

Michigan . . . . . . . . . . . . . . . . . . . . . . . .

Wisconsin . . . . . . . . . . . . . . . . . . . . . . .

West North Central . . . . . . . . . . . . . . . .

Minnesota . . . . . . . . . . . . . . . . . . . . . . .

Iowa .. .. .. .. .. . . . . . . . . . . . . . . .

Missouri . . . . . . . . . . . . . . . . . . . . . . . .

North Dakota . . . . . . . . . . . . . . . . . . . .

South Dakota . . . . . . . . . . . . . . . . . . . .

Nebraska . . . . . . . . . . . . . . . . . . . . . . . .

Kansas . . . . . . . . . . . . . . . . . . . . . . . . . .

South Atlantic . . . . . . . . . . . . . . . . . . . . .

Delaware . . . . . . . . . . . . . . . . . . . . . . . .

Marylandd 

. . . . . . . . . . . . . . . . . . . . . . . .

District of Columbia . . . . . . . . . . . . .

Virginia . . . . . . . . . . . . . . . . . . . . . . . . .

West Virginia . . . . . . . . . . . . . . . . . . . .

North Carolina . . . . . . . . . . . . . . . . . .

South Carolina . . . . . . . . . . . . . . . . . .

Georgia . . . . . . . . . . . . . . . . . . . . . . . . .

Florida . . . . . . . . . . . . . . . . . . . . . . . . . .

East South Central . . . . . . . . . . . . . . . . .

Kentucky . . . . . . . . . . . . . . . . . . . . . . . .

Tennessee . . . . . . . . . . . . . . . . . . . . . .

Alabama . . . . . . . . . . . . . . . . . . . . . . . .

Mississippi . . . . . . . . . . . . . . . . . . . . . .

Number of CT Scanners

Installed

17

1

1

0

11

1

3

35

17

2

16

50

16

4

15

7

8

30

9

1

13

1

1

1

4

49

0

3

2

5

0

4

2

6

27

18

3

7

6

2

Installed

plus

Committedc

24

3

1

1

12

1

6

79

41

12

26

134

36

15

49

17

17

48

10

7

17

2

2

5

5

99

2

4

10

14

5

4

5

17

38

36

5

17

11

3

CT Scanners per

Million Populationb

Installed

1.4

1.0

1.2

0

1.9

1.1

1.0

.9

.9

.3

1.4

1.2

1.5

.8

1.3

.8

1.7

1.8

2.3

.4

2.7

1.6

1.5

.6

1.7

1.4

0

.7

2.9

1.0

0

.7

.7

1.2

3.2

1.3

.9

1.7

1.6

.9

Installed

plus

Committedc

2.0

2.8

1.2

2.1

2.1

1.1

1.9

2.1

2.3

1.6

2.2

3.3

3.4

2.8

4.4

1.9

3.7

2.9

2.5

2.4

3.6

3.1

2.9

3.2

2.2

3.0

3.4

1.0

14.2

2.8

2.7

1.0

1.8

3.4

4.5

2.6

1.5

4.0

3.0

1.3
52 ● Ch. 4—Number and Distribution

Table 8.—Cent.

Region or State

West South Central . . . . . . . . . . . . . . . .

Arkansas . . . . . . . . . . . . . . . . . . . . . . . .

Louisiana . . . . . . . . . . . . . . . . . . . . . . .

Oklahoma . . . . . . . . . . . . . . . . . . . . . . .

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mountain . . . . . . . . . . . . . . . . . . . . . . . . . .

Montana . . . . . . . . . . . . . . . . . . . . . . . .

Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . .

Wyoming . . . . . . . . . . . . . . . . . . . . . . . .

Colorado . . . . . . . . . . . . . . . . . . . . . . . .

New Mexico . . . . . . . . . . . . . . . . . . . . .

Arizona . . . . . . . . . . . . . . . . . . . . . . . . .

Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nevada . . . . . . . . . . . . . . . . . . . . . . . . .

Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Washington . . . . . . . . . . . . . . . . . . . . .

Oregon . . . . . . . . . . . . . . . . . . . . . . . . .

California . . . . . . . . . . . . . . . . . . . . . . .

Alaska . . . . . . . . . . . . . . . . . . . . . . . . . .

Hawaii . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of CT Scanners

Installed

30

3

5

3

19

19

0

3

0

4

2

5

3

2

69

5

3

60

0

1

321

Installed

plus

Committed

59

5

11

7

36

39

2

4

0

12

2

8

4

7

134

6

6

119

( e)

3

652

CT Scanners per

Million Population

Installed

1.4

1.4

1.3

1.1

1.5

1.9

0

3.6

0

1.6

1.7

2.2

2.4

3.3

2.4

1.4

1.3

2.8

0

1.1

1.5

Installed

plus

Committed

2.8

2.4

2.9

2.5

2.9

4.0

2.7

4.8

0

4.6

1.7

3.5

3.3

11.5

4.7

1.7

2.6

5.5

(e)

3.4

3.0

a Statistics are current as of August 1976, andare fairly complete through May 1976. But therewere873 CT

scanners knownto be installed by November 1977.

b Population data were provisional asof July l,1976.

c Committed refers to CT scanners already ordered and approved by local Health Systems Agencies.

d Four CT scanners at the National institutes of Health are excluded from Maryland, but included in Total.

e Not available.

Sources: 495; Office of Technology Assessment.

Throughout 1976, the national average was about 1.5* CT scanners per million

population. States with the highest ratios of scanners per million population included

Idaho (3.6), Nevada (3.3), Florida (3.2), the District of Columbia (2.9), California(2.8)

and Missouri (2.7).

By November 1977, at least 873 scanners were operational, and every State had

at least one. The national ratio was approximately 4 scanners per million population.

The District of Columbia had the highest ratio of scanners to population (16.8), and

States with high scanner to population ratios included Nevada (13,5), Florida (9.6),

Alaska (8.5), California (8.4), and North Dakota (7.9). States with the lowest

*Only ~rude ratios are shown.
Ch. 4–Number and Distribution ● 5 3

concentration of scanners included South Carolina (2.1), Rhode Island (2.2), New

Hampshire (2.4), New Jersey (2.5), and Massachusetts (2.6). *

By the end of 1977, the CT scanner manufacturers reported 921 operational

scanners, 85 percent of which were in hospitals.**

Institutional Distribution of CT Scanners

Table 9 shows that 76 scanners, or 19 percent of the 401 machines identified in

May 1977, were owned by physicians in private offices and clinics. At least 33

scanners, or 43 percent of those 76 were in radiological offices.

Hospitals accounted for 325 scanners, or 81 percent, of the machines identified.

The overwhelming majority of these institutions are nonprofit community hospitals

Table 9.—Distribution of CT Scanners by Type of Facility a

Type of Facility

Community Hospitals

(by number of beds)

0-99 . . . . . . . . . . . . . . . . . . . . . . .

100-199 . . . . . . . . . , . . . . . . . . . . .

200-299 . . . . . . . . . . . . . . . . . . . . .

300-399 . . . . . . . . . . . . . . . . . . . . .

400-499 . . . . . . . . . . . . . . . . . . . . .

500-599 . . . . . . . . . . . . . . . . . . . . .

600-699 . . . . . . . . . . . . . . . . . . . . .

700-799 . . . . . . . . . . . . . . . . . . . . .

800-899 . . . . . . . . . . . . . . . . . . . . .

900-999 . . . . . . . . . . . . . . . . . . . . .

1,000-1,099 ., . . . . . . . . . . . . . . . . . .

1,100-1,199 . . . . . . . . . . . . . . . . . . . .

1,200-1,299 . . . . . . . . . . . . . . . . . . . .

1,300 and over . . . . . . . . . . . . . . . . .

Other Short-term Hospitals . . . . . . .

All Hospitals (total) . . . . . . . . . .

Offices . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . .

Percent of

All Facilities

100

50

23

12

6

4

5’

100

100

Number of

Facilities

with CT

Scanners

302

6

10

43

53

58

43

30

13

14

10

7

6

1

5

3’

305

76

381

Percent

with CT

Scanners

Number

of CT

Scanners

5.1 \ 323

0.2

0.7

6.5

14.0

25.2

44.0’

0.5

4.7

6

10

43

53

60

48

32

13

16

12

8

7

4

5

6

323

78

401

“ Includes scanners known to reinstalled by May 1977.

b Percentages applyto all hospitals with 500beds and over. Hospitals with l,C)OO beds and over accountforC),5

percent of all beds, and68 percent of these hospitals havea CT scanner,

c Includes three Federal hospitals: Veterans Administration, Boston, Mass., 291 beds, 1 scanner; Veterans

Admlnlstratlonf Indlanapolls, Ind.. 725 beds, 1 scanner; and National Institutes of Health, Cllnlcal Center,

Bethesda, Md , 511 beds, 4 scanners.

Sources: 30,32, 33. Office of Technology Assessment.

* Data from the Center for the Analysis of Health practices, Harvard School of Public Health.

● * Information furnished by the National Electrical Manufacturers Association.
54 Ch. 4—Number and Distribution

with general medical and surgical services. Six Federal hospitals and 50 non-Federal

governmental hospitals were identified as owning CT scanners. Table 9 also

compares the size of hospitals with scanners to the size of all community hospitals.

Forty-four percent of all community hospitals with 500 beds or more had a CT

scanner; 5 percent of all community hospitals are in this bed size category.

The diffusion of CT scanners by size of hospital has followed a pattern similar to

the diffusion of other expensive technologies. For example, the largest hospitals were

also the first to adopt cobalt therapy, electroencephalographs, and intensive care

facilities (448). While small hospitals might eventually obtain an expensive medical

technology, frequently they are not able to meet operating expenses due to a low

patient load. The same reason may explain why smaller hospitals have not purchased

scanners at the same rate as larger hospitals.

Like other large hospitals, those affiliated with medical schools have been among

the first to acquire equipment requiring large initial expenditures, as borne out with

CT scanners. Eighty-nine of the Nation’s 113 accredited medical schools, or 79 percent, had a major affiliation with a hospital that had a scanner by May 1977 (24). This

high percentage is consistent with a suggestion from the Department of Health,

Education, and Welfare (HEW) that Health Systems Agencies give priority to

placement of scanners in medical school teaching centers and hospitals with large

neurological and neurosurgical caseloads (500). *

The greater the number of physicians in an area, the greater seems to be the

purchase by hospitals of technologies with high fixed costs (123). However, a test of

this hypothesis showed little correlation between physician to population ratios and

CT scanners to population ratios.**

Little can be inferred from the data about the pattern of ownership of scanners.

The scanners known to be in private offices and clinics are owned privately or by the

facilities. Of the scanners located in hospitals, less is known about ownership. One

report indicated that at least 61, or 10 percent, of the 637 CT scanners identified in

June 1977, were owned or leased by physicians (usually radiologists), but located in

hospitals (263).

GOVERNMENTAL AND NONGOVERNMENTAL POLICIES

An objective of the Congress in enacting health planning legislation was to

achieve equal access to quality medical care at a reasonable cost (505). Under the

provisions of the National Health Planning and Resources Development Act of 1974

and other health laws, this objective applies to CT scanners. In addition, some policies

adopted by the private sector complement those of the public sector.

Section 1122 of the Social Security Act

In 1972, P.L. 92-603, section 221, added section 1122 to the Social Security Act.

This section introduced an important concept that has influenced subsequent health

● HEW’s reason for issuing this advice has not been made explicit.

**Kendall’s coefficient of ~ = .04. Possible values of ~ are -I (inverse relationship), O (no relationship), and +1 (identity). It would be useful to retest the hypothesis with a different statistical

technique; a different geographical division, for example, by Standard Metropolitan Statistical Area;

and ratios of medical specialists to population in lieu of all physicians.
Ch. 4—Number and Distribution ● 5 5

legislation: that financing of medical care should be closely related to health planning.

Section 1122 provides that “health care facilities” may not be reimbursed for any

depreciation, interest or return on equity relating to capital expenditures that the

Secretary of HEW finds to be inconsistent with a State health plan. Those funds

available from Medicare, Medicaid, and Maternal and Child Health Programs (titles

XVIII, XIX, and V, respectively, of the Social Security Act) may be withheld under

the provisions of section 1122. By statute, capital expenditures that exceed $100,000

are subject to review. Currently, 37 States have contracts with HEW to conduct

reviews of capital expenditures under section 1122 (table 10). Section 1122 also

covers increases and decreases in numbers of beds, services offered in medical care

facilities, the introduction of new services, and the cessation of existing ones that

involve capital expenditures.

Federal regulations implementing section 1122 were amended in January 1977 to

define medical care facilities subject to review as hospitals; psychiatric hospitals;

tuberculosis hospitals; skilled nursing facilities; kidney disease treatment centers,

including free-standing hemodialysis units; intermediate care facilities; and ambulatory surgical facilities. Health maintenance organizations are also included, but offices

of private physicians are explicitly exempted (234).

Since operating expenses and physician services are not subject to regulation,

only a small percentage of a provider’s total income is at risk under section 1122. (For

CT scanners, operating expenses account for 50 to 75 percent of the machine’s

technical expenses. ) Even without strong penalties, compliance with the law is

widespread. One explanation suggests that compliance is due to the threat of stiffer

sanctions and to the tradition, among medical care providers, of voluntarily abiding by

public regulation (323). A more critical interpretation cites the high rate of approvals

of capital expenditures under section 1122 as evidence that it rarely threatens

providers’ investment plans (85).

State Certificate-of-Need Laws

Expenditures for the construction and expansion of medical facilities are also

regulated through State certificate-of-need laws, In the 35 States that have enacted

such laws since 1965, new construction and equipment purchases, additions to

existing physical plant, expansion of the number of beds, or changes in services may

occur only with prior State review and approval.

The type of facilities covered by certificate-of-need laws varies from State to

State. Most States cover hospitals and nursing care facilities. Less than half cover

outpatient facilities not associated with hospitals, such as surgical centers and health

maintenance organizations. Like section 1122, most certificate-of-need laws exempt

private physicians’ offices from review. However, coverage of medical care facilities

under section 1122 is usually more comprehensive than it is under current certificateof-need laws.

Providers of medical services are subject to stringent sanctions if they do not

comply with certificate-of-need rulings. The designated agencies can deny operating

licenses, obtain court injunctions, and levy fines. State certificate-of-need laws differ

in the minimum expenditure on physical plant or equipment that is subject to review.

Furthermore, some States require a review whenever any facility, equipment, or

service change is proposed, regardless of capital expenditures.

15-703 C) - 78 - 5
56 ● Ch. 4—Number and Distribution

Table 10.—States With Certificate-of-Need Legislation,

Section 1122 Agreements, or CT Planning Criteriaa

State

Alabama . . . . . . . . . . . . . .

Alaska . . . . . . . . . . . . . . . .

Arizona . . . . . . . . . . . . . . .

Arkansas ... , . . . . . . . . . .

California . . . . . . . . . . . . .

Colorado . . . . . . . . . . . . . .

Connecticut . . . . . . . . . . .

Delaware . . . . . . . . . . . . . .

District of Columbia . . .

Florida . . . . . . . . . . . . . . . .

Georgia . . . . . . . . . . . . . . .

Hawaii . . . . . . . . . . . . . . . .

Idaho . . . . . . . . . . . . . . . . .

Illinois . . . . . . . . . . . . . . . .

Indiana . . . . . . . . . . . . . . .

lowa . . . . . . . . . . . . . . . . . .

Kansas . . . . . . . . . . . . . . . .

Kentucky . . . . . . . . . . . . . .

Louisiana . . . . . . . . . . . . .

Maine . . . . . . . . . . . . . . . . .

Maryland . . . . . . . . . . . . . .

Massachusetts . . . . . . . . .

Michigan . . . . . . . . . . . . . .

Minnesota . . . . . . . . . . . . .

Mississippi . . . . . . . . . . . .

Missouri . . . . . . . . . . . . . .

Montana . . . . . . . . . . . . . .

Nebraska . . . . . . . . . . . . . .

Nevada . . . . . . . . . . . . . . .

New Hampshire . . . . . . .

New Jersey . . . . . . . . . . . .

New Mexico . . . . . . . . . . .

New York . . . . . . . . . . . . .

North Carolina . . . . . . . .

North Dakota . . . . . . . . . .

Ohio . . . . . . . . . . . . . . . . . .

Oklahoma . . . . . . . . . . . . .

Oregon . . . . . . . . . . . . . . .

Pennsylvania . . . . . . . . . .

Rhode Island . . . . . . . . . .

Certlficateof-Need

Legislation

Yes

No

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

No

Yes

No

Yes

Yes

Yes

No

No

Yes

Yes

Yes

Yes

No

No

Yes

No

Yes

No

Yes

No

Yes

No

Yes

Yes

Yes

Yes

No

Yes

Section 1122

Agreement

Yes

Yes

No

Yes

No

Yes

No

Yes

No

Yes

Yes

No

Yes

No

Yes

Yes

No

Yes

Yes

Yes

Yes

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

CT Planning

Criteria b

Statewide

No

Statewide

Statewide

Statewide

Statewide

Statewide

No

No

Regional only

No

No

Statewide

Statewide

Statewide

Statewide

No

Statewide

No

Statewide

Statewide

Statewide

Statewide

Regional only

No

Statewide

No

Statewide

No

No

Statewide

No

Statewide

No

Statewide

Statewide

Regional only

Regional only

Regional only

Statewide
Ch. 4—Number and Distribution ● 5 7

Table 10.—Cont.

State

South Carolina . . . . . . . .

South Dakota . . . . . . . . . .

Tennessee . . . . . . . . . . . .

Texas . . . . . . . . . . . . . . . . .

Utah . . . . . . . . . . . . . . . . . .

Vermont . . . . . . . . . . . . . .

Virginia . . . . . . . . . . . . . . .

Washington . . . . . . . . . . .

West Virginia . . . . . . . . . .

Wisconsin . . . . . . . . . . . . .

Wyoming . . . . . . . . . . . . . .

Certificateof-Need

Legislation

Yes

Yes

Yes

Yes

No

No

Yesc

Yes

Yes

Yesc

Yes

Section 1122

Agreement

Yes

No

No

No

Yes

Yes

No

Yes

Yes

Yes

Yes

CT Planning

Criteria

No

No

Statewide

Statewide

Statewide

No

No

Statewide

No

Statewide

Statewide

a Data concerning certificate-of-need laws and section 1122 agreements are current as of July 1977. Data

concerning CT planning criteria are current as of August 1976. -

b Includes formal guidelines, regulations, and staff papers used in reviewing applications.

c Review and approval authority may extend to physicians’ offices.

All certificate-of-need laws review the impact of a proposed change in existing

facilities, equipment, or services on the basis of the population’s need for medical

services. Therefore, the critical component in the review process is how to determine

need for the medical services and how to relate it to the number and distribution of

facilities and equipment. The certificate-of-need form of regulation will continue to be

associated with health planning since it figures prominently in the National Health

Planning and Resources Development Act, P.L. 93-641.

The National Health Planning and Resources Development Act of 1974,

P.L. 93-641

P.L. 93-641 revised existing health programs and added new ones in order to unify

the Federal Government’s role in health planning, program development, regulation,

and financing (505). The provisions of the Act which have particular relevance to CT

scanners are those that authorize development of the National Guidelines for Health

Planning and those that establish Health Systems Agencies (HSAs) and State Health

Planning and Development Agencies (SHPDAs). The National Guidelines are

intended to clarify and coordinate national health policy, thereby assisting in area plan

development. The responsibility for areawide planning and development is given to

the HSAs. Statewide planning and administration of regulatory programs are the

responsibility of. the SHPDAs. The major programs administered by the State

agencies include certificate-of-need and reviews of existing institutional health

services and facilities. Reviews under section 1122 of the Social Security Act are also

conducted by SHPDAs.

The certificate-of-need provisions of P.L. 93-641 are to be implemented according to uniform minimum requirements and standards. The kinds of facilities to be

covered have been specified and correspond to those covered under section 1122 of

the Social Security Act. Minimum capital expenditures subject to review have been

set at $150,000. Criteria for review of proposed services have also been specified
58 ● Ch. 4—Number and Distribution

according to section 1532(c). HSAs and SHPDAs are required to consider at least the

following criteria:

(1) The relationship of the health services being reviewed to the applicable HSP and

AIP. *

(2) The relationship of services reviewed to the long-range development plan (if any)

of the person providing or proposing such services.

(3) The need that the population served or to be served by such services has for such

services.

(4) The availability of alternatives, less costly, or more effective methods of

providing such services.

(5) The relationship of services reviewed to the existing health care system of the

area in which such services are provided or proposed to be provided.

(6) In the case of health services proposed to be provided, the availabilit y of

resources . . . for the provision of such services and the availability of alternative

uses of such resources for the provision of other health services.

(7) The special needs and circumstances of those entities which provide a substantial

portion of their services or resources, or both, to individuals not residing in the

health service areas in which the entities are located or in adjacent health service

areas. . . .

(8) The special needs and circumstances of health maintenance organizations for

which assistance may be provided under title XIII.

(9) In the case of a construction project—

(A) the costs and methods of the proposed construction, and

(B) the probable impact of the construction project reviewed on the costs of

providing health services by the person proposing such construction project.

Because of their prices, CT scanners purchased or leased by covered facilities are

subject to review by an HSA and approval by an SHPDA. These agencies will be

assisted in their reviews of scanners by the National Guidelines. Seen as a shortterm way to moderate escalating medical care costs, the National Guidelines set

limits on supplies of CT scanners and eight other facilities and services. Health

systems plans and, in turn, State health plans and medical facilities plans are to be

consistent with the National Guidelines by March 28, 1979. The standards of the

National Guidelines will be reflected in the States’ criteria for review of certificateof-need applications since certificate-of-need criteria are also required to be consistent with health systems plans.

Lastly, the SHPDAs are required to review existing medical services and make

public findings of their appropriateness. Unlike the other two programs, no mechanism has been provided to translate these findings into recommendations for action.

Nonetheless, inclusion of the reviews in the law may presage more comprehensive

regulation.

*HSP refers to health systems plan and AIP refers to annual implementation plan.
Ch. 4—Number and Distribution ● 5 9

Non-Governmental Policy

Increasingly, third-party payers link their reimbursement policies to the

planning policies of the Federal and State governments. In 1976, 16 of 46 Blue Shield

Plans limited payment for CT scans to institutions whose scanners had been

approved by a planning agency. Eighteen had no such policy, and 12 had the matter

under study (374). Similarly, most Blue Cross Plans link reimbursement to approval

by planning agencies. Forty-two of 59 plans reporting in 1976, or 71 percent, had

conformance clauses in their contracts or operated in States with certificate-of-need

laws. These clauses made reimbursement for services contingent upon approval of

equipment by planning agencies. * Unlike Blue Cross and Blue Shield, commercial

insurance companies have shown little interest in coordinating reimbursement

practices with the planning policies of the Government. There are indications that

this pattern is changing. In response to a request from a commercial insurance

company, the Connecticut Insurance Department in August 1976, authorized a rider

denying payment for procedures performed in facilities or on equipment not

approved by a designated State agency. The rider further provided that when State

approval is not required, CT scanning will be reimbursed only if performed in a

hospital (233).

FEDERAL POLICIES IN PRACTICE

Federal law ties planning for medical care services to the population’s health

“needs. ” In the absence of readily available, valid, or reliable measures of the need for

CT scanning, State and local planners have adopted substitute indicators of need. For a

variety of reasons, to be explained in the concluding section, it cannot be shown that

planning in practice has guided the diffusion of CT scanners in a manner consistent

with the intent of the law.

Often, planners have used a fixed ratio of scanners per population to indicate the

number of scanners needed, and therefore approved for installation within an area.

This ideal or “target” ratio is derived in several ways (250). Three commonly used

approaches are: (1) to specify by a “rule of thumb” the population served; (2) to

specify the population by the incidence and prevalence of specific diseases; and (3) to

determine the number of scanners needed by the number of diagnostic procedures

that could be replaced by CT scanning.

In the first approach, much discretion is used to choose an optimal ratio of

scanners to population. As a result, planning targets vary among planning areas,

Indiana allowed one scanner in each service area with more than 100,000 population

(554), while Alabama suggested that a service area should have at least 500,000

population (544). Massachusetts’ (564) and New Jersey’s (572, 573) guidelines stated

that each health service area should have one scanner, while in Ohio, (581) t he

guidelines suggested one for every major medical center.

Instead of directly specifying the number of machines required, the second and

third approaches estimate the number of scans required by the population and then

‘Conformance clauses notwithstanding, some Blue Cross plans are contractually obliged to

reimburse hospitals for CT scanning services rendered in private offices (70).
60 ● Ch./ 4—Number and Distribution

translate this number into a specific number of machines. Arriving at a number of

scanners in this way depends on how the operating capacity of the machine is

computed. The variables which determine the operating capacity of a CT scanner

together with actual data from operating machines are presented in appendix II.

The second approach calculates the incidence and prevalence of diseases for which

CT scanning is used and estimates the number of scans needed. Kentucky, for example, used data on risks, prevalence, and incidence of cancer and certain neurological

diseases. The State estimated that 46,000 persons per year needed CT scans (558).

However, identifying diseases suitable for CT scanning assumes knowledge of appropriate medical indications for use. As seen, information about the efficacy of scanning

is still being accumulated.

Estimates of the replacement of other diagnostic procedures by CT scanning are

being derived from both clinical and experimental data as discussed in the previous

chapter. Some of these data have been incorporated into planning criteria by various

States. For example, the South Central Pennsylvania Health Planning Council (583)

used the formula (.90A + .20B + .75C) K = the number of CT scans needed; where A, B,

and C are the number of brain scans, cerebral arteriograms, and pneumoencephalograms (respectively) that are performed yearly. * However, applying rates of use of

alternative procedures as a guideline for CT scanning incorporates utilization

patterns which were also developed without first evaluating their efficacy.

While an average of the results that different calculations yield might appear to

reconcile different assumptions, it often does not in practice. A staff paper from the

Massachusetts Department of Public Health (564) applied formulas from 11 different

sources and found estimates of “need” ranging from 5 to 52 scanners for the State.

The range is so wide that an average of the estimates is not representative of any set of

assumptions.

Ideally, once the number of scanners needed by a population has been estimated,

that number becomes the upper limit in approving purchases of additional scanners.

The issue of the distribution of scanners is important in this phase of the planning

process. Because of the large number of proposed purchases by mid-1975, many

States and localities developed criteria for the placement of machines (table 11).

Many of these criteria reflect current medical practices. There is a preference for

placing CT scanners in medical centers, usually university-affiliated ones with an

active radiological-neurological service. Presumably, the motivation is to place

scanners close to the more seriously ill patients and to large population centers,

thereby maximizing potential use. However, concern for sharing services and

proximity to ambulatory patients is also evident.

Most agencies do not specify the relative importance of various criteria. Among

agencies that do assign priorities to certain criteria over others, there is little

agreement among rankings. Available information has been widely circulated.

Guidelines developed by the Comprehensive Health Planning Council of Philadelphia published early in 1974 (582), for example, have had a noticeable influence on

guidelines of other States (appendix 111).

The standards for CT scanners in the National Guidelines are more specific than

the criteria used by most planning agencies. The intention is that as the health

.——

● K is an adjustment factor added to account for referrals and other unique circumstances.
Ch. 4—Number and Distribution ● 61

systems plans become consistent with these standards, so too will the ranking of

criteria for review of scanners. The three standards are:

1. A Computed Tomographic Scanner (head and body) should operate at a

minimum of 2,500 medically necessary patient procedures per year, for the

second year of its operation and thereafter.

Table Il.—Criteria Used by Health Planning Agencies

in Reviewing Applications for CT Head Scannersa

August 1976

Number of Agencies

Type of Criteria Using Criteria

Active neurosurgical service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirement for full-time neurosurgeon . . . . . . . . . . . . . . . . . . . . . .

Specification of number of procedures . . . . . . . . . . . . . . . . . . . . . . .

Requirement for an “active service” . . . . . . . . . . . . . . . . . . . . . . . . . .

Active neurological service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirement for full-time neurologist . . . . . . . . . . . . . . . . . . . . . . . .

Specification of number of beds or admissions . . . . . . . . . . . . . . .

Requirement for an “active service” . . . . . . . . . . . . . . . . . . . . . . . . . .

Active radiology service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirement for full-time radiologist . . . . . . . . . . . . . . . . . . . . . . . . .

Requirement for radiologist with training

in neuroradiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Radiologist merely mentioned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirements concerning other personnel

(technicians, engineers, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specified number of certain neurodiagnostic

procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Utilization beyond an 8-hour day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitment to more than 8 hours . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitment to 24 hours availability . . . . . . . . . . . . . . . . . . . . . . . . .

Regionalization and geographic proximity . . . . . . . . . . . . . . . . . . . . . . . .

Proximity . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. .. O . . . . . . . . . . . . . .

Availability to ambulatory patients . . . . . . . . . . . . . . . . . . . . . . . . . . .

Formal referral arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Letters of endorsement from providers

and/or consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

University medical centers favored . . . . . . . . . . . . . . . . . . . . . . . . . . .

Low priority for noninstitutional (physician

offices) scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirement for scanning those unable to pay . . . . . . . . . . . . . . . . . . . .

General quality of care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Peer review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Availability of emergency services . . . . . . . . . . . . . . . . . . . . . . . . . . .

Neuropathologist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and education capability . . . . . . . . . . . . . . . . . . . . . . . . . . .

29

12

18

9

29

12

13

12

30

4

21

7

12

20

20

18

5

29

15

11

14

11

5

8

11

18

5

6

3

10
62 ● Ch. 4—Number and Distribution

Table 11.—Cont.

Number of Agencies

Type of Criteria Using Criteria

Financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of expected charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of projected volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of financial feasibility . . . . . . . . . . . . . . . . . . . . . . .. . . . . .

Financial reporting after operational . . . . . . . . . . . . . . . . . . . . . . . . .

General reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-range plan and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consideration of alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Training plan for staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General reporting required after operational . . . . . . . . . . . . . . . . . .

30

15

21

14

18

20

12

5

4

16

‘ Arequestmade to all States to submit criteria used by the Stateor local agenciesto review head and body

scanners. Criteria submitted by Statesfor reviewof body scanners were similar tothatfor head scanners, with the

exception of the neurological criteria.

Sources: 544-546,550,552-553,555-561 ,563-566,568-57O,573-577,579,58l-584,585-586,589-59O.

2. There should be no additional scanners approved unless each existing

scanner in the health service area is performing at a rate greater than 2,500

medically necessary patient procedures per year.

3. There should be no additional scanners approved unless the operators of the

proposed equipment will set in place date collection and utilization review

systems. ”

SHORTCOMINGS OF PLANNING POLICIES

The impact of health planning on the number and distribution of CT scanners is

difficult to determine in the absence of efficacy criteria. For example, even with regulation, the rate of diffusion of CT scanners has accelerated since their introduction

in 1973. What production schedules might have existed in the absence of regulation

are, of course, not known. But there is no basis for judging whether current levels of

production are too high or too low.

The National Health Planning Act may not have been in effect long enough to

affect the pattern of installation of CT scanners. However, State certificate-of-need

laws and section 1122 agreements have been in effect longer. Taken together, these

planning laws do not explain the differences in the number of CT scanners among

States.

Throughout the entire country, only the District of Columbia lacked guidelines or

legislation that applied to scanners in June 1976 (table 10). During the reference

period, Missouri had statewide planning criteria for CT scanners. Of the other 10

areas with the highest concentration of scanners, Nevada, Colorado, and Florida had

both certificate-of-need laws and section 1122 agreements. The remainder of this

group of States had either a certificate-of-need law or a section 1122 agreement that

covered CT scanners.

Among the 10 States with the lowest ratios of scanners to population in June

1976, Mississippi, New Hampshire, New Mexico, and North Carolina did not have a

certificate-of-need law. Neither did Wyoming, the only State without a scanner.
Ch. 4—Number and Distribution ● 63

Nonetheless, all of these States had section 1122 agreements.

This simple correlation may be misleading however, since at least 4 of the 30

States with certificate-of-need laws as of June 1976 did not cover CT scanners.

Georgia and Illinois did not cover purchases of equipment; Ohio’s law, which had not

been implemented, did not specify coverage; and California’s initial law covered only

hospital beds (497).

In addition, the rate of State approvals of capital expenditures under section

1122 has been over 90 percent (85). Without further information, the effectiveness

of planning cannot be judged by the extent to which it either prevents or encourages

resource development.

Thus, the first shortcoming of public policy is that concepts essential for

implementing plans and regulations are not defined. In particular, planners are

seriously handicapped by the lack of appropriate medical indications for use of CT

scanners, matters that hinge on efficacy. A population’s need for CT scanning services cannot be adequately estimated without this information.

The best indications for use of particular neurodiagnostic procedures consider

specific disease categories (62,23). However, defining acceptable medical practice for

use of CT scans is in the early stages. Thus, diagnostic protocols have not yet been

widely accepted for use of CT scanners. Without a protocol, the frequency with which

physicians use CT scans as a complementary or as a substitute procedure is unknown

(564,264).

In lieu of appropriate medical indications, present rates of use of CT scanners are

incorporated into planning targets. Since the CT scanner is still a new technology,

current experience with it is not likely to be representative of long-term experience.

For example, familiarity gained over time with the technology can increase its use by

physicians. Improvements in design for handling patients, which raise the potential

productivity of the machine, could also increase average future use. On the other

hand, obsolescence may decrease future rates of use. To date, no suitable planning

indicators for CT scanners are available. In light of this finding, adherence to rigid

planning targets may be unsound.*

The second shortcoming of Federal health planning policy is that regulations do

not apply uniformly to all purchases of CT scanners. Offices of private physicians,

whether for individual or group practice, are exempt from the certificate-of-need

provisions of P.L. 93-641 and from those of section 1122. These exemptions encourage the location and ownership of scanners in private practices, despite any efforts of

planning agencies to the contrary.** In Ohio and Florida, for example, physicians have

leased space from hospitals in order to install privately purchased machines. In these

States, such arrangements are not subject to review by planning agencies. When a

hospital in Miami was denied permission to purchase a scanner, a physician on the

hospital staff purchased a machine, installed it in an adjoining office building, and

made it available to the patients in the hospital (256).***

*There are indications that the Department of Health, Education, and Welfare supports more

flexibility in the planning process. The Department endorses periodic review and revision of the standards proposed in the National Guidelines as experience with their use accumulates.

**Besides the laws’ exemptions of private medical practices, the investment tax credit gives

providers an incentive to install scanners outside of hospitals, The credit lowers the effective cost of a

CT scanner to physicians in private offices as opposed to nonprofit hospitals.

**’Final regulations of the National Health Planning Act prc)hibit leasing arrangements that have

the intent of c i rcu mven ti n~ review. Intent, however, is difficult to prove under the law.
64 ● Ch. 4—Number and Distribution

Current State certificate-of-need laws also usually exempt from review

expenditures for facilities, equipment, or services by private physicians. Only seven

States—Colorado, Connecticut, Hawaii, Iowa, Minnesota, Virginia, and Wisconsin—

review acquisitions by private physicians. Massachusetts, New York, and Vermont

are considering extending their laws, An expansion by the States of the minimum type

of facilities covered under the provisions of P.L. 93-641 would not conflict with the law

(498). These initiatives are often supported by a variety of organizations, including

Blue Cross (71) and the Institute of Medicine (258).
5 ●

PATTERNS OF USE
PATTERNS OF USE

..

67
EXPERIENCE WITH CT SCANNING

Patterns of Use

Head Scanning

The use of CT head scanners has varied considerabl y from institution to

institution (47, 84, 108, 167, 205, 219, 249, 264, 265, 388, 405, 540). Many diseases

and medical conditions can be diagnosed by CT scanning (table 12). The most

common diagnoses have been mass lesions (mostly tumors, but some cysts as well),

cerebrovascular disease (including stroke, hemorrhage, and aneurysm), and diseases

with enlargements of the ventricular space of the brain (hydrocephalus and cerebral

atrophy). Institutions reported that from 7 to 30 percent of patients scanned had

brain tumors, 6 to 29 percent atrophy or hydrocephalus, 8 to 17 percent infarction

(stroke), and 2 to 11 percent hemorrhage or aneurysm. The remaining CT examinations were either normal or revealed other neurological disorders. Reporting

institutions found that from 11 to 44 percent of scans were normal (table 13). A

recent study of nine hospitals reported that 53 percent of head scans and 36 percent of body scans were normal (149).

One study of several institutions found that about 50 percent of head scans were

normal, with some institutions running as high as 80 to 90 percent normal. Two

institutions surveyed had data on the percent of normal scans over time. One reported

an increase of normal scans from 25 percent to 40 percent and the other from 34 percent to 46 percent (265). A high percentage of normal findings might indicate that CT

scanning is being used more frequently as a primary diagnostic or screening tool than

earlier. CT scanning is also used increasingly to plan therapy or to monitor changes in

a patient’s condition. For example, patients receiving radiation therapy for brain

tumor are often monitored to observe the effects of therapy (90,407).

Body Scanning

As noted above, body scanners are often used primarily for scanning the head. In

1977, about 60 percent of examinations on body scanners were head scans (158).

However, institutions that have both head and body scanners use their body

scanners primarily to examine parts of the body other than the head. Mayo Clinic,

for example, reported 76 percent of the examinations by its body scanners were body

scans (465), and the Mallinckrodt Institute in St. Louis reported 95-percent (474)

body scans on its body scanner. In institutions with both a head and body scanner, 65

percent of examinations on body scanners were body scans in a 1977 survey (158).

Most scans of the body relate to suspected abdominal problems, such as

pancreatic tumors, abscesses, or jaundice (149). Scans are used less often for the

thorax or extremities (table 12). However, these patterns of use are in flux. They can

be expected to change rather dramatically as more becomes known about the

usefulness of body scanning. For example, a study reported use of CT scanning as an

adjunct of draining abdominal abscesses by needle, thereby avoiding surgery (215).

According to a 1977 survey, 29 percent of scans on body scanners were of the

abdomen, 6 percent of the pelvis, 5 percent of the chest, and 1 percent of the

extremities (158).
Ch. 5—Patterns of Use ● 6 9

Table 12.—Some Diseases That Can Be Diagnosed by CT Scanninga

HEAD SCANNING BODY SCANNING

(Refs. 15,18,21,23,39,50,99, (Refs. 6,7,8,9,38,95,157,209,

124,125,162,211 ,223,224,229, 21 7,218,222,306,316,31 7,366,

267,268,291 ,343,386,405,406, 452,461 ,465,474,477,493,526)

410,41 1,459,472,478,537,539,

540)

Mass lesions

acoustic neuroma

astrocytoma

epidermoid tumors

glioblastoma

meningioma

metastatic neoplasms

oligodendroglioma

pituitary adenoma

teratoma

cysts

Atrophy

Cerebral abscess

Hydrocephalus

Porencephaly

Trauma

Tuberous sclerosis

Multiple sclerosis

Cerebrovascular disease

aneurysm

arteriovenous malformation

infarction (stroke)

intracerebral hemorrhage

subarachnoid hemorrhage

Diseases of the eye

tumors of eye and optic nerve

exophthalmos

Congenital abnormalities

Tumors or cysts in:

adrenal

bladder

bone

kidney

larynx

liver

lung

lymph nodes

mediastinum

pancreas

parathyroid

pelvis

pharynx

retroperitoneum

thyroid

ureter

Aortic aneurysm

Obstructive jaundice

Syringomyelia

Abdominal abscess

Traumatic damage to organs

a This table lists only some of the diseases for which CT scanning has been applied and includes only selected

references; it is not comprehensive.

Contrast Enhancement

The use of contrast enhancement varies from institution to institution (44, 45,

47, 48, 118, 119, 159, 264, 265, 303, 382), but has generally been increasing over the

past few years (45, 382). Overall, more than 50 percent of patients are scanned after

the injection of contrast material (29, 159). Initially, contrast enhancement was used

less frequently for body scanning than for head scanning (149). But by 1977, a

survey showed that 68 percent of head scans on body scanners were enhanced, while
70 ● Ch. 5—Patterns of Use

Table 13.—Major Diagnostic Uses of Head Scanning

Atrophy or Hemorrhage Other

Hydroce- or Neurological

Tumor

(Referphalusa

Infarction Aneurysm Disorders Normal ence)

18 29 17 3 1 32 (82)

25 22 8 3 5 37 (47)

19 20 13 8 29 11 (388)

7 25 11 2 11 44 (108)

30 6 8 11 18 27 (405)

12 20 —13— 12 43 (264)

Each horizontal line shows the types of diagnoses made on the basis of CT scanning at one institution or group of

Institutions. Numbers indicate the percentage of patients scanned who fell into a particular diagnostic category.

“ Diseases which entail enlargements of the ventricular space

65 percent of abdominal scans were enhanced and 60 percent of scans of the pelvis

were enhanced. Scans of the chest and extremities were enhanced less frequently

(158).

Research Use

A few scanners are used solely for research; the National Institutes of Health has

several CT scanners for use in the medical care of patients who are research subjects.

Other scanners are scheduled for some research time, usually 5 to 10 percent of the

total time available. Some uses combine service with research studies of accuracy o r

efficacy.

Although clinical researchers have concentrated so far on evaluating diagnostic

usefulness, CT scanning is also a potentially valuable tool for biomedical research.

Investigators have used CT scanning to study the anatomy and physiology of the

normal brain (213, 220, 309, 414) and to seek correlations between brain anatomy and

behavioral (170, 171,252,372, 441), biochemical (122, 453), or neurological (254, 442,

468) abnormalities. Experimental uses of body scanning are also increasing (145, 313,

461), such as evaluating damage to the heart (200).

Indications for Use of CT Scanning

The critical question of the appropriate indications for use of CT scanners has not

been effectively addressed. Ideally, patients are scanned when it can be reasonably

expected that useful information about their condition will be found. Indications for

use must be specified through consideration of the benefits from CT scanning, the

population who will benefit, the medical problem affected, and appropriate conditions

of use.

Development of indications for use depends on information about efficacy. If

arriving at a diagnosis is the goal, CT scanning may be used to diagnose all the

conditions listed in table 12. If improved patient outcome were the goal, however, the

indications for use would be different.
Ch. 5—Patterns of Use ● 71

However the goal is defined, little is known about appropriate indications for use

of CT scanners. Few institutions have reported indications used for head scanning. In

two large neurological referral centers, CT head scans were ordered for patients

because of suspected mass lesions in 30 percent of scans, vascular abnormalities (such

as stroke) in 10 percent, trauma in 5 percent, suspected optic lesions in 5 percent,

suspected hydrocephalus or shunts in 5 percent, and symptoms such as headache,

confusion, seizure, or dementia in 23 to 30 percent. Indications for other patients were

not given (265). A survey of nine hospitals in 1977 found the following indications for

performing head scans (149):

Headaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 percent

Motor disturbances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 percent

Tumors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5 percent

Cerebral vascular accident

(stroke) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 5.5 percent

Mental symptoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 percent

Trauma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 percent

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.1 percent

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 percent

The same survey reported that suspected abnormalities of the pancreas, liver,

abdomen, kidney, and pelvis, plus a variety of carcinomas, accounted for more than 64

percent of CT body scans (149).

Alderson and his coworkers reviewed the experience of one institution. They

found that of 490 patients scanned, 195 had an abnormal neurological examination (38

of whom were diagnosed as having strokes), and 295 patients had a normal

neurological examination. Of those with normal neurological examinations, 67 had

headache only, 54 had seizures, 60 had mental deterioration, and the remaining 114

had miscellaneous complaints (4).

A CT head scan is commonly given to patients whose only symptom is headache.

Two studies have examined the results of such scans. Alderson and his coworkers

found that of 67 otherwise normal patients with headache, only 3 had abnormal scans,

and that these were of little clinical importance (4). Carrera and his coworkers

reviewed the experience of 53 patients whose chief complaint was headache but who

had no other neurological findings. They found no abnormal CT examinations (92).

Another common use is for patients with head trauma. French and Dublin

reported on 1,000 consecutive patients who were scanned for head injuries. Twentyseven percent of the patients were alert and had normal neurological examinations;

only 13 percent of those with normal neurological examinations had abnormal scans,

and none of them required surgery (173).

Alderson analyzed the results of 295 patients with complaints but no focal

findings* on neurological examination; 205 scans (0o percent) were normal. If “brain

softening” is excluded, only 15 (5 percent) had an abnormality. A symptom that often

indicated abnormalities was the acute onset of seizures. In 28 such patients, 4 had

lesions, 2 of them tumors (4).

‘Focal findings are those indicating an abnormality in a specific part of the brain.

95-703 C) - 78 - 6
———.————-

Similar experience has not yet been reported for body scanning, so it will not be

further discussed in this section.

Potential Levels of Use for CT Scanners

The five levels of efficacy suggested by Fineberg et al. (167) (chapter 3) indicate the

impacts that different policies might have on the use of CT scanners. The maximum

number of “appropriate” scans may vary greatly depending on the definition of

efficacy. If efficacy is defined as the therapeutic impact of a diagnostic technology, data

on such effects of CT scanning are currently too limited for full evaluation. One could

identify possible therapies for a particular diagnosis and change in use of such

therapies due to CT scanning. For example, the major available therapy for intracranial lesions is neurosurgery. In 1975, 89,000 intracranial procedures were performed in

the United States (511). This figure represents a possible level of use based on the

fourth level of the Fineberg definition of efficacy, therapeutic impact. Surgery

canceled as a result of demonstrated spread of cancer could also be considered. Other

diagnoses of potentially treatable conditions could be added to this figure.

If diagnostic reliability alone were used as the criterion on which to determine

need, then the potential number of scans would be much greater. For example, in

1974, there were approximately 600,000 hospitalizations for stroke in the United

States (513). Each person with a stroke serious enough to require hospitalization could

be scanned one or more times. But it is unclear what this information would add to the

patient’s well-being, because generally, strokes can be well diagnosed clinically, and

little effective therapy can be performed (314). One important use is to ensure that the

stroke is not hemorrhagic if anti-coagulation is planned or contemplated.

Many patients present symptoms such as headache that could indicate a serious

neurological disorder. J. Lloyd Johnson Associates estimated the number of scans required to diagnose intracranial disease and to examine patients with symptoms

possibly indicating such a disease (table 14). Patients with serious disease would

certainly be a minority of the total number of cases with symptoms (524). For example,

about 12 million people with headaches visit physicians’ offices each year (512)—J.

Lloyd Johnson Associates estimates that 750,000 of these patients appear to be serious

enough to be scanned (265). (Since the major concern in such headache is primary

brain cancer, this figure may be compared to the yearly incidence of such cancer, which

is about 6,000. See table 14. )

Using this reasoning, Johnson Associates estimated a level of use of about 4

million head scans annually (265). This estimate is partially based on the common

medical assertion that it is valuable to scan worried patients likely to be normal to

reassure them that no lesion is present; and it is valuable to scan patients likely to have

untreatable disease to give them realistic prognoses, Scanning the brain of patients

with lung cancer, breast cancer, and so forth could not only give such information, but

might also obviate painful and expensive therapy if the cancer were found to have

spread to the brain (a common condition in its final stages). Because of this philosophy

and of the lack of data on using CT scanning to plan therapy, indications for appropriate use of scanning are difficult to define.

Similar rough estimates could be made for body scanning, but data on the efficacy

of body scanning are even more limited than for head scanning. J. Lloyd Johnson
Ch. 5—Patterns of Use ● 73

Table 14.—Estimated Types of Patients Diagnosed or

Referred Annually Who Are Potential Cases for CT Head Scanning

Diseases of the Central Nervous System

Subarachnoid Hemorrhage . . . . . . . . . . . . . . . . . . . . . . . .

Cerebral Hemorrhage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cerebral Embolism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stroke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Intracranial Abscess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Head Injuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unspecified Neurological Signs . . . . . . . . . . . . . . . . . . . .

Other Diseases of the Brain . . . . . . . . . . . . . . . . . . . . . . .

Malignant Neoplasms of the

Brain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Breast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prostate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Functional and Other Symptoms

Headache . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Convulsions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vertigo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of Cases

15,000

555,000

220,000

80,000

6,000

250,000

700,000

324,000

6,000

80,000

290,000

150,000

750,000

400,000

100,000

Totals

2,150,000

526,000

1,250,000

3,926,000

Source: Adapted from table B.l, reference 265.

Associates used assumptions similar to those for head scanning and projected a

national level of use of about 2.7 million body scans annually (265). - 

‘

Thus, planning on the basis of expected patterns of use requires explicit consideration of the efficacy of a technology. The goal of using a diagnostic technology such

as the CT scanner must be defined. Different goals yield very different levels of use.

Depending on the goal, existing knowledge would justify either a very small or a large

number of scanners. In fact, using the J. Lloyd Johnson Associates estimates, more

than 2,200 CT scanners would be called for,’ a number that could cost more than $1

billion to purchase the machines, and $l billion to $2 billion per year in payments for

scans.

Institutional Setting of CT Scanning

Most CT scanners in hospitals are operated by the department of radiology,

although they may be owned by that department, by the radiologists, or by the

hospital One reason for operation by the radiology department is that the Joint

Commission on Accreditation of Hospitals (JCAH) required that an authenticated

report by a radiologist be included in every interpretation of a radiological procedure,

including CT scanning. In 1976, however, this requirement was changed to allow

*6.7 million examinations divided by 3,000 scans per scanner.
74 ● Ch. 5—Patterns of Use

any qualified physician to interpret special diagnostic procedures, including CT

scans. Neither policy has applied to nonhospital scanners, some of which are under

the control of neurologists and/or neurosurgeons. *

Regardless of the kind of institution or specialist owning or operating a CT

scanner, a patient cannot be scanned except by a physician’s order. In hospitals,

clinical physicians refer patients to the department of radiology for a CT scan. A

1975 survey reported the source of referrals for head scans as follows (80):

Neurology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37%

Neurosurgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26%

Other hospital staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14%

Outside physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28%

Similar results were reported in a 1977 survey of nine hospitals (149):

Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27%

Internal medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%

Neurology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24%

Family/General practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14%

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%

This later survey reported on sources of referrals for body scans (149).

Internal medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391%0

Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19%

Family/General practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27%

Inpatient-Outpatient Use of CT Scanning

CT scanning can be performed on inpatients or outpatients, depending on the

patient’s condition and the physician’s desire. Unlike arteriograms and pneumoencephalograms, the procedure does not require admission to a hospital. Although CT

scanning can avert hospital admissions and reduce lengths of stay, available information indicates that that potential has not been fully realized.

Most institutions perform scans on both inpatients and outpatients. T h e

fraction of those scanned who are inpatients varies from 20 to 90 percent (264)

Massachusetts General Hospital performs 90 percent of its scans on inpatients, but

Mayo Clinic conducts 80 percent of its scans on outpatients (582). In a 1975 survey of

10 institutions, Buenger and Huckman (82) found an average of 46-percent inpatient

scans, with a wide range. The American Hospital Association (29) surveyed 41

hospitals in 1976 and found 51-percent inpatient scans, with a range from 23 to 90

percent. A recent survey of nine hospitals reported that 52 percent of head scans and

60 percent of body scans were performed on inpatients (149)

Outpatients have confronted much longer waiting periods for scans: an average

of 11.5 days compared to 1.6 days for inpatients (159). A survey in 1976 reported

*Partly because they cannot profit from self-referral, radiologists consider CT scanners most appropriate in their custody. Neurologists and neurosurgeons believe that they should reinvolved in the control of head scanning because they have more training and experience in interpreting brain anatomy than

radiologists.
Ch. 5–Patterns of Use ● 7 5

that delays for inpatients had increased in 21 percent of the institutions and had

decreased in 9 percent. Delays for outpatients had increased in 35 percent and had

decreased in 6 percent. Waiting periods tended to decrease after installation of a new

machine in the same region (159). By 1977, a survey of body scanners found a scheduling delay of 0.9 days for inpatients and 3.4 days for outpatients (158).

Self-Referral for CT Scanning

Self-referral occurs when a physician both refers a patient for a test or

procedure and receives payment for performing the test. At least 89 percent of all

CT scanners are in hospitals or in radiological offices where one physician orders,

and another performs scans. Thus, self-referral is associated with 11 percent of

existing scanners, at most. *

FEDERAL POLICIES CONCERNING USE

The Professional Standards Review Organizations (PSRO) program is one of

the principal expressions of Federal policy concerning the use of medical services,

including CT scanning. The PSRO program, established in 1972 by P.L. 92-603, is

administered by the Health Standards and Quality Bureau (HSQB, formerly the

Bureau of Quality Assurance) of the Health Care Financing Administration. The

purposes of the program are to help improve the quality and control the costs of

medical services reimbursed through Federal payment programs. The program

operates by setting standards and criteria for the desired level and quality of medical

services and by evaluating against these standards the services actually provided.

This process is designed to ensure that payment will be made only when services are

medically necessary (235).

The PSRO program is based on the concept that medical professionals are the

most appropriate individuals to evaluate the quality of medical services and that

effective peer review at the local level is the soundest method for ensuring the appropriate use of medical care resources and facilities. The PSRO program is made up

of separate and independent organizations covering 203 geographic areas. Each

PSRO must be substantially representative of all practicing physicians in an area.

The PSRO program is new and is not yet fully implemented. Of the 203 PSRO areas in

March 1977, only 120 PSRO agencies had been funded; 100 were in “conditional status;

20 were in “planning’ ’status. By September 30, 1977, 120 were in “conditional” status and

60 in “planning” status.

PSROs usually review only services reimbursed through Federal payment

programs, Medicare and Medicaid,** whose coverage policies and eligibility

*As noted in chapter 4, 20 percent of all scanners are located in private offices of all kinds, including at

least 8 percent that are clearly radiological practices.

● *Although the law mandates review of publicly funded services only, some PSROS have begun to

review privately funded services also. PSROS also have authority over other health programs authorized by

the Social Security Act, including Maternal and Child Health programs. Because of the small size of such

programs, they will not be referred to further.
76 ● Ch. 5--Patterns of Use

requirements are set nationally, and PSROs must function within those limits. A

service may be ruled ineligible for coverage either nationally or locally, with national

decisions taking precedence. As will be described in chapter 6, CT body scanning is

not yet a covered service under the Medicare program. Therefore, PSROs neither are

permitted to find body scanning to be “medically necessary,” nor would de velop standards for its use. Questions about coverage can be answered locally or

referred to the national level for resolution. If a PSRO disagrees with coverage

policies or eligibility requirements, it may ask for reconsideration of such policy.

Although no such question has yet come to the national level, this mechanism does

have promise as a method of obtaining reactions from the local level and from

medical practitioners to the national Medicare program.

Each State with three or more PSROs has a statewide Professional Standards

Review Council. Among other duties, these Councils have the responsibilit y t o

disseminate information and data among the PSROs within the State. At the

national level, a National Professional Standards Review Council is established by

law. This Council has several functions, including one to “provide for the development and distribution, among Statewide Professional Standards Review Councils

and Professional Standards Review Organizations of information and data which

will assist such review councils and organizations in carrying out their duties and

functions.” Such information is specified as including regional norms and standards.

Local PSROs are not required to accept model standards issued by the National

Council. However, the National Council has authority to disapprove local standards

that deviate from model standards if the Council determines that the differences are

not medically justified. The National PSRO Council has provided general guidance

and sample criteria sets developed by several organizations, including the American

Medical Association, under contract with the Department of Health, Education, and

Welfare (HEW). The purpose of these contracts has been mainly to develop criteria on

medical necessity for hospitalization for different disease categories. HSQB hopes

that both technical assistance and norms and standards will have an important

educational effect, as well as affecting practice directly through reimbursement policy.

Each PSRO is initially limited to reviewing hospital inpatient services. After a

PSRO has demonstrated its effectiveness, the Secretary of HEW may grant permission for it to review outpatient services also, although none have yet begun to carry

out such reviews. PSROs review the medical care provided by utilization review of

medical care for individuals and by medical care evaluation (MCE) studies. Utilization

review can be either admission review, to determine the necessity for admission, or

concurrent stay review, to determine the length of time a patient should be

hospitalized. * In most instances, hospital committees are delegated by PSROs to perform these reviews, but PSROs must monitor the review process. Medical Care

Evaluation studies are retrospective reviews of the medical care that was provided to

certain groups of patients (e. g, by diagnosis), of the use of specific medical technologies, or of any category of medical or administrative services provided.** As

*Under proposed regulations, concurrent review may be applied prior to major diagnostic or

therapeutic procedures if medically unnecessary or inappropriate utilization of a procedure is documented (242). This provision could apply to CT scanning in the future.

**Through the use of medical information systems, the quality of medical care can be monitored

during the process of medical care rather than afterward. For a discussion of this subject, see OTA

report, POlli!/ ]??lp/lfflficJw 0/ f’vftv~l(nl lrl/OrvfflfiOtf 5ySl[’VI$.
Ch. 5—Patterns of Use ● 7 7

specified in the statute, PSROs review services to determine whether:

(A) such services and items are or were medically necessary;

(B) the quality of such services meets professionally recognized standards of health

care; and

(C) in case such services and items are proposed to be provided in a hospital or other

health care facility on an inpatient basis, such services and items could,

consistent with the provision of appropriate medical care, be effectively provided on an outpatient basis or more economically in an inpatient health care

facility of a different type.

The law requires that PSROs use norms, criteria, and standards in evaluating

medical services. This approach allows nonphysicians to perform many of the

reviews and also enhances the objectivity of the review process. Standards are developed by a consensus of physicians, based on typical patterns of practice in the area

and on such regional or national information as may be available and considered

applicable by the PSRO. No PSROs had developed standards for CT scanning by

September 1977.

In its early stages, the PSRO program has concentrated on determining the need

for hospitalization. Now PSROs are beginning to move beyond the question of necessity for hospitalization to review of surgical procedures and review of ancillary

services, including such radiological services as CT scanning. HSQB which

administers the PSRO program, hopes to provide sample criteria in these areas.

PSRO decisions on medical care utilization and quality can be enforced in several ways. Reimbursement for services provided can be withheld by Medicare and

Medicaid (Medicaid regulations are established in each State and vary somewhat).

For serious and repeated violations of PSRO standards, a physician’s right to be

reimbursed through Medicare and Medicaid can be suspended or revoked.

SHORTCOMINGS OF UTILIZATION POLICIES

Potential uses of CT scanning are virtually unlimited. The entire body of every

patient could be scanned to provide physicians and patients the most complete and

accurate anatomical information possible. Further, each patient could then be

scanned periodically to monitor the effect of treatment and rate of recovery. CT

scanning could even be used routinely as a screening tool. Such uses would require a

large number of scanners operating at full capacity and would result in a substantial

increase in national medical expenditures. Such extensive use would obviously represent an extreme approach. Optimal use of CT scanners would probably be at some

level below this extreme. A principle issue, then, is how to ensure appropriate use.

How can limits on use be established without sacrificing quality of care?

Historically, individual physicians have made decisions about appropriate use of

a technology for each patient. Such decisions were based on clinical experience,

advice from colleagues, information obtained from medical journals and manufacturers, judgment, and experience. As more physicians used a technology, usual and

customary patterns of use developed. No formal process has existed for developing

scientific information about the efficacy of medical technologies or for using that

information as the basis for decisions about appropriate use.
78 ● Ch. 5—Patterns of Use

The PSRO legislation established a framework by which appropriate use of

medical technologies could be evaluated by physicians acting in organized groups

rather than as individuals. Their decisions, however, are still based largely on

traditional sources of information, so that customary practice patterns, whether

appropriate or not, become accepted as standard. For CT scanners, as well as other

medical technologies, little is known about the four factors defining efficacy: benefits received and probability of benefit, population benefiting, medical problem

affected, and appropriate conditions of use. Evaluating the overall efficacy of diagnostic technologies such as CT scanning does pose special problems. Nevertheless,

the lack of scientifically derived information on indications for use hampers the development of appropriate standards. Provided with such information, PSROs could

become a mechanism for evaluating medical care. In its absence, PSROs are developing local standards for medical services based primarily on prevailing patterns of

medical practice.

The Health Standards and Quality Bureau (HSQB) does not have the authority

to impose national standards for use. It does have the authority, but not the

mandate, to collect the results of studies concerning efficacy and safety and to

provide them to PSROs as model or recommended norms, criteria, and standards.

Experience with the PSRO program seems to indicate that local PSROs have generally been willing to adopt, with minor modification, the model standards and criteria

developed nationally. Although limited information on efficacy and safety of CT

scanners exists, HSQB has furnished none to PSROs.
— —-

6 ●

REIMBURSEMENT
6 ●

REIMBURSEMENT

EXPERIENCE WITH CT SCANNING

Expenses of Operating a CT Scanner

The figures in table 15 suggest, rather than describe, actual annual expenses of

operating a CT scanner. (See appendix IV for more detail. ) Although some of the studies were based on actual experience, all but one are estimates. The report of actual

expenses documents the experience of one hospital (81). As described more fully

below, the estimates depend heavily on judgments about accounting techniques, staff

time, and the like that vary widely among the different sources.

81
82 ● Ch. 6—Reimbursement

Table 15.—Estimated Annual Expenses of Operating a CT Scannera

Range

(Thousands

Category of Dollars)

Technical expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $177-337

Equipmentb 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76-117

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0-28

Maintenance on scanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40

Other maintenance and remodeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0-13

Nonphysician staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36-75

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-38

Indirect expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-112

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0-1o

Professional expensesc 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60-130

Total expensesd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $259-379

(Number of examinations per year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600.3,828)

Dollars

Average technical cost per exam .. .. .. .. .. .. ... ,,. .....,O ... ,.. .+ O O... $59-130

Average professional cost per exam .. .. .. .. .. .., ... .OO. ,OO.. . . . . . . . . . . 20-43

Average total cost per examd . . . . . . . . . . . . . . . . . . . . ., . .,...,. . . . . . . . . . . 86-173

a Estimates except forthereport ofone hospital’s experience from reference81.These reportsare based

on experience during 1975and 1976 when most CT scanners were head scanners, and most scanning was of

thehead.

b Straight-line, 5-year depreciation except for rental estimate of $76,000 in reference 81. Depreciation was

based on purchase prices of $400,000 to $585,000.

CBased on 1 radiologist except for the highest estimate using 1.3 radiologists (577). These fi9ures rePresentthecosttothe institution ofobtaining physician services, not revenue from physicians’ charges.

d Half of the sources, including the two with the highest estimates of technical expenses, made no estimate

of professional expenses. Adding the highest estimates of technical and professional expenses would result in

average total cost of $173. The highest total estimate made was $126 per exam.

Source: AppendixlV,

Most estimates for the annual expenses of operating a CT scanner have been

based on a rate of about 3,000 examinations per year (81,159,425,554,577,584). In

effect, this rate assumes the machine is operating for one shift per day. These

estimates are based on 1975 and 1976 figures when most scanners were head

scanners.

Estimates of total annual expenses range from $259,000 to $379,000, or from $86

to $126 per examination (table 15 and appendix IV). Those making estimates

distinguish between technical and professional expenses. However, the study with the

highest estimate of technical expenses, $130 per examination, made no additional

estimate of professional expenses (159). Adding the highest estimates of technical and

professional expenses would produce $173, a more realistic figure for the highest

estimate of total expense per examination.
Ch. 6–Reimbursement ● 8 3

Professional expenses ranged from $20 to $43 per examination. These figures

represent the cost to the institution of obtaining physician services, not the revenue

generated from fees charged. All estimates except one are based on the services of one

radiologist. No specific information indicates what method is the most common one of

paying physicians responsible for CT scanning. Possible variations include fee-forservice, a percentage of net or gross revenue the institution receives from scanning,

and departmental or staff salary (577). The highest figure reported for the annual

expenses of a physician, $130,000, was based on an annual salary slightly higher than

the others. This high figure also included fringe benefits and assumed the services of

the equivalent of 1.3 radiologists (577).

Total annual technical expenses ranged from $177,000 to $337,000, or from $59

to $130 per examination. Most CT scanners are depreciated using the straight-line

method* over 5 years, although standard procedure f or depreciating equipment uses 8

years (577). The length of time chosen relates to the rapidly changing technology of

CT scanning, that is, the issue of obsolescence.** An institution can reduce the risk of

obsolescence by leasing a machine or updating older models. At least 26 percent of 96

institutions surveyed in 1976 leased machines (159), and the annual rental charge has

been estimated at $76,000 (81). This estimate suggests that rental is less expensive for

providers than purchase and depreciation. Manufacturers also market kits to update

older machines. The estimate of Evens and Jest, for example, includes $25,000 for the

purchase of new equipment in addition to depreciation (159). In 1976, EMI charged

$100,000 to update its original head scanner (265).

Different ways of accounting for interest on loans explain one discrepanc y

among estimates in table 15. Health planning agencies in Indiana, which made the

highest estimate for equipment, included interest on a loan to purchase the machine

(554). N O other estimate mentioned interest. Such interest represents a cost to an

institution and should have been included in other estimates involving purchase of a

machine.

Estimates for other technical expenses also vary. An institution has several

choices for maintenance of a machine: a service contract with the manufacturer,

maintenance by its own staff, or some combination of the two. Installation of a

scanner may require remodeling of a building. The time over which remodeling

expenses and general building depreciation are spread may vary, reaching 20 years in

some cases (577).

The technical expenses noted above are, by and large, fixed costs; that is, their

amount does not vary with the rate of the machine’s output.*** Other expenses

increase with the number of patients examined during the year. Some basic staff is

necessary for operation of the machine. Increases in staff, however, are necessary, for

example when a second shift is added. Opinions differ about the number of staff

needed to operate the machine, even at roughly the same level of output. But most

include the full-time equivalents of one or two X-ray technicians, one or two aides, and

one other person for about 3,000 annual examinations. The quantity and cost of

supplies such as film, X-ray tubes, and contrast material clearly vary with the rate of

output .

*The straight-line method of depreciation divides the total dollar amount to be depreciated into equal

annual parts. In contrast, the accelerated method depreciates a higher percentage of the total amount at

the beginning and gradually diminishes percentages over the course of the depreciation cycle.

**Of course depreciation, an allowance for the equipment’s wearing out, differs conceptually from

obsolescence.

***Maintenance may in fact increase after some level of output, but estimates treat it as a fixed cost.
84 ● Ch 6—Reimbursement

All estimates of expenses are divided into direct and indirect costs. Indirect costs

attempt to measure that portion of an institution’s general expenses attributable to

the CT unit, including such items as administration, billing, collection, hospital or

university overhead, and messenger service (159). Estimates of indirect costs vary

widely, from 50 percent of direct costs by Evens and Jest, to 15 percent of direct costs

by the Health Planning Council of Rhode Island, to $2,000 per year by the Genessee

Health Planning Council (159,577,584).

Because CT scanning is a new technology, changes in expenses over time are

important. The price of a CT scanner is the largest single item in technical expenses.

EMI manufactured 58 percent of all machines and 92 percent of all head scanners

known to be installed by May 1977. During the three years from 1973 to 1976, the

average price of an EMI head scanner rose at an annual rate of 17, 12, and 3 percent

respectively (148) (table 16). The rate of price increase not only slowed, but in 1974

and 1976 fell below the increase in the Wholesale Price Index. More recently, some

models of CT scanners have been priced under $100,000.

Table 16.—Prices of EMI Scanners, 1973-77a

Type of Scanner

Head Scanner . . . . . . . . .

Change in Price . . .

Body Scanner . . . . . . . . .

Change in Price . . .

Change in Wholesale

Price Index . . . . . . . . . . .

1973 I 1974 I 1975

$310,000 $360,000 $400,000

. 17% 1 20/0 —

— l–l– — —

190/0 90/0

1976

$410,000

30%

$475,000

—

50/0

1977b

—

$530,000

120/0

a Prices of the most commonly purchased configuration of CT scanning equipment, i.e., the modal value,

prices are in current dollars.

b Estimated.

Sources: 148,501.

Diverse factors are at work here making future price projections difficult.

According to the theory of a learning curve (238), the very process of production over

time increases experience and leads to lower average costs. Insofar as economies of

scale exist in the industry, average costs could also decrease as companies increase

their levels of production. The entry of new firms into the industry is another

potential force for lower prices over time, provided price competition exists. In 1976,

six firms in the United States were in active production, and six were in the

developmental stage. Other foreign manufacturers, such as the Japanese, may begin

marketing machines in the United States at lower prices, adding to the competition

and potentially driving prices down (491).

At the same time, other factors are likely to produce increases or restrict

decreases in prices. The market for CT scanners is by no means a perfectly competitive

one with free entry of firms. Thus, competition cannot be expected to drive the price

of machines down to the point at which it equals marginal cost. * In addition, price

comparisons over time are not completely valid in this market because the technology

*Marginal cost is the cost of producing an additional scanner.
Ch. 6—Reimbursement ● 8 5

of scanning is undergoing great change. Third-generation machines already being

marketed have features that increase the potential rate of examinations and the clarity

of the scan. Finally, because inflation occurred throughout the economy during the

1970’s, prices of CT scanners must be measured against general inflation, which may

increase manufacturing expenses and ultimately prices of scanners.

The Veterans Administration (VA) found that it could purchase scanners at a

lower price by requiring bids from manufacturers. In 1977, the VA solicited bids from

all known manufacturers for three body scanners that fit the VA’s specifications. The

company whose bid was accepted offered a scanner that usually sells for $450,000 for

$375,000. A further indication of savings was the wide spread between the lowest and

highest bids, $1 million for the three scanners (515).

Expenses of CT Examinations at

Within the ranges of operation

Different Rates of Output

reported, the average cost of a CT examination

decreases as a scanner is used to produce more examinations per year. All of the

expenses in table 15 have been calculated at the rate of about 3,000 examinations per

year. Table 17 illustrates the differences in average costs per examination that result

from higher and lower rates of operation. These estimates, made in 1975 and 1976,

were based primarily on CT head scanning.

Table 17.—Estimated Average Cost of a CT Examination at Different Rates of Output

I Annual Number of CT Examinations Per Scanner

Cost Per Examination Rhode Island, 1975 Indiana, 1976 Evens and Jest, 1976 Genessee, 1975’

(Dollars) 1,000 2,000 3,000 1,500 2,500 4,500 7,500 2,080 2,600 3,120 4,160 3,000 5,500

Average Technical

cost . . . . . . . . . . . . . . 175 91 62 140 97 60 46 157 130 112 89 59 42

Average Professional

cost . . . . . . . . . . . . . . , 72 36 24 — — — — — — — — 43 36

Average Total Cost . 247 126 86 — — — — — — — –

102 78

a Straight-line 4-year depreciation has been changed to 5-year here

Sources: 159,554,577,584.

An annual rate of 3,000 examinations has been considered average for a machine

operated on one shift daily. However, according to the estimates of the Genessee

Region Health Planning Council, the average total cost of an examination would be 24

percent lower, $78 instead of $102, with two shifts (577). All of the other sources i n

table 17 also estimated lower average costs with increased operation of a CT scanner.

In 1976, average use of a head scanner varied with the length of time it had been

operational. Scanners in operation for less than 1 year averaged 11 examinations per

day, and those in operation from 1 to 2 years averaged 13 examinations per day.

Although a machine’s output apparently increases over time, these rates of operation

represent about 3,000 examinations a year, approximately one shift daily (265). The
&j ● Ch 6—Reimbursement

experience with CT scanners therefore conforms to the observation that hospital

equipment is typically used at only 50 to 70 percent of capacity (123).

These observations suggest that, other things being equal, a given number of C T

examinations could be performed at lower cost on a smaller number of scanners

operating more intensively, rather than on a larger number operating less intensively.

Of course, cost, quality, and access must all be considered when deciding the number

of CT scanners that are appropriate for sparsely populated areas. Operating a C T

scanner more than one shift daily would also require adjustments in the work schedules of radiologists and technicians. It is interesting to note, however, that one

estimate by radiologists calculated that certain CT head scanners can perform 6,600

annual examinations per machine if used 12 hours a day and 5% days a week (519).

Little information is available about differences in rates of use and costs of

scanning between hospital and office settings. One survey distinguished between

hospital and office scanners, but made no mention of variations in diagnoses and other

characteristics of patients that could have greatly influenced utilization and costs.

Although machines in hospitals operated an average of 1 hour a day longer, they performed 5 percent fewer examinations than the office-based machines (159). Hospitals

took longer than offices to perform fewer examinations. This lower rate might not

have resulted from the setting itself: patients in hospitals are often more seriousl y ill

and could have taken longer to scan for reasons associated with their illnesses.

Fees Charged for CT Scanning

Several categories of fees are charged for CT scanning. Providers differentiate

between scans with and without contrast material and between technical and

professional services. About 59 percent of institutions surveyed in 1976 levied separate technical and professional charges (265).

According to a survey of CT head scanning, over 10 percent of the institutions

charged a standard fee whether an examination used contrast material, no contrast

material, or a combination of the two (265). The other 90 percent levied an additional

charge for the use of contrast material. Experience indicates that about 60 percent of

CT examinations involved scans with contrast material, either alone or in addition to

scans without contrast material. About 60 percent of the institutions charged more

for a contrasted scan when performed without an uncontrasted scan, than for an

uncontrasted scan alone.

In 1976, fees for CT head scans covered a wide range. Surveys reported averages

of $240, $244, and $260 for both technical and professional charges (29,159,265)

(table 18). The lowest total charges were found at the Cleveland Clinic: $100 for a scan

without contrast material, $135 for a scan with contrast, and $175 for scans with and

without contrast (102). The highest total charge reported was $325 without contrast

and $476 with and without contrast (265).

Average fees for body scans were slightly more than for head scans. The average

charge for a basic body scan was $228, and the average charge for an examination

with and without contrast material was $278 (265). A survey of CT body scanners in

1977 reported higher average total charges: $273 for a head scan and $286 for a body

scan (158).
Ch. 6—Reimbursement ● 8 7

Table 18.—Fees Charged for CT Examinations, 1976

(dollars)

Technical Professional

Type of Examination Total Charge Component Component

and Source Average Range Average Average

Head Scans

Basic scan

40 sites . . . . . . . . . . . . . . . .

48 sites . . . . . . . . . . . . . . . .

96 sites . . . . . . . . . . . . . . . .

205 150-350

220 —

224 175-325

50

63—

155

157

—

Scans with contrast

40 sites . . . . . . . . . . . . . . . .

48 sites . . . . . . . . . . . . . . . .

96 sites . . . . . . . . . . . . . . . .

— — —

—

—

—

—

—

— —

243 200-330

Scans with and

without contrast

40 sites . . . . . . . . . . . . . . . .

48 sites . . . . . . . . . . . . . . . .

96 sites . . . . . . . . . . . . . . . .

257 150-440

260 156-410

292 200-476

202

186

55

74

— —

Average charge for

CT examination

40 sites . . . . . . . . . . . . . . . .

48 sites . . . . . . . . . . . . . . . .

96 sites . . . . . . . . . . . . . . . .

240 —

244 —

260 —

—

—

—

—

—

—

Body Scans

Basic scan

15 sites . . . . . . . . . . . . . . . .

Scans with and

without contrast

3 sites . . . . . . . . . . . . . . . . .

228 200-335 — —

278 — — —

Sources: 29,159,265.

Charges for specific kinds of scans have shown no variation between hospitals

and offices. The average charge per examination did vary, however, from $171 in

hospitals to $203 in offices (159).

Some evidence suggests that charges have increased over time. Sixteen sites

surveyed in 1975 and again in 1976 had increased their charges for uncontrasted scans

an average of 8 percent, from $200 to $216. Fees charged for examinations with and

without contrast material had risen an average of 12 percent, from $245 to $274.

Likewise, some increase had occurred in the percentage of scans with contrast

material. In 1975, 35 to 40 percent of patients had scans with contrast material; in 1976

at least half of the same sites reported increased use of contrast material (265).*

———

*As noted earlier, in 1976 about 60 percent of CT examinations used contrast material

q5-703 o - 78 - ;
88 ● Ch. 6—Reimbursement

In another 1976 survey, no definite pattern emerged from historical charges

reported by five institutions that acquired CT head scanners in 1973 and 1974. Two

of the institutions, Massachusetts General Hospital and Cleveland Clinic, have

lowered their rates; two others, George Washington University Hospital and the

Mayo Clinic, have raised theirs; and one, Mallinckrodt Institute, reported no change

(102,186,341,345,349).

Less weight should be given to changes in rates reported in the latter survey

because it had a smaller sample of institutions, 5 compared to 16. Furthermore, many

of the five are large teaching hospitals, which are perhaps atypical of providers in

general. However, increases in charges reported in the first survey also should be

interpreted cautiously. The institutional composition of the 16 sites is unknown, and

they represented only 9 percent of all scanners installed by the end of 1975.

Annual Profits From Operating a CT Scanner

Average charges for CT examinations have exceeded estimated expenses by 39

to 229 percent. Average total fees reported by different sources range from $240 to

$260, and the extremes of estimated technical and professional expenses range from

$79 to $173 (table 19). In general, providers initially set fees for CT scanning to

cover expenses projected on the basis of about 2,000 examinations yearly for each

scanner. But in practice, the use turned out to be much higher, about 3,000 examinations yearly (564). Because the cost of a CT examination decreases with greater

use of a scanner, the average cost of an examination was lower than expected, and

the gap between charges and costs was greater than expected.

Looking only at the difference between charges and costs would overstate profits

(revenue minus cost) from operating a CT scanner. Providers do not receive 100 percent of charges for all examinations. Some examinations are paid on the basis of costs.

Parties who provide services directly (the Department of Defense and Veterans

Administration) or who reimburse on the basis of costs (Medicare, Medicaid, and some

Blue Cross plans) account annually for about 30 percent of all personal medical

expenditures. Furthermore, about 45 percent of annual expenditures for hospital

services are based on costs or direct provision of services (364,365), and 81 percent of

all installed CT scanners documented in May 1977 were located in hospitals. *

The percentage of CT examinations reimbursed on the basis of cost is not clear.

Part of the expenditure for a CT examination performed in a hospital is for physician

services, typically a charge rather than a cost. Such a charge may be 50 percent or more

of estimated technical costs (tables 15 and 17 and appendix IV). Available information

also indicates that scanners in ambulatory settings (private offices and hospital

outpatient departments) may be used more intensively and hence may account for a

higher percentage of examinations than their number would indicate (159).

Insufficient data prevent calculation of profits separately for hospital and ambulatory

settings.

*Expenditures based on costs included those for hospital services by Medicare and Medicaid, half of

the benefit expenditures of Blue Cross, and health service expenditures by the Department of Defense

and Veterans Administration. Expenditures based on charges included those for physician services by

Medicare and Medicaid, the other half of the benefit expenditures of Blue Cross, all the benefit

expenditures of Blue Shield and commercial insurance companies, and out-of-pocket expenditures of

patients.
—

Ch. 6—Reimbursement ● 8 9

To calculate revenue and profit of a scanner, it is necessary to estimate how much

revenue is based on costs and how much on charges. For the portion of a scanner’s

annual revenue based on costs, the estimates of profit in table 20 use 30 percent, the

Table 19.—Reported Charges and Estimated Expenses of

a CT Head Examinationa

Range

(Dollars)

Average total charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240-260

Average total expenseb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79-173

Average technical charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174-200

Average technical expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59-130

Average professional charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53-70

Average professional expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-43

(Annual number of examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600-3,000)

aLevelsofcharges take into account relative useofcontrasted and uncontrasted scans. Dataarefor1975

and 1976.

b Average total expense differs from that drawn from the literature. Half of the sources in table 15 gaveno

estimates for professional expenses. Here the extremes of technical and professional expenses were added to

produce a more realistic range, especially for the high estimate.

Sources: Table 18 and appendix IV.

Table 20.—Estimated Average Annual Profits From

a CT Head Scanner, 1976

[dollars]

Low High

Average charge per examination . . . . . . . . . . . . . . . . . . . . . . . .

Average revenuea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Number of examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total gross revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average total cost per examination . . . . . . . . . . . . . . . . . . . . . .

(Number of examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average profit . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .

(Percent of original purchase price . . . . . . . . . . . . . . . . . . . . . . . .

$240

222

2,600

577,200

-57,720

$519,480

$180b

2,600

468,000

51,480

11

$260

210

3,000)

630,000

-63,000

$567,000

$92’

3,000)

276,000

291,000

65)

a Average revenue= .3 xaveragecost +.7xaverage charge. Based onnonphysician expenditures byMedicare

and Medicaid, personal health expenditures by Defense Department and Veterans Administration, and half of

ben~fit expenditures by Blue Cross.

Based on estimate in reference 159for technical cost and inreference 577 for physician cost. The latter

estimates were prorated toa rate of2,600 annual examinations, $50 per examination.

c Based on estimatesin reference 577j with physician cost prorated to one radiologist, $33per examination.

Sources: 29,159,265,425, 554,577,584.
90 ● Ch. 6—Reimbursement

approximate percentage of overall personal medical expenditures reimbursed on a cost

basis. The difficulty in approximating cost reimbursement underscores the rough

nature of the estimating procedure. The cost statistics are themselves estimates,

which vary widely among sources. Third parties define costs in different ways. In

addition, methods for cost reimbursement are not limited to paying costs, but may

include paying costs plus or minus some percentage.

In table 20, estimated annual profits from operating a CT scanner in 1976 range

from $51,000 to $291,000. The high boundary was constructed from high charges and

low costs, and the low boundary from low charges and high costs. Bad debts were

estimated at 10 percent of gross revenue, an average of estimates in the literature. It is

interesting to note that a profit results even with low charges and high costs. For a

scanner priced at $450,000, estimated annual profits range from 11 to 65 percent of

the original purchase price.

The estimates of profits in table 20 are approximations of average profits. Any

one institution might have charges and costs outside the high and low boundaries. As

noted previously, institutions have reported total fees as high as $476 with and

without contrast material (29,265) and as low as $100 without contrast (102).

Evidence presented above indicates that fees have tended to increase over time

(265) despite the gap between charges and costs and the resulting profits from

operating a CT scanner. The gap between charges and costs does not deter use of

scanners because use depends on decisions of physicians who order, but do not pay for,

scans. When paying charges, third-party payers do not look at profit margins, and

individual consumers are unable to affect providers’ prices. In general, there is little

stimulus from competition and free entry for fees to approach costs. However, there

may be some competition among radiologists, especially in large urban areas with several CT scanners.

Although economic forces will not necessarily lead to lower profits over time, regulatory and political factors may have that effect. In some areas of the country, State

rate review commissions are examining the gap between charges and costs. The

Massachusetts Rate Setting Commission, fen- example, suggested that fees of

physicians for CT scanning be reduced because annual use of scanners had increased

(564). The Commission has, in fact, lowered allowable rates for scanning in some cases

(346). Such instances, although rare, illustrate the potential effect of rate review on

fees.

In addition, providers appear somewhat cautious about cost and price increases in

an attempt to avoid formal regulation, especially after restrictions experienced under

the Economic Stabilization Program (423). Massachusetts General Hospital and

Cleveland Clinic have lowered their rates. They attributed their decisions to greater

use of scanners and hence higher profits than originally expected (102,345). Cleveland Clinic also noted that it had paid off the original cost of a scanner installed in

1974 before reducing rates in 1975 (102).

Of course profits per se are not grounds for concern. A provider’s profits from CT

scanning may be counterbalanced by losses from other technologies. The level of

profit is also likely to change over the history of a technology. At issue are net

expenditures on CT scanning and, if net expenditures are positive, whether the extra

benefits are worth the extra expenditures.
Ch. 6—Reimbursement ● 91

Gross and Net Expenditures

Estimated expenditures on CT examinations alone ranged from $189 million to

$206 million in 1976 (table 21). In addition, expenditures for patients who were

hospitalized while waiting for CT scans brought estimated total expenditures to

$278 million to $377 million. ’ Expenditures associated with hospitalization thus

accounted for about 30 to 45 percent of total expenditures.

Net expenditures on CT scanning are those that remain after subtracting from

total expenditures the savings that resulted from the replacement of other diagnostic

*These estimates used the mix of costs and charges in table 20; 327 scanners, the number installed by

June 1976; 46 to 51 percent of examinations performed on inpatients; and a wait of 1.6 to 2.2 days for

inpatients to receive a scan. Excluded are standard diagnostic tests performed on all inpatients. Also,

calculations assume the extra hospital stay occurred only because of the wait for a CT scan. To the extent

that other required procedures are performed during the wait, expenditures for CT scanning are

overestimated. To the extent unnecessary procedures are added during the wait, expenditures connected

with CT scanning are underestimated.

Table 21.—Estimated Expenditures for CT Scanning, 1976

[thousands of dollars]

Low High

Based on costs and charges’

Expenditures, all scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $188,744 $206,010

Hospital day expensesb 

., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,459 143,286

Inpatient physician chargesc 

. . . . . . . . . . . . . . . . . . . . . . . . . . ., . . 7,917 27,853

Total expenditures on CT scanning . . . . . . . . . . . . . . . . . . . . . $278,120 $377,149

Based on charges only d

Gross expenditures, CT examinations . . . . . . . . . . . . . . . . . . . . $293,425 $426,199

(Includes scans, hospital days,

and inpatient physician visits)

Reduced expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 113,318 – 38,336

(Includes reduced tests, hospital

days, and inpatient physician visits)

Radionuclide brain scans . . . . . . . . . . . . . . . . . . . . . . . . . . . -37,499 – 17,375

Pneumoencephalograms . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 53,944 - 8,790

Arteriograms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21,875 -12,171

Net expenditures on CT scanning . . . . . . . . . . . . . . . . . . . . . . $180,107 $387,863

3 Based on the mix of costs and charges of CT examinations from table 20 for 327 scanners, the number

Installed by June 1976.

b Based on 274 hospital scanners, 46 to 51 percent of hospital examinations for inpatients, a wait of 1.6 to 2.2

days, and adjusted hospital day expenses of $155.36.

~ Based on 1 to 2 physician visits per hospital day by an internist charging $15.10 for a followup hospital visit.

Based on charges, not costs, of procedures, except for hospital day expenses. See appendix V for

calculations.

Sources: 29, 82, 159, 241, 507.
92 ● Ch. 6—Reimbursement

procedures by CT scanning. Estimated net expenditures on CT examinations ranged

from $180 million to $388 million (table 21). Calculation of net expenditures was

based on charges alone, rather than the mix of costs and charges used in table 20 and in

the first part of table 21, because cost data for other procedures were not available.

Substituting CT examinations for radionuclide brain scans, pneumoencephalograms,

and arteriograms reduced average expenditures by an estimated $38 million to $113

million, or 9 to 39 percent. These estimates are rough, but the range includes the most

likely figures. They make no allowance for reduced hospitalization independent of

reductions in alternative procedures and do not differentiate between head and body

scanners.

CT scanning has the potential to reduce expenditures further for other services

and procedures. Patients receiving scans do not require hospitalization for the

procedure itself, whereas arteriograms and pneumoencephalograms necessitate

hospitalization. CT scanning subjects patients to less danger and discomfort.

Furthermore, the marginal cost of a CT examination, which can be derived from the

figures in table 17, falls below $50 with an annual utilization rate of 3,000 examinations or more. These data suggest a need for exploration into the costs and benefits

of using CT scanning compared to alternative procedures.

Three studies* have attempted to evaluate the cost-effectiveness or cost-benefit

of CT head scanning as compared to other neurodiagnostic tests (160,440,538). All

concluded that CT scanning lowered diagnostic costs while permitting diagnoses of

equivalent accuracy. They found a decrease in hospital use due to CT scanning for a

specific diagnosis, procedure, or department. However, they did not report whether

hospital use changed overall. One study (538), for example, estimated only potential

savings from CT scanning and stressed the necessity of closing facilities, such as

hospital wards, to achieve actual reductions in use and expenditures for medical care in

general.

Two other surveys of actual hospital use reported that 46 to 51 percent of patients

scanned were inpatients, with ranges from 11 to 90 percent (29,82). None of these

studies indicated whether changes in patient mix occurred after a hospital acquired a

CT scanner. This information is necessary for evaluating the effect of CT scanning

because patient characteristics greatly affect use and expenditures. Trends that

existed before the introduction of CT scanning are also important. As noted earlier,

some authors have reported declines in pneumoencephalography prior to and independent of CT scanning (4,33).

A study sponsored by EMI in 1977 investigated the costs and benefits of CT body

scanners and concluded that they could reduce the costs of making certain diagnoses if

used at the optimal time so that prompt diagnosis and treatment resulted. Costs could

be reduced by eliminating other tests, shortening hospital stays and obviating surgery.

The study, then, described typical and optimal courses of diagnosis and estimated

possible savings, but did not present any evidence that savings had in fact occurred

(149).

*Another study being conducted by Arthur D. Little, Inc., for Ohio Nuclear concerns the actual cost savings from the use of CT head scanning in cranial diagnosis. Arthur D. Little is also investigating body scanning for Ohio Nuclear (480).
Ch. 6—Reimbursement ● 93

GOVERNMENTAL AND NONGOVERNMENTAL REIMBURSEMENT

POLICIES

Third parties in the United States pay two-thirds of all personal medical care

expenditures and nine-tenths of expenditures for hospital care (364). The percentage

paid by third parties for CT scanning probably falls somewhere between these two

extremes since scans can be performed on an inpatient or ambulatory basis. No

available information refers specifically to CT scanning. The policies of Medicare and

some private third parties that have withheld reimbursement for CT body scans may

have resulted in a lower percentage of body scans paid by third parties.

For all personal medical expenditures, Government programs have accounted for

the largest share of third-party payments, 40 percent, compared to 27 percent by

private insurance companies. For hospital care, Government programs have paid an

even larger share of expenditures, 55 percent, compared to 36 percent by private

insurance. The largest Government effort is Medicare, the Federal program for the

aged and disabled. It accounted for about $15 billion, or 15 percent of all personal

medical expenditures in 1975. Medicaid, under which the Federal Government

provides matching funds to States for medical care to welfare recipients and the

medically indigent, spent $13 billion or 13 percent of all personal medical expenditures

in 1975 (364,365). All payments under Medicare, Medicaid, and Maternal and Child

Health programs must be compatible with section 1122 (see chapter 4) and section

1151 (PSRO program; see chapter 5) of the Social Security Act.

Linking Reimbursement With Efficacy

Historically, third-party payers have made few attempts to link reimbursement

with a determination of the efficacy of a new technology. With CT scanning, however, Medicare and some individual Blue Cross and Blue Shield plans have made reimbursement for head and body scans conditional upon an appraisal of their efficacy.

These programs have also begun to link reimbursement of other services to a

determination of their efficacy, a development that appears to indicate a new

direction in reimbursement policy.

The Public Health Service evaluates the efficacy of technologies for Medicare

under section 1862(a)(l) of the Social Security Act. That section states that Medicare

shall pay for services only if they are reasonable and necessary for the diagnosis or

treatment of illness or injury or for improved functioning. The Social Security Act

thus restricts consideration of benefits to diagnosis, treatment, and functioning and

apparently restricts the definition of efficacy of diagnostic technologies to Fineberg’s

third level, diagnostic accuracy. To put into effect any other definition of efficacy

would appear to necessitate a change in the law.

The Public Health Service provides advice on efficacy under an interagency

agreement with the Medicare program. For drugs, Medicare limits its coverage to the

indications for use that the Food and Drug Administration (FDA) approves for

labeling. Until the reorganization of the Department of Health, Education, and

Welfare (HEW) in 1977, advice about the efficacy of other medical technologies was

provided by the Bureau of Quality Assurance (BQA) of the Health Services Admin-
94 Ch.---Reimbursement

istration. Although Medicare is exploring the possibility of relying on FDA for advice

about medical devices, FDA’s experience under the 1976 Medical Devices Amendments is not yet sufficiently advanced to provide a basis for Medicare coverage.

In recommending whether or not a service should be covered by Medicare, BQA

considered four factors: safety, efficacy, acceptance by providers, and stage of development. BQA had no formal, systematic mechanism for making these decisions: it

identified certain Federal agencies, representatives of professional associations, and

others and asked for their judgments. Its decisions were not necessarily based on

formal studies, although if available, such studies were sometimes used.

Thus, BQA was an important decisionmaking agency in determining Federal

policy about use of a new medical technology, even though it gave advice only when

asked by the Medicare program. Under the 1977 reorganization, BQA was made part

of the new Health Care Financing Administration, and its name was changed to

Health Standards and Quality Bureau. At the same time, the responsibility for

making recommendations on efficacy was left in the Public Health Service. This

activity was subsequently assigned to the Office of Health Practice Assessment in

the Office of the Assistant Secretary for Health.

After receiving advice form the Public Health Service, Medicare conveys its

decisions to the intermediaries and carriers, who are responsible for implementing

them. Carriers and intermediaries notify physicians and hospitals of coverage

policies and institute administrative mechanisms to monitor compliance. Because of

the large volume of services involved, especially drugs, implementation depends ultimately on the good faith of providers and the possibility of a future audit.

In 1973, the Bureau of Health Insurance (BHI), which administers Medicare,

refused to reimburse for CT scans on grounds that CT scanning had not been

established as a reasonable and necessary procedure (496). Such a course of action is

open to Medicare under section 1862 of the Social Security Act. At the same time,

BHI sought the advice of BQA, which advised Medicare that it considered head

scanning an efficacious procedure, BHI then authorized reimbursement by Medicare

for head scans. Because the data examined by BQA had pertained only to EMI

machines, only EMI scans were authorized for reimbursement, Although other

manufacturers began marketing scanners in 1974, Medicare reimbursement for CT

scans was formally limited to EMI machines until October 1976. At that time, BHI

changed its policy to authorize Medicare payment for scans performed on machines

of several additional companies. Medicare coverage was later broadened to include

head scans performed on both head and body scanners, but not body scans themselves. The issue of body scanning is still under consideration; coverage is expected for

specified medical conditions.

At the Federal level, Medicaid does not consider efficacy in reimbursing for its

share of expenditures. The States decide whether to pay for new procedures, and

Federal administrators honor the States’ decisions. No information has been compiled on the manner by which the 53 Medicaid regions make these determinations

(510).

Blue Shield and Blue Cross plans contract directly with hospitals and physicians

for payment of services to their beneficiaries. Provisions of contracts allow Blue Shield

plans to exclude reimbursement for experimental procedures or to limit

reimbursement to procedures considered part of accepted medical practice. The
Ch. 6—Reimbursement ● 95

national Blue Shield Association consulted with American College of Radiology (ACR)

about the efficacy of CT head and body scanning. On the basis of that advice, the

national Blue Shield organization advised individual Blue Shield plans to pay for CT

head scanning only (374). Until 1977, the national Blue Shield advised against

reimbursement for CT body scanning on the grounds that insufficient data supported

its efficacy (91). In June 1976, only four of the 50 Blue Shield plans were reimbursing

for CT body scans (374), In April 1977, ACR endorsed CT body scanning. Although

Blue Shield is not bound by the decisions of ACR, in September 1977, Blue Shield’s

Board recommended that individual plans reimburse for body scanning. At the same

time, the Board recommended that the plans establish local standards of appropriate

medical indications for using body scans (174).

Under its Medical Necessity Program, Blue Shield has become more active in

linking reimbursement with efficacy. In May 1977, the national Blue Shield Association announced that it would pay for 30 procedures only when physicians justified

their medical necessity. The list included diagnostic and surgical procedures that were

said to be outmoded, redundant in combination with others, unlikely to yield

additional information through repetition, and of unproven value. Three societies of

medical specialists helped to develop the program: the American Colleges of Physicians, Radiology, and Surgeons. Blue Shield planned to expand the list of procedures of

undemonstrated effectiveness in the future (257, 35 I).

Individual Blue Cross plans, like those in Blue Shield, decide whether CT scanning

is a reimbursable category. In November 1976, at least three Blue Cross plans were

refusing to reimburse for body scanning because clinical evidence about its appropriate use was lacking. Individual Blue Cross plans vary greatly in the way they decide

upon reimbursement for CT head and body scans. The Arizona Blue Cross-Blue

Shield plan reimburses for CT scanning only for particular medical conditions. Some

plans reimburse for CT scanning in general, and others base their decisions on the

opinions of medical advisors (67).

Like Blue Shield, the National Blue Cross Association has also become more

actively concerned with efficacy. In late 1976, Blue Cross requested the Institute of

Medicine to examine the policy implications of CT scanners. Linking reimbursement

with efficacy, the Institute of Medicine recommended that third parties pay for CT

head and body scanning when used appropriately. The report further recommended

that usual standards of clinical practice be accepted as criteria of efficacy (258).

In their contracts with and payments to consumers, commercial insurance

companies historically have not questioned appropriate use of particular technologies

when used under a physician’s direction. And individual patients who pay out-ofpocket for scans are inclined to accept physicians’ judgments concerning the

advisability of a procedure and to pay for charges as billed.
96 ● Ch. 6—Reimbursement

Third-Party Coverage

Third-party coverage affects total expenditures for CT scanning. Such coverage

influences the setting in which CT scans are performed and the use of other

procedures. If coverage extends to inpatient but not ambulatory diagnostic procedures, providers and patients are encouraged to favor hospitalization. Increased

hospitalization would produce greater revenues for providers and lower out-ofpocket expenses for patients but higher per capita expenses. In contrast to ambulatory

use, performing CT scanning on an inpatient basis increases total expenses and

charges for a patient’s medical care because of the costs of inpatient care and additional

physician services. These related services taken together greatly raise total

expenditures attributable to CT scanning. Running multiple diagnostic tests also

results in greater expenditures for a patient work-up. Coverage that applies to

diagnostic procedures as a category offers no incentive to substitute less costly

procedures for expensive ones of equal value.

Third-party coverage typically does not encourage substitution of procedures on

the basis of either lower costs or extent and accuracy of information. Incentives

concerning hospitalization vary among third parties. Under Medicare, * a patient

receiving a CT scan must pay a deductible for inpatient care (under Part A) or a

deductible and coinsurance for ambulatory services (under Part B). For inpatients

under Part A, Medicare pays 100 percent of the reasonable cost or charges of the

CT scan itself and for ambulatory patients under Part B, 80 percent of costs or

charges after the deductible. A patient who had no deductible for Part B accumulated

for the year would probably be indifferent about the expense of being scanned as an

outpatient or an inpatient. But a patient who had already met the deductible under

Part B would pay less out-of-pocket for an outpatient scan. Section 1151 of the Social

Security Act, which pertains to Professional Standards Review Organizations, restricts payment for inpatient services. Medicare and Medicaid are authorized to pay

for services on an inpatient basis only if they cannot be provided effectively on an

outpatient basis.

Although Medicaid covers the expenses of hospitals and staff physicians, the

extent of coverage varies among States. For nonhospital physicians, Medicaid uses

the reasonable and customary charge of physicians as an upper limit for the State’s

payment and often pays them much less than the upper limit.

Blue Cross plans typically cover inpatient diagnostic services and would therefore reimburse for CT scans on inpatients. Outpatient coverage would depend on a

particular subscriber’s policy. Most Blue Shield plans pay for the charges of physicians who are not on hospital salary and for some outpatient services. These plans

would therefore pay the professional fees of nonhospital physicians for inpatient

scans. Blue Shield plans, with appropriate coverage for diagnostic procedures, would

pay professional fees of nonhospital physicians for outpatient scans in hospitals, and

would pay both professional and technical fees for scans in physicians’ offices (67).

Commercial insurance companies usually cover diagnostic services such as CT

scans for inpatients, while coverage for outpatients is subject to more variation.

*Bills submitted for Medicare payment of inpatient services do not clearly identify the procedure. Consequently, it is difficult to distinguish a CT scan from another radiological procedure

(106).
Ch. 6—Reimbursement ● 97

According to a small sample of companies, payment for CT scans ranged from 70 to

100 percent of total charges (29).

Retrospective Reimbursement

For the most part, third parties reimburse retrospectively, that is, they pay for

costs after they have been incurred or charges after billing. Because of this policy,

third parties often have an open-ended commitment to finance covered services that

are provided.

Payments related to providers’ costs are almost entirely based on those already

incurred. Such payments include those by Medicare and Medicaid for institutional

services (Parts A and B), about half of the benefit expenditures of Blue Cross, and

medical services expenditures of other governmental agencies, such as the Department of Defense and Veterans Administration, that provide medical services directly

to patients. Cost-based reimbursement for CT scans by Medicare, Medicaid, and

Blue Cross would apply to costs incurred by hospitals in the course of performing the

procedure. Both Medicare and Medicaid pay that portion of costs attributable to their

own patients, but may use different definitions of costs. Cost-related formulas used

by Blue Cross plans may have several bases, such as reasonable costs, costs plus a

certain percentage, or costs minus a certain percentage.

Payments based on charges billed by providers include those of Medicare and

Medicaid for physician services and certain noninstitutional ambulatory services, the

other half of the benefit expenditures of Blue Cross, most of the expenditures of

Blue Shield, payments by commercial insurance companies, and out-of-pocket

payments by patients. Charge-based reimbursement could apply to CT scans in both

hospitals and physicians’ offices.

Several third parties use some variation of the “usual, customary, and reasonable” approach when paying charges. In some cases, limits apply to the charge for a

service, but additional numbers and kinds of services may be performed. Medicare

(under part B) pays “reasonable” charges for physicians’ services. In establishing

what is reasonable, Medicare compares the physician’s customary charges with

charges prevailing in the area for the specific service. Payment is then limited to the

75th percentile of the customary charges in the area (259). Under “assignment,”

physicians agree to accept as total payment for a service the limit determined by

Medicare. The proportion of claims for which providers accepted assignment had

fallen to 52 percent by 1975 (197). If a physician does not accept assignment, the

patient is liable for any difference between the physician’s charge and Medicare’s limit. Medicaid uses “usual and customary” charges in an area as the ceiling for

payments to physicians. Medicaid typically pays a smaller proportion of usual and

customary charges than Medicare, and only a small fraction of physicians accept

assignment under Medicaid (54).

For about half of its business, Blue Shield uses fee schedules or pays usual,

customary, and reasonable charges up to a certain percentile. The rest consists chiefly

of indemnity payments (374). Commercial insurance companies usually pay either

indemnity payments or physicians’ charges subject to coverage of specific policies.
... .

98 Ch. 6--Reimbursement

Patients who pay out-of-pocket are liable for whatever providers bill for their services.

Recent activities by Blue Cross and Blue Shield indicate that they plan to take a

much more active role in controlling expenditures. Blue Cross plans in May 1977

unanimously approved a program that requires each plan to put into effect certain

measures to control costs. Each plan must keep data on and try to affect key statistics

on use and expenditures. Programmatic requirements include multilevel claims

review, educational programs for subscribers, investigation of fraud and abuse, and

participation in health planning. Requirements also call for each plan to explore alternative payment systems by such methods as demonstration projects or comparison of

costs under alternative payment methods. The national Blue Cross Association will

monitor the effort and provide technical assistance as needed. The measures adopted

were developed as part of a joint effort with the Blue Shield Association. Blue Shield

plans have adopted similar standards aimed at cost control (68, 35 I).

Fee-for-Service Payment

Under the fee-for-service method of payment, providers receive more revenue

from a service with a higher fee. Thus, relative charges can affect use and total

expenditures. When the fee is higher for contrasted scans, providers have an incentive

to perform more of those scans. In 1976, 90 percent of the institutions with scanners

charged extra for scans with contrast material (265). One study examined relative fees

and use of contrasted scans. But that study failed to give any information about other

relevant factors, such as patient characteristics, that might have prompted use of

contrast material independently of fee structure (159). Therefore, no conclusions may

be drawn.

No third-party reimbursement policy considers relative prices of CT scans and

other neurodiagnostic procedures. Therefore, third parties give providers and

patients no incentive to prefer less costly substitutes.

Prospective Reimbursement

Prospective reimbursement on the basis of costs or charges exists, but mostly on a

small and experimental scale. Prospective reimbursement refers to payment according

to rates set prior to the time during which they apply; the unit of payment (case,

physician visit, hospital day, plan member, institutional budget) may vary. In 1976,35

Blue Cross plans were engaged in prospective reimbursement, in some cases as an

option for hospitals or as part of an experiment.

Some States have attempted to review the appropriateness of rates prospectively.

The jurisdiction of State rate review bodies has usually been limited to hospitals. The

potential and actual authority connected with rate review varies greatly among States.

Of course, State laws do not apply to Medicare payments by the Federal Government.

Laws in Massachusetts, Washington, and Maryland cover rates paid by other
Ch. 6—Reimbursement ● 99

purchasers of services, including self-payers (individual patients who pay out-ofpocket). * New York and New Jersey set rates for Blue Cross and Medicaid, but not for

Medicare and self-payers. Indiana and Rhode Island have voluntary systems (344). As

mentioned previously, the Massachusetts Commission has recently lowered some of

its approved rates for CT scanning.

Medicare prospectively sets limits on its payment of routine operating costs to

hospitals. Under a provision of section 1861 of the Social Security Act added in 1972,

Medicare determines in advance limits that will apply, usually for the coming year.

Limits vary according to bed size, SMSA or non-SMSA area, and per capita income of

the area. Only about 750 hospitals have in fact had their payments limited under this

provision. It is notable that only operating costs are restricted. Since other costs,

such as costs of ancillary services, are not restricted, hospitals could channel costs

into those categories (352, 508).

The Health Care Financing Administration in HEW is funding demonstration

projects involving prospective reimbursement under the Social Security Act. A project

in the State of Washington, for example, is comparing the results under prospective

reimbursement of total budgets for hospitals, prospective reimbursement by hospital

departments, and continuation of present retrospective reimbursement. The Maryland Health Services Cost Review Commission has a contract to review budgets and

rate structures using a public utility approach. In the area of Rochester, N. Y., 23

hospitals together plan to stay within a total community budget rather than focusing

on costs or charges of a single hospital. Other demonstration projects are taking place

in Massachusetts, western Pennsylvania, Connecticut, New Jersey, and California

(514).

The objective of section 1526 of the National Health Planning and Resources Development Act of 1974 is to evaluate the feasibility of rate regulation by State planning

agencies. This section authorizes the Federal Government to award demonstration

grants to a maximum of six State agencies. Provisions of the Act and proposed regulations go beyond the mechanics of rate review to the implications of reimbursement

methods. For example, proposed regulations for awarding grants consider the extent

to which a State agency offers positive and negative incentives for efficient and appropriate use of services (514).

In September 1977, final approval of the regulations was imminent. However,

grants can be made only to fully designated State agencies, and no State agencies have

been fully designated. Some State agencies will pass from conditional to fully

designated status in mid-1978. Only then may they apply for these demonstration

grants. Awards of grants and implementation of the program stretch further into the

future (506).

*Connecticut’s law technically applies only to commercial insurance companies and self-payers. To

the extent that a hospital’s costs are equal to or greater than charges, some cost-based payers pay the

lesser of costs or charges, Connecticut rate review affects such cost payers as well (IIS). Under an

experimental program in Maryland, Medicare is following decisions of the State cost review commission

(54).
.

100 ● Ch. 6—Reimbursement

SHORTCOMINGS OF REIMBURSEMENT POLICIES

Because third parties, the Federal Government in particular, account for such a

large portion of personal medical care expenditures, they have the potential to restrain

expenditures on medical care and to channel funds into efficacious services. The data

for CT scanning indicate that, although third parties have increasingly been taking an

active role, they have not fully realized this potential.

Public and private third parties reimburse for services that have already been

provided. Review processes question whether claims may be reimbursed in light of

limits on services covered and expenses allowed, rather than whether production is

efficient. Third parties then act as intermediaries in passing on any increased

expenditures resulting from higher use or costs. Private companies raise health

insurance premiums for subscribers, and governments increase taxes or decrease

expenditures for other sectors of the economy.

In some cases, Federal and private programs have tried to link reimbursement of

CT scans with efficacy and are exploring similar requirements for other procedures.

But their efforts have been handicapped by inadequate procedures of evaluation and

insufficient data. The Bureau of Quality Assurance did not consider itself well

qualified to advise Medicare about new technologies (502), The Bureau had no formal

mechanism for arriving at decisions about CT scanning. A small staff of one or two

people, little money, and no formal procedure are problems that will continue under

the new Office of Health Practice Assessment. Third parties interested in efficacy and

appropriate utilization have often relied on medical advisors. But the medical

profession itself has had insufficient information on appropriate indications for CT

head scanning, as chapters 3 and 5 have discussed.

Apart from the issue of efficacy, this study of CT scanning illustrates the perverse

incentives of reimbursement policies for medical care delivery in general. These

policies have not been structured to encourage efficiency or to heighten concern about

increased expenditures on CT scans or other medical services. Retrospective

reimbursement, by costs or charges, existing third-party coverage, and fee-for-service payment all stimulate providers to increase services and result in higher expenditures. Payment methods generally fail to encourage efficiency or cost-consciousness

by providers.

The experience of Kaiser-Permanente in Northern California is noteworthy as a

contrast. Kaiser-Permanente receives a predetermined cavitation (per patient)

payment that remains fixed regardless of the number of services provided. In KaiserPermanence’s budget during 1976, CT scans added to expenses, but not to revenue.

Kaiser did not own a CT scanner, but ordered about 2,500 annual examinations from

outside providers, at the rate of 1,900 examinations per million population for its 1.3

million members. Under the assumption that 3,000 annual examinations have been

the equivalent of one scanner, Kaiser-Permanente has been using the equivalent of

0.65 scanner per million population. That rate is roughly 23 percent of the California

rate of 2.8 scanners per million population, and 50 percent of the national rate of 1.5

scanners per million population. Kaiser-Permanente’s rate of 1,900 examinations per

million population compares to 8,400 estimated examinations per million in

California. Standardization for age would raise Kaiser’s relative rates: the KaiserPermanente membership has fewer persons 65 years and over than California’s

population (4.9 percent compared to 7.8 percent). Kaiser also expects an increase in use

after installation of its own scanner (283) because it will then internalize expenses
Ch. 6—Reimbursement ● 101

instead of paying charges to outside providers. Even with these qualifications,

utilization under the Kaiser-Permanente system has been dramatically lower than

that for the State or the country.

In contrast to Kaiser-Permanente’s method of payment, retrospective reimbursement of services by costs or charges gives providers an incentive to order additional

tests to gain revenue. It also provides no incentive for physicians and hospitals to try to

lower costs of performing a CT examination by, for example, using a scanner more

intensively. Existing reimbursement mechanisms contain no incentives for a CT examination to be performed when possible on an ambulatory basis. In fact, coverage,

billing methods, and reimbursement policies often encourage the provision of scans on

an inpatient basis, the more costly manner. In the absence of a budget or fixed

payment, providers have no need to consider total costs when choosing which

neurodiagnostic procedure to order for patients. Undercurrent policies, providers are

reimbursed for many tests performed, even if some provide the same or little

additional information. No mechanism stimulates providers to make trade-offs

between increased information and increased costs.
7 ●

POLICY ALTERNATIVES
POLICY ALTERNATIVES

The computed tomography (CT) scanner is a new diagnostic device that represents

an important advance in medical detection. Studies show that CT scanners perform reliably and provide accurate diagnoses of abnormalities in the head and abdomen. As a

relatively safe and painless procedure, CT scanning can replace several less safe and more

painful technologies, such as pneumoencephalography. CT scanning has been readily

accepted by the medical profession, and its use is expanding rapidly. To the extent that a

fundamental problem with CT scanning exists, it lies not in the existence of the technology, but in its appropriate use.

Although this study focuses on CT scanners, its findings are applicable to the general problem of appropriate use of diagnostic medical technologies. Appropriate use includes considerations of safety, efficacy, and cost. Overuse of a technology may lead to

both excessive expenditures and unwarranted risk to patients; underuse may result in delayed detection or prolongation of medical problems. In either case the study demonstrates basic policy problems related to the appropriate use of medical technologies.

Use of a diagnostic medical technology such as a CT scanner depends on many factors: some increase and others restrict use. A principal and obvious factor is the desire of

physicians to provide good care for their patients. Attempts to identify medical problems

and to refine diagnoses lead physicians to use the technologies available to them. Medical

education also predisposes physicians to liberal use of diagnostic technologies by emphasizing thoroughness rather than discrimination and concern for costs. The current

medical malpractice situation further encourages the use of diagnostic tests to avoid

error. In some instances patients themselves request that physicians perform diagnostic

tests. Although these are important issues, this report has not addressed medical education, malpractice, and patient demand. Rather it concentrated on available information,

governmental regulation, and financing.

After their formal training, physicians continue to receive information about medical technologies from scientific meetings, professional publications, colleagues, manufacturers’ representatives, and their own clinical experience. Two Federal agencies, the

Food and Drug Administration (FDA) and the National Institutes of Health (NIH), develop and disseminate such information. By law, manufacturers of drugs and medical devices must submit to FDA data that supports claims made in labeling. NIH conducts evaluations of certain medical technologies and makes the results available to the public.

However, as illustrated by this study, no single Federal or private policy establishes a formal, systematic process to develop needed information about medical technologies. Nor

is there a clearly defined mechanism for disseminating what is known to all appropriate

parties.

105
106 ● Ch. 7—Policy Alternatives

Without such information, physicians appear to test new technologies using a variety of methods to develop a sense of their worth empirically. Unfortunately, these methods are often not designed to yield statistically reliable information. This informal experimentation can both retard the early application of valuable technologies and advance the

use of questionable ones. Without valid information obtained from well-designed

studies, physicians face a very difficult task in deciding on the appropriate use of new

technologies.

Prevailing methods of financing medical care provide incentives for additional use of

technologies, regardless of their marginal value. Health insurance programs have continued previously existing fee-for-service payment of physicians; performance of additional tests thereby generates additional revenue for the physicians. Hospitals are reimbursed on the basis of their costs or charges. These methods at the least facilitate and at

the most stimulate providers to prescribe additional use. Under such a system, providers

have little incentive to weigh the benefits and costs of additional tests.

The regulatory framework created by FDA, the Professional Standards Review

Organizations (PSROs), and capital expenditure laws also affects the use of medical technologies, in a restrictive sense. FDA requires proof of safety and effectiveness before

drugs and devices may be marketed. The PSRO program was designed to establish

norms and standards for hospital utilization and medical care provided under Medicare

and Medicaid. And review of proposed capital expenditures is aimed at avoiding unnecessary duplication of facilities and promoting their efficient use. Unlike many of the other

factors affecting technologies, these programs may restrict their use. The PSRO program

and capital expenditure review were created in part to counter incentives for greater use,

especially from financing methods.

The following sections present alternatives that might improve the use of medical

technologies such as CT scanners. The alternatives are presented in three sections, each

addressing a specific category of governmental policy: Section 1 focuses on developing

and disseminating information on efficacy and safety; Section 2 on regulatory policies;

and Section 3 on financing. The alternatives in each of these sections illustrate, but do not

exhaust, possible options. Nor are they necessarily mutally exclusive. Each alternative

should be measured against the continuance of current policies and their consequences as

well as against the consequences of the alternative itself. These alternatives represent

broad guidelines for policy. As such, they do not consider in depth the more technical

aspects of implementation, such as the mechanisms for evaluating efficacy, specific

criteria for utilization review, methods of cost accounting, or details of ratesetting.

1. INFORMATION ON EFFICACY AND SAFETY

Many decisions concerning the use of a medical technology depend—directly or

indirectly—on an assessment of its efficacy and safety. Much of the available information on efficacy and safety is not derived from well-designed controlled clinical trials,

epidemiological studies, or analyses of clinical experience. Instead, informal judgments

evolve, judgments based primarily on the experience and perceptions of individual physicians. Judgments of this type, when they do not accurately reflect the efficacy and safety

of a technology, may contribute substantially to inappropriate use.
—

Ch. 7—Policy Alternatives

The development of information on efficacy and safety involves identifying the

● 1 0 7

technologies to be studied, conducting the appropriate evaluations, and synthesizing the

results of those evaluations and relevant clinical experience. The synthesized information

may then be disseminated to the individuals and organizations most in need of guidance.

Although simple to delineate on paper, this process of synthesis and dissemination can be

complex and difficult to implement.

This section presents two policy options designed to address the needs of medical

care decisionmakers for efficacy and safety information. The first concerns the development and dissemination of the information. The second requires the type of synthesis

that analyzes information to produce formal policy judgments about a technology’s efficacy and safety. This section and the alternatives presented in it are concerned only

with developing and disseminating information.

Together, the two alternatives, if adopted, would increase the amount of information available to physicians in their use of medical technologies. It would also be helpful

to planners, regulators, and public policy decisionmakers. As explained in alternative 3

of the following section, FDA already requires the development of information and

makes certain policy judgments about the safety and efficacy of medical technologies.

The alternatives in this section would substantially enlarge these existing processes.

As discussed in chapter 3, information about efficacy is used or could be used by

many Federal programs, as well as by providers of medical care. Decisions and policies

based on efficacy may now be inconsistent as each user defines efficacy in its own way.

As described in chapter 3, only FDA has a formal definition of efficacy at present, and

that definition mereIy ensures that the evidence substantiates the claims of the manufacturers. But FDA’s decisions on efficacy and safety are of limited value to health planning

agencies, PSROs, and reimbursement programs.

A general definition of efficacy could be developed for all types of medical technologies—preventive, therapeutic, and diagnostic. No medical technology is beneficial in all

circumstances and some technologies can be extremely beneficial only if used in very

limited situations. Therefore, the efficacy of a particular technology must be related to a

defined population, a given medical problem, and particular conditions of use. A complete specification of efficacy encompasses all three of these factors. *

Alternative 1: Establish a formal process to identify medical technologies

that should be assessed for efficacy and safety; conduct the necessary evaluations; synthesize the results from the evaluations and from relevant clinical experience; and disseminate the resulting information to appropriate parties.

Except for new drugs and, potentially, new medical devices, the Federal Government’s identification of technologies warranting study occurs in an ad hoc manner.

Often, decisions to evaluate a technology depend on the curiosity of investigators or Federal program administrators. Few efforts have been made to coordinate the selection of

technologies to be studied with the informational needs of relevant governmental agencies and private groups.

*Efficacy is defined as the potential benefit to individuals in a defined population from a medical

technology applied for a given medical problem under ideal conditions of use. These ideal conditions

may be approached in research settings, but are unlikely in average practice. Efficacy, then,

represents an outer limit to benefit.
108 ● Ch. 7—Policy Alternatives

No existing Federal procedure systematically identifies those technologies that are

most in need of investigation. Indeed, no formal set of criteria has been developed for

establishing such priorities. The private sector identifies medical technologies to be

assessed for efficacy and safety through an even more informal process. As described in

chapter 6, however, some efforts have been initiated by organizations such as the Federal

Health Care Financing Administration and private Blue Cross-Blue Shield to identify and

develop information on possibly inefficacious or unsafe technologies.

Various Federal agencies currently have responsibility for conducting or funding

studies on efficacy and safety, although in each case their mandate is limited and often

ambiguous. The NIH effort is by far the largest; that agency spent approximately $100

million on more than 750 studies during fiscal year 1975. The emphasis at NIH is on new

technologies, rather than on those already diffused;* thus, existing technologies receive

relatively little scrutiny. Similarly, drugs and biologics receive more attention than

devices or medical and surgical procedures.

No Federal policy focuses responsibility for the dissemination of efficacy and safety

information. Although NIH and FDA both disseminate substantial amounts of information, their efforts are hampered by various factors. For example, NIH historically lacks

working relationships with many of the parties in need of the information. Although

FDA obtains information on efficacy of drugs and devices from manufacturers, most of

that information is considered to be proprietary and is not released in that form by FDA

to the public or to providers. In addition, the information disseminated is often not in a

form readily usable by parties in need.

This study of the CT scanner illustrates some of the consequences of using the present informal assessment process. Although the CT scanner has been the subject of much

publicity since its introduction, few well-designed evaluations of its efficacy and safety

have been conducted. Despite this dearth of information, CT scanning has been more

fully evaluated than many other diagnostic technologies.

Instead of continuing the present informal assessment system, the process could be

made explicit and formal as indicated by this alternative. The process could be applied to

both existing and new medical technologies. With the implementation of an explicit, formal system, criteria could be developed for screening the thousands of existing and future

medical technologies to establish priorities for investigation. These criteria could take

into account factors now excluded or only minimally included in the process of assigning

research priorities. Such factors as needs of health planning agencies and third-party

payers and the level of expenditures for the technology could be included in the criteria to

be established.

Also, under this alternative, an agency or agencies would be given explicit responsibility for conducting studies of efficacy and safety or ensuring that they are conducted,

for synthesizing the results of those trials and other available information, and for

disseminating the synthesized information to appropriate parties. (Two bills before Congress, H.R.12584 and S.2466, would create an office within the Department of Health,

Education, and Welfare (HEW) to evaluate medical technologies.) The direct anticipated

result of this alternative is the production of science-based information for use by

medical professionals, policymakers, Government agencies, and the public.

*Diffusion of a technology refers to the process of adoption from development until general acceptance.
Ch. 7—Policy Alternatives 109

This alternative is not designed to change the current processes of introducing and

using medical technologies except to increase the amount of validated information available. The present process allows a broad and varied experimentation process to occur

with new medical technologies. Through its processes of careful human experimentation,

the present system also permits technologies to be used early in their development. Controlled clinical trials, epidemiological studies, and other forms of technology evaluation

are often lengthy activities. Thus, the development of information on efficacy and safety

can be a time-consuming process. Under this alternative, diffusion and use of a medical

technology would not necessarily be postponed until the conclusion of the evaluation

process.

Implementation of this alternative could be costly. Controlled clinical trials are expensive: an average trial funded by NIH costs more than $100,000 per year, and those for

surgical procedures or expensive technologies may be several times higher. Formalizing

activities under this alternative is likely to increase substantially the number of trials

because the screening and synthesizing processes would identify problems with technologies and gaps in efficacy and safety information. A large number of medical technologies might warrant careful examination, requiring complete reviews of available information and attention to clinical experience. The process outlined would make cooperative trials (such as many of those of the National Cancer Institute) more feasible, a

development that could reduce the magnitude of the increase in the trials.

A distinction can be made between changing the total use of medical technologies

and reducing inappropriate use (e.g., of technologies that are underused or overused).

This alternative makes the latter possible, though it does not ensure it. Reduction in the

use of certain technologies, following evaluation, might be offset by increased use of

other technologies, some of which may themselves be unevaluated. The relative

magnitude of these three factors—reducing use of overutilized technologies, increasing

use of underutilized ones, and the unpredictable shifting of utilization patterns from one

technology to another—will in part determine the effect of this alternative on total use of

medical technologies and on expenditures for medical care.

Alternative 2: As part of alternative 1, establish a formal process for making official judgments about the efficacy and safety of medical technologies.

Under current law, FDA must determine the efficacy and safety of a drug or device

before it can be marketed. No Federal organization is responsible for officially determining the efficacy and safety of medical and surgical procedures. At least two components

of the U.S. Public Health Service (NIH and the Office of Health Practice Assessment) are

attempting to develop formal systems to synthesize information and arrive at decisions

on particular medical technologies.

The synthesis process of alternative 1 could take many forms. It could collect and

analyze existing information, or it could attempt to identify gaps in existing knowledge

as a guide for further research. Under this second alternative, synthesis would involve

collecting and analyzing available information in order to produce official policy judgments about the efficacy and safety of the technologies under examination.

This alternative would establish a process whereby relevant information on a

medical technology is critically evaluated. The evaluation would result in a judgment, or

policy decision, as to a technology’s efficacy and safety. This alternative would be integrated with alternative 1. The judgments could contain detailed information on a wide

c
110 ● Ch. 7—Policy Alternatives

range of indications for appropriate use of the technology. Thus, they could be broader

than FDA’s current determinations for marketing approval.

Providing official judgments to relevant individuals and organizations would add to

the information available to them for making decisions. However, those individuals and

groups would still make the final decisions. The judgments about efficacy and safety

might be issued as guidelines or as recommendations. They would not be binding. This

second alternative would only produce information; it would not be a regulatory process.

Such official information might reduce the errors in judgment that such individuals

and organizations make. However, mistakes made by the group developing the judgments, while perhaps fewer in number, would have broader ramifications because of

their official nature. Since mistakes are inevitable and judgments of efficacy and safety

can change as additional information becomes available, this alternative would require a

substantial degree of flexibility in operation. The process outlined in this alternative and

alternative 1 could be used initially for a small number of technologies to test its feasibility. An evaluation of CT body scanning, for example, could produce judgments about

the types of benefits likely to result for certain kinds of patients and specific medical conditions.

This second alternative would almost certainly have an effect on the current medical

malpractice situation. The existence of official, though voluntary, statements as to the efficacy and safety of a technology might become the standard for judging whether a provider properly used that technology.

The major controversy surrounding this alternative would be determining the process that would be used to make such scientific judgments. Because such judgments could

be used to decide whether a technology is to be reimbursed and where it can be useful,

this alternative could become the focus of considerable political and economic pressure.

Care would have to be taken to see that the process is both timely and scientifically

appropriate.

2. GOVERNMENTAL REGULATORY POLICIES

In an attempt to offset powerful incentives encouraging the use of medical technologies, Congress has established three regulatory programs: the FDA, the PSRO program,

and capital expenditures review. FDA regulates the marketing of drugs and devices.

Marketing requires prior FDA approval that the technology is safe and effective, and

advertising is limited to the approved conditions. FDA does not have authority to restrict

subsequent use by physicians or patients. PSROs evaluate appropriateness of care given

to Medicare and Medicaid patients. PSROs may establish standards for the use of specific

medical technologies, such as CT scanners, although few such standards have yet been

developed.

State certificate-of-need laws require prior approval for capital expenditures greater

than a certain amount, usually $100,000 to $150,000. Federal and most State laws cover

hospitals, but exclude private physicians’ offices. In general, capital expenditure laws do

not regulate use of facilities or equipment once they are in place. The Social Security Act

also restricts payment under Medicare to services that are reasonable and necessary for

diagnosis, treatment, or improved functioning.
Ch. 7—Policy Alternatives ● 111

Inadequate information about efficacy and safety handicaps the effectiveness of

these three programs. FDA obtains information about efficacy and safety from manufacturers, but that information is limited to certain uses of the drug or device. PSROs, reimbursement agencies, and State and local planning agencies need information about the

appropriate use of a technology—the population benefiting, the medical problems affected, and the conditions of use under which the technology is safe and effective. Further

information is required concerning the substitution of a new technology for existing

ones. Both the PSRO and the health planning programs are new and not yet fully implemented. In addition, lack of universal coverage facilitates circumvention of these programs.

This section includes alternatives concerning the use of medical technologies, capital

expenditure review, and Medicare reimbursement. Alternatives 1 and 2 from Section 1

would facilitate alternative 3 and would be necessary for alternative 4. Alternative 3

would restrict the use of medical technologies to those indications approved by FDA for

marketing purposes. Alternative 4 would link Medicare reimbursement to the information and judgments of alternatives 1 and 2. And alternative 5 would expand the regulation of capital expenditures to include all purchases of medical equipment regardless of

setting or ownership.

Alternative 3: Authorize a Federal regulatory agency, such as FDA, to

restrict the use of medical technologies to the conditions of use specified in the

FDA-approved labeling.

When FDA approves a drug or device for marketing, it also approves the specific

wording of the product’s labeling, i.e., the written information used by the manufacturer

to describe the product. Labeling (which includes package inserts) lists medical conditions (and possibly populations) for which the drug or device is deemed to be safe and effective and warns about possible side effects.

These “indications for use” are usually not exhaustive. A manufacturer that has conducted premarketing clinical tests to evaluate safety and effectiveness for defined medical

conditions and population groups could then seek marketing approval only for those

conditions. Thus, the FDA marketing approval process might consider only a portion of

the possible indications or contraindications for a new drug or device.

Use of drugs and devices by physicians and patients, however, is not restricted to the

approved conditions. Although the manufacturer provides only the approved information to physicians and other providers, this information is in effect merely advice.

Nothing in the law prevents the use of drugs or devices for conditions other than those

specified. (A bill before Congress, S.2755, would restrict distribution of drugs to particular providers. )

Uses of a technology for conditions other than those approved by FDA are not necessarily inefficacious. Conceivably, some potentially efficacious uses are not evaluated

prior to initial marketing approval by FDA. However, the absence of a particular use

from the list of approved uses implies that sufficient information is not available to determine the technology’s efficacy for that use.

Examples can be cited of beneficial uses that were neither anticipated nor evaluated

by the manufacturer but were later adopted by practitioners. Use of the drug propranolol

for treating hypertension (high blood pressure) is such an example. Other unevaluated

uses, however, have been shown to be medically unjustified when investigated after the
112 ● Ch. 7—Policy Alternatives

drug or device was marketed. For example, chloramphenicol has often been used for upper respiratory infections when equally effective and less toxic drugs were available. The

balance between positive and negative effects of unapproved uses of drugs and devices is

difficult to determine. One factor is clear—unapproved uses usually have not been

verified by the rigorous clinical research that is necessary to gain FDA approval.

Allowing physicians to use technologies for unapproved uses has resulted in a de

facto research or experimentation process. Formal clinical investigations of a new use

must proceed under an FDA-monitored Investigational New Drug (IND) process for

drugs and under a similar process for devices. Unapproved use by physicians and patients could be considered an unofficial clinical investigation. This result can be either

beneficial if a new efficacious use is found or harmful if the use is unsafe or ineffective.

Also, aside from the technical questions of efficacy and safety, moral or human rights

questions may be raised by this unapproved application.

This third alternative would make FDA decisions binding on physicians. Drugs and

devices could be used legally only in accordance with the indications for use specified by

FDA’s marketing approval. Other uses would be allowed only as part of an approved

IND or an investigational process for devices. The investigational process for unapproved uses, the mechanics of which could be similar to the current process, could

replace the present practice of unapproved use. A scientific process evaluated by FDA or

another agency charged with the task could add validated indications or contraindications to the approved labeling for a drug or device. This alternative is based on marketing approval, which is now limited to drugs and devices; it would not cover medical

and surgical procedures.

The indications for use comprise one aspect of efficacy and safety, as noted above.

Therefore, this third alternative would be most effective if generally accepted and comprehensive definitions of efficacy and safety were developed. In addition, a publication

listing the FDA-approved indications for use of all covered technologies might be necessary to inform physicians who rely on these technologies.

The principal intention of this alternative is to improve the quality of medical care

by ensuring more appropriate use of medical technologies. Fewer patients would then be

subjected to unapproved and unscientific uses of technologies. Instead, medical technologies would be more likely to be used in accordance with valid scientific information.

A probable consequence of implementing this alternative would be an increase in

premarketing clinical investigation to determine appropriate indications for use. The

number of such investigations would depend on the proportion of potential uses that had

already been investigated.

This alternative could affect the timing of using a technology for a new indication.

Use of the technology for the new indication would not be permitted until the experimentation process had been completed (although some use would obviously occur as part of

the experimentation process itself). However, once a use had been demonstrated to be efficacious and safe, the manufacturer would be allowed to advertise that use. This advertising promotion might result in diffusion of the new use to a larger number of individuals in a shorter period of time than occurs under the present system. However, if

no firm or other organization decided to conduct investigations and seek approval for a

particular condition of use, that potential use might go undetected.

The financial costs of this third alternative are not predictable. Additional clinical
Ch. 7—Policy Alternatives 113

trials would increase the costs of bringing a technology to market. The net cost to manufacturers is not clear. They would bear the costs of extra clinical trials, but might receive

revenue from additional sales if a new use gained approval. A system of financing additional evaluations of efficacy and safety could be developed, possibly through a combination of manufacturers, patients, and third-party payers. Expenditures for the use of

many technologies might fall if third-party payers and patients did not have to pay for

unapproved uses. But expenditures on new uses might rise.

Adoption of this alternative would require a system for ensuring compliance. One

can imagine very elaborate enforcement measures requiring additional paperwork and

specialized personnel that are not readily available. A more simple approach would rely

on the good faith of providers. A provider found to be noncompliant would be penalized, but compliance would otherwise be assumed.

The practicality of this third alternative is questionable. Although laws and regulations can mandate this alternative, their enforcement could be cumbersome and expensive. Monitoring, let alone altering, physicians’ use of medical devices and drugs is difficult. In addition, the cost of enforcement might exceed the benefits. At a minimum,

however, enactment of this alternative might increase providers’ awareness of their legal

liability in using technologies for unapproved uses and might lead them to operate within

the approved investigational process. In fact, approved uses might serve as a basis for

liability.

Alternative 4: Link Medicare reimbursement to the information and judgments about a technology’s efficacy and safety that would result from alternatives 1 and 2.

Medicare administrators have interpreted the provision of the Social Security Act

limiting payment to reasonable and necessary services as allowing Medicare to withhold

payment for experimental procedures whose efficacy has not been determined. It was

under this provision that Medicare withheld payment first for CT head scanning and

then for CT body scanning pending evaluation of efficacy. Historically, Medicare has

denied reimbursement for outmoded procedures rejected by the medical community. But

Medicare’s action on CT scanning used efficacy and safety criteria to make a more controversial decision. And overall Medicare policy supports strengthening the dependence

of reimbursement on efficacy and safety. It is Medicare’s policy to restrict reimbursement

for drugs to conditions of use approved by FDA. FDA’s evaluation of devices under the

Medical Device Amendments of 1976 does not yet provide a sufficient basis for Medicare

action. For advice on procedures and devices, Medicare continues to rely mainly on the

Office of Health Practice Assessment of the Public Health Service.

Although Medicare policy links reimbursement to efficacy and safety, major problems remain. As discussed in Section 1, information on the efficacy and safety of devices

and procedures is insufficient for reimbursement purposes. These deficiencies range from

inadequate clinical data through incomplete syntheses of existing information to the

processes used in making judgments. The task of evaluation is much beyond the present

capability of the Office of Health Practice Assessment. Besides an inadequate information base, the office has a small staff and no formal process for evaluating technologies.

FDA labeling provides more available and useful information on drugs.

This fourth alternative suggests linking Medicare’s reimburesement for use of a technology to the information provided by alternative 1 and to the judgments about efficacy
114 ● Ch. 7—Policy Alternatives

and safety reached under alternative 2. Medicare would not only refuse payment for a

technology considered inefficacious or unsafe, but would also limit payment to conditions for which the technology was deemed efficacious and safe. The Office of Health

Practice Assessment could continue to advise Medicare. It could secure the relevant evaluations, digest them for Medicare purposes, and point out areas needing further information. Alternatively, Medicare could deal directly with any new office established.

Theoretically, the same procedure could apply to reimbursement under Medicaid,

but such a step might require amending the Social Security Act. Although Medicare officials have already decided that the program has administrative authority to deny reimbursement for new technologies, Medicaid administrators are less certain of Medicaid’s

legal authority at the Federal level. States have the authority to deny Medicaid reimbursement and have exercised that authority.

As a probable consequence of this fourth alternative, judgments about efficacy and

safety would affect the use of medical technologies. To the extent that payment by

Medicare is important to hospitals, physicians, and patients, all three groups would have

an incentive to follow the judgments made. As a result, this alternative could help prevent inappropriate and harmful technologies from being introduced, diffused and used,

and could reduce expenditures on them for Medicare patients. At the same time, however, this alternative is less intrusive than directly prohibiting the use of a technology.

Providers might use unapproved technologies, but would then simply forego Medicare

reimbursement.

Substantial changes in the medical care system could flow from this alternative. The

traditional process of third-party payment by Government would change. Government

has traditionally left decisions of appropriate technologies and conditions of use to practicing physicians. To the extent that Government reimbursement exerts leverage on providers, this alternative would restrict the use of technologies.

Implementing decisions at the local level to deny reimbursement would pose difficult

technical problems. Medicare already transmits to its carriers and intermediaries instructions on particular technologies and conditions of use for which reimbursement should

be denied. These Medicare agents in turn have the responsibility of informing providers

and enforcing the restrictions. Because of the magnitude of services involved, implementation depends primarily on the good faith of providers and secondarily on selected

audits.

Billing practices, for example, make monitoring the use of specific technologies difficult. CT scans may be reported under the general category of radiological procedures.

The present level of detail rarely indicates specific drugs or their conditions of use. In

theory, Government agents adjust cost reimbursement for institutions to exclude costs of

disallowed technologies, such as CT body scans. If implementation of this alternative

made these adjustments too intricate and lengthy, the Government might choose to drop

cost reimbursement and switch to payment by service, even in institutional settings.

This alternative could substantially lengthen the time required to introduce an innovation into medical practice. As discussed in Section 1, the mere existence of information and judgments might influence the use of technologies. By denying Government reimbursement for unapproved uses of technologies, this alternative would give substance

to those judgments. Providers would be reluctant to adopt procedures for which they and

their patients could not receive payment. And the longer time required to introduce an

innovation would apply to both efficacious and inefficacious technologies.
Ch. 7—Policy Alternatives 115

Linking Medicare reimbursement to more systematic evaluations of efficacy and

safety could occur only as a gradual process and over a long period of time. Clinical

studies, syntheses, and judgments are all lengthy undertakings. A practical approach

would be an incremental process of making reimbursement contingent on comprehensive

evaluations as they become available. Or in the case of new technologies, the Government could mitigate the problem of delay by screening and permitting reimbursement for

those with the potential to save patients for whom no efficacious technology exists. A

new surgical procedure, for example, might be reimbursed for patients suffering from an

otherwise fatal condition.

While a new technology is undergoing evaluation, Medicare could pay for it only in

designated locations. The choice of centers would have to take into account access for patients throughout the country. These centers could provide data for evaluating the technology; their participation in controlled clinical trials could be a condition of their

designation. These trials could generate data for analyzing efficacy and safety without

widespread dissemination of the technology .This alternative might reduce innovation

because it would make the process of innovation riskier for developers of new technologies. If other third-party payers followed Medicare’s lead and if this policy affected use

and sales of a technology, innovation could become more risky.

Another consequence of this fourth alternative is that reimbursement would be withheld for patients covered by governmental programs, but not for other patients.

Medicare and Medicaid cover certain subgroups of the population because they have

greater medical need or less ability to pay. Restricting reimbursement for these patients

would probably result in their receiving different services from other patients because

many Medicare and Medicaid patients would be unable to pay for their own medical

services. Such a consequence could protect these patients from harmful and inefficacious

services as well as prevent their receipt of efficacious and safe services. Other third parties such as Blue Shield are starting to make payment contingent on efficacy. To the extent that other insurers followed the same course, Medicare and Medicaid patients might

not be restricted more than other patients with insurance.

The Department of Health, Education, and Welfare is already linking reimbursement and efficacy through administrative action, as discussed in chapter 6. HEW’s decisions, then, may make congressional action superfluous.

Alternative 5: Expand regulation of capital expenditures to cover purchases of medical equipment regardless of setting or ownership.

Under the provisions of the National Health Planning and Resources Development

Act (P. L. 93-641), capital expenditures over $150,000 are subject to certificate-of-need

review only if made by specific medical care facilities. These facilities include hospitals

and certain categories of ambulatory care facilities, but exclude private physicians’

offices. Similarly, section 1122 of the Social Security Act applies to capital expenditures

over $100,000 only if made by the same types of facilities. Therefore, unless State

certificate-of-need laws authorize such regulation, purchases of equipment by physicians

in private offices are not subject to review by planning agencies. At the end of 1977, the

laws of only seven States covered physicians’ offices.

These State laws encourage circumvention of the regulatory process by treating the

same kinds of equipment differently, depending on ownership or setting. Physicians and

other individuals may lease or purchase capital equipment, such as a CT scanner, place it
116 ● Ch. 7—Policy Alternatives

near a facility that is regulated, and be exempt from review. To the extent that the National Guidelines issued under P.L. 93-641 increase the stringency of criteria for regulated

providers, the Guidelines will further induce placement of equipment in unregulated settings.

Incomplete coverage of capital expenditures may foil the plans developed by local

agencies. A planning agency may decide that a certain number of CT scanners is appropriate for its area and approve that number of applications from regulated providers.

Purchase of scanners by other unregulated providers would counteract the local plan, but

would lie outside the planning agency’s jurisdiction.

This fifth alternative suggests amending current laws to cover capital expenditures

over a certain amount, regardless of the ownership or setting where the equipment is

operated. A planning agency would then have more complete control over the number

and distribution of such equipment in its area. By expanding the regulation of capital expenditures to cover providers such as physicians’ offices that are now exempt, the alternative would remove the present incentive for providers to place equipment in unregulated settings. This alternative would not give preference to one setting or form of ownership over another. Planning agencies could still set priorities among applications and

exercise discretion over the placement of equipment. (Two bills, S. 2410 and S. 2551, that

would so amend P.L. 93-641 are now before Congress. ) The Social Security Act and the

National Health Planning and Resources Development Act differ in the amount of the expenditure that triggers coverage. Legislation could make these amounts uniform, but that

is an issue separate from this alternative.

Broadening the planning provisions under this fifth alternative would necessitate arrangements for physicians to have access to available equipment. Since laws now generally apply to hospitals, any new problems of access would be limited to ambulatory patients; these patients could be transported between facilities. Many planners already include sharing of services in their criteria (see chapter 4). Ensuring access to equipment for

physicians might require changes in the legal liability that a medical practice bears. A

practice, which is now responsible for its own staff physicians, might otherwise become

responsible for the actions of other physicians who are using the facility’s equipment.

Implementation of this fifth alternative would increase the workload of the regulatory process. The total number of purchasers of equipment covered by the law would increase substantially, with a probable rise in the number of certificate-of-need applications. Administrative costs of capital expenditure regulation would increase accordingly.

To the extent that newly regulated purchasers of medical equipment required additional

personnel time to apply for certificates of need, their costs would also rise. One should

note that regulated providers already bear the cost of applications.

An increase in the level of regulatory activity could also slow the diffusion of new

medical equipment. The implications for quality of care are unclear, since delay would

affect efficacious and inefficacious technologies alike. Likewise, the effect on expenditures for a given technology is difficult to determine. The certificate-of-need process may

deter some potential purchasers. Later purchasers of new products may benefit from

lower prices as a result of competition or decreased manufacturing costs. Or they may

face higher prices due to inflation, increased demand, or product development.

A related issue is the effect of this fifth alternative or any such regulation on total

capital expenditures. Practical limitations of time and money require a minimum expenditure threshold for certificate-of-need review. But it has already been observed that
—

Ch. 7—Policy Alternatives . 117

regulated providers such as hospitals shift their capital expenditures to less regulated

technologies. Such substitution is sometimes possible within the same category of equipment; some models of CT scanners sell for less than $100,000. This situation is part of the

larger context wherein a new technology is not necessarily substituted for another.

Rather the new are typically added to the store of existing technologies. This alternative,

then, will not in itself limit either total capital expenditures on medical equipment or expenditures on the use of that equipment.

3. FINANCING METHODS

The financing of medical care influences use of and expenditures for technologies

through incentives to providers and patients and through restrictions on coverage and

payment. The Federal financing programs, Medicare and Medicaid, have largely continued the reimbursement methods that prevailed in the private insurance field (see

chapter 6). Payment by these programs to hospitals on the basis of costs incurred, and to

physicians on the basis of charges, has resulted in an open-ended commitment by these

Federal programs to finance the use of covered services.

In the course of financing medical care, public and private third-party payers have

restricted the extent of coverage and payment. They have, in effect, defined the product

for which they will pay. Medicare and certain private third parties in some cases have

limited coverage to efficacious technologies. On that ground, Medicare refused payment

for CT body scans. (Setting maximum rates of payment for certain services is more

widespread. Medicaid, for example, has placed ceilings on its reimbursement for drugs,

and most third parties place some limits on their payment of physicians’ charges. )

Ironically, Federal financing—like health insurance in general—has encouraged the use

of services such as CT scans, but not efficient methods in their performance or their

substitution for other services. No restrictive mechanism such as a finite budget induces

providers to make tradeoffs between increased information or benefit and increased costs

from using technologies. On the contrary, financing methods reward with higher

revenue those providers who perform additional services, regardless of their marginal

value or efficient performance. As a result, providers have little incentive to choose

among alternative procedures or to perform services efficiently. Prevailing third-party

payment thus insulates providers as well as patients from the financial consequences of

using technologies.

Contained in this section are two alternatives to address problems with current

financing methods. Under the first, Medicare and Medicaid would continue to use costs

or charges as the basis for reimbursement, but would base their rates on efficient methods

of performing services. The second alternative would fundamentally change the payment

method in order to create incentives for providers to become cost-conscious in using and

producing medical services. Although the alternatives in this section are mutally exclusive, either could be combined with alternatives from the previous sections on information and regulation.

Alternative 6: For services paid by Medicare and Medicaid, establish rates

of payment that are based on efficiency.

The Department of Health, Education, and Welfare has set limits on routine hospital

operating costs and charges of drugs payable under Medicare and Medicaid, respective-
118 ● Ch. 7—Policy Alternatives

ly. However, reimbursement limits on routine hospital costs are only very generally

related to efficiency of operation. And with routine costs of a hospital day limited,

hospitals have a strong incentive to allocate costs as much as possible to ancillary services, which are often not limited.

These policies give providers who receive cost reimbursement little incentive to be

cost-conscious in their services and production methods. As a result, governmental

payments probably exceed those that would result from limits based on a tighter definition of efficiency.

Similarly, reimbursement to physicians is based not on standards of efficient operation, but on charges prevailing in a given area. Nor does governmental policy coordinate

payments to hospitals and physicians’ offices to ensure comparable payment for comparable services. Medicare, for example, could pay different amounts for the technical

component of an ambulatory CT scan depending on the setting where it occurred. And

the charge for that service in a physician’s office is typically higher than its cost in a

hospital.

Under this sixth alternative, rates of payment would be based on the basic costs necessary to operate a facility or piece of equipment at an efficient level. Soliciting bids from

manufacturers might be required to lower purchase prices of equipment. To make

payments consistent for comparable services that are based on charges in one setting and

on costs in another, fee schedules would be developed for services paid by charges. Fees

paid to physicians would also be based on costs using efficient methods of operation. To

that basic amount would be added a predetermined profit margin to arrive at the allowable fee. This alternative could apply to all payers or all third-party payers, not just

Medicare and Medicaid. In that case, the alternative would entail the establishment of

national ratesetting for medical services.

Under this alternative, Medicare and Medicaid would not pay for inefficient methods of operation or for high profits. Rates could be reviewed to enable Medicare and

Medicaid to take advantage of changes that had resulted in lowered costs, such as reductions in prices of equipment or improvements in methods of operation. Of course,

changes in these factors could lead to increases in rates as well as decreases.

Under the assumption that Medicare and Medicaid payments exert a degree of leverage over providers, these federally set rates could encourage the performance of services in ways considered desirable by the Government. The relative rate structure for different settings, different tests, and different types of physician specialists could provide

incentives favoring one over another. For example, the Government could establish rates

for CT examinations and alternative diagnostic procedures, such as arteriograms, that

would encourage the relative level of use of each test that was considered desirable. If all

physicians were considered equally capable of reading CT scans, all could be reimbursed

at the same rate. If some were considered capable and others not, reimbursement could

be limited to those considered capable.

Considerable technical expertise would be needed to set, monitor, and review rates

under this sixth alternative. For both hospitals’ and physicians’ rates, the Government

would require experts with detailed knowledge of such factors as budgets, methods of

performing services, and types of equipment. Also, to set fees and monitor costs,

hospitals and physicians would have to adopt uniform methods of recording and reporting their costs. (P. L. 93-641 mandated the development of uniform accounting and reporting, and P.L. 95-142 required uniform reporting for institutions. ) If payment under
Ch. 7—Policy Alternatives ● 119

Medicare and Medicaid were based on the efficiency of services provided, hospitals

would have to apportion costs to specific services, not to departments or functions as is

currently done.

Whether the ratesetting described here would result in lower net expenditures on

medical services is not clear. Rates would probably be lower for Medicare payments, but

total expenditures would not necessarily rise more slowly or decline absolutely. Other

governments, such as those of the Canadian provinces, have found that rates of use and

therefore total expenditures have risen when rates of payment were held fixed. The costs

of hiring the new technical experts required would also add to government expenditures.

Despite the time and expense involved, this alternative would not necessarily lower

payments under Medicaid. Since 1972 when the law was amended, Medicare’s definition

of reasonable costs for hospitals has been a maximum limit for Medicaid payment; many

States pay less. Medicaid’s limits for physicians’ services are also typically below those of

Medicare.

Certain adverse consequences might result if Medicare rates paid to physicians were

reduced below their current levels. For example, fewer physicians might be inclined to accept assignment for Medicare patients (acceptance of Medicare rates as full payment); the

rate of assignment is already falling. In such circumstances, Medicare patients with some

financial means could pay the difference between physicians’ charges and Medicare’s

allowable fee. But patients with less ability to pay might have to rely on physicians with

lower charges.

Overall, ratesetting entails detailed consideration of each service, the method of performing that service, and the profit margin. This course of action would be time-consuming and expensive for providers and governmental agencies alike. Implementing this

sixth alternative might result in the Government’s questioning in detail how medical services are provided. Furthermore, ratesetting would not affect the incentives of present

reimbursement methods that encourage additional medical services, such as diagnostic

tests, regardless of their marginal value.

Alternative 7: Fundamentally restructure the payment system to encourage

providers to perform and use medical services efficiently.

Present retrospective payment of costs and charges and fee-for-service payment contain perverse incentives, as discussed in alternative 6. These payment methods, used by

public and private third parties and by self-payers, reward physicians and hospitals with

higher revenue when they provide additional services. This result occurs regardless of

whether the services substantially improve patient care or whether they are produced efficiently. Medicare, for example, pays for a CT head examination regardless of any other

neurodiagnostic tests that have been performed and the information that may have been

gained from them.

This study has identified the incentives of the present reimbursement system, but has

not systematically analyzed possible changes in that system. This alternative, then, suggests a general restructuring of payment methods, but does not propose a definite substitute. The altered payment system would contain incentives for physicians and hospitals to provide appropriate care and to do so efficiently, instead of present incentives that

confict with these goals. Rather than control rates of payment for each service as in alternative 6, this alternative would indirectly or directly fix the total revenue of a provider in

advance of the delivery of medical care. Payment by cavitation (per person) would do so

95-703 0 - 78 - ‘1
120 ● Ch. 7—Policy Alternatives

indirectly, while review of providers’ budgets would fix that revenue directly.

The consequences of a restructured payment system would depend on the specific

plan put into effect. Nevertheless, certain generalizations are possible. Limiting total

revenue would both enable and force providers to make choices among alternative services and among alternative methods of performing those services. Within the predetermined revenue, a provider could choose which services to perform and how to perform

them. With total revenue limited, for example, a hospital’s administrator and physicians

would decide whether to operate a CT scanner, how many scans to perform annually,

which patients to scan, and how to combine CT scans with other diagnostic procedures.

Furthermore, physicians and hospital administrators rather than Government

would make the decisions. The Government would set the cavitation payment or budget

limit, but would not become involved with production methods, use, or payment for

particular services. Providers could consider the cost implications of their actions,

choose services to provide, and determine how to perform those services. The factors

that physicians and hospitals weigh when making decisions would undoubtedly undergo

great change. Additional services would no longer automatically increase their revenues

and might even decrease their incomes by increasing their costs.

This seventh alternative could pertain either to Federal financing programs alone or

to all payers of medical care. However, if only Medicare and Medicaid limited their

payments, a provider could increase costs and charges and generate additional revenue

from other third parties and self-payers. The alternative could also cover either hospitals

or physicians. But some services that are performed in both hospitals and physicians’ offices, such as ambulatory CT scans, are often substitutes for each other. If revenue were

limited only for hospitals, one would expect payments to rise for nonhospital providers

whose revenues were not limited. Although this alternative would clearly be most effective if applicable to all payers and providers, such an approach would represent a major

policy decision. Private payers could, of course, follow any Federal lead. This alternative

would also be compatible with national health insurance, for the Federal Government

would then be the major payer of health care.

Calculating cavitation levels or revenue limits would require the responsible Government office to have much technical expertise. Experts would have to identify variables

that cause costs to differ among providers or consumers and adjust payment levels accordingly. (Such efforts have not proved very successful in the past. ) Governmental experts would also have to review rates periodically. The ways in which rates changed

would greatly influence total medical expenditures. For example, a system of basing the

rate of change on an indicator within the medical care system could simply accept and

transmit increases with a lag of 1 year. Rate changes could be based on broader economic

indicators, such as the GNP deflator, which would not necessarily be self-generating. But

broader indicators might be insensitive to changes specific to the medical care sector.

Although the changed payment system would create an environment with different

incentives, this seventh alternative would not necessitate substantial changes in the way

providers are organized. Providers could continue to deliver medical care under current

practice arrangements. Compared to the current situation, the new environment would

enhance the competitive position and perhaps stimulate the growth of Health Maintenance Organizations (HMOS) and other providers currently paid by cavitation. Such

groups now compete for physicians, supplies, and enrollees with providers who gain

more revenue from the provision of additional services. If cavitation payment or budget
Ch. 7—Policy Alternatives ● 121

limits applied to all providers, all would have similar incentives and be subject to similar

restrictions under the payment method. But the relative position of providers now paid

by cavitation would be improved if others faced some limit on their total revenue.

The presence of different incentives would affect the kind of medical care delivered

and expenditures on that care only over a long period of time. Similarly, any effect on the

nature of medical care delivery and the strength of HMOs would occur over several

years.

Changing payment to providers as described in this seventh alternative would be

compatible with regulatory programs of certificate-of-need and utilization review, and

might make these programs even more valuable than at present. Under this alternative,

providers would have an incentive to underserve patients in order to stay within their

budgets. Minimum standards of appropriate use might have increased importance in this

new context. Utilization review under the PSRO program currently applies only to

Medicare and Medicaid patients, as described in chapter 5. To prevent providers from

economizing on services to non-Medicare and non-Medicaid patients, PSRO review

could be broadened to cover all patients. Such an expansion of the PSRO program would

represent a major policy decision and would substantially increase PSRO regulatory activities and administrative costs. Utilization review might also guard against the tendency of providers to consider costs exclusive of benefits in order to meet their budgets.

Standards of appropriate use would thereby function as a counterweight to the possibility of increased cost-consciousness by providers.
APPENDIXES
Appendix I

LOCATION OF CT SCANNERS INSTALLED IN

THE UNITED STATES, MAY 1977

Type of

State/City Name of Facility Facility

Alabama

Birmingham

Birmingham

Birmingham

Huntsville

Mobile

Mobile

Montgomery

Montgomery

Alaska

(Not available)

Arizona

Phoenix

Phoenix

Phoenix

Phoenix

Phoenix

Scottsdale

Tucson

Arkansas

Ft. Smith

Little Rock

Little Rock

California

Arcadia

Bakersfield

Bakersfield

Berkeley

Burbank

Carmichael

Culver City

Eureka

Fountain Valley

Fresno

Fullerton

Baptist Medical Center-Montclair

Baptist Medical Center (Princeton)

University of Alabama Hospitals

Neuro-Radionics

Mobile Infirmary

Mobile General Hospital

Montgomery Baptist Hospital

Jackson Hospital

Computed Neurological Scanning Center

Dr. Allen Yudail

Drs. Tobias & Waldman

Good Samaritan Hospital

St. Joseph’s Hospital & Medical Center

Scottsdale Memorial Hospital

Tucson Medical Center

Sparks Regional Medical Center

Baptist Medical Center

Radiology Association

Arcadia Radiology Medical Group

Kern Radiology & Nuclear Medical Group

Mercy Hospital

Alta Bates Hospital

St. Joseph Medical Center

Mercy - San Juan Hospital

David M. Brotman Memorial Hospital

Carlos Sullivan Eureka General Hospital

Fountain Valley Community Hospital

St. Agnes Hospital & Medical Center

St. Jude Hospital - Rehabilitation Center

H

H

H

P

H

H

H

H

P

P

P

H

H

H

H

H

H

P

P

P

H

H

H

H

H

H

H

H

H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.

125
126 ● Appendix I

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Gardena

Glendale

Inglewood

Laguna Hills

LaJolla

LaJolla

LaMesa

Loma Linda

Long Beach

Long Beach

Los Alamitos

Los Angeles

Los Angeles

Los Angeles

Los Angeles

Los Angeles

Los Angeles

Lynwood

Modesto

Newport Beach

Oakland

Orange

Palo Alto

Palo Alto

Palo Alto

Pasadena

Riverside

Sacramento

Sacramento

San Bernardino

San Diego

San Diego

San Diego

San Francisco

San Francisco

San Francisco

San Francisco

San Francisco

San Jose

San Jose

San Leandro

Computerized Axial Tomography

Glendale Adventist Hospital

Daniel Freeman Memorial Hospital

Saddleback Community Hospital

Hospital of Scripps Clinic

Scripps Memorial Hospital

Grossmont Hospital

Loma Linda University Medical Center

Bauer Hospital - St, Mary Medical Center

Long Beach Community Hospital

CT Systems

Children’s Hospital of Los Angeles

Hospital of the Good Samaritan

St. Vincent’s Medical Center

University of California Department of

Radiological Sciences

White Memorial Medical Center

Los Angeles New Hospital

St. Francis Hospital of Lynwood

Doctors Hospital

Hoag Memorial Presbyterian Hospital

Brain Scan Laboratory Center - Samuel

Merritt Hospital

St. Joseph Hospital

Children’s Hospital at Stanford - Stanford

University Hospital

Palo Alto Clinic

VA Hospital

Huntington Memorial Hospital

K.W. Zimmerman

Sacramento Medical Center (University of

California - Davis)

Sutter General Hospital

St. Bernadine Hospital

Alvarado Community Hospital

Mercy Hospital & Medical Center

University of California Medical Center

Mt. Zion Hospital & Medical Center

Ralph K. Davis Medical Center

University of California Hospitals &

Clinics - San Francisco

Presbyterian Hospital of the Pacific

Medical Center

St. Francis Memorial Hospital

San Jose Hospital & Health Center

Santa Clara Valley Medical Center

Doctors Hospital of San Leandro

P

H

H

H

H

H

H

H

H

H

P

H

H (2)

H

H (2)

H

H

H

H

H

H

H

H

P

H

H

P

H

H

H

H

H

H

H

H

H (3)

H

H

H

H

H
Appendix 1 ● 127

Appendix I—Cont.

Type of

State/City Name of Facility Facility

San Luis Obispo

Santa Barbara

Santa Cruz

Santa Monica

Santa Monica

Santa Rosa

Stockton

Tarzana

Torrance

Van Nuys

Ventura

Walnut Creen

West Covina

West Covina

Colorado

Colorado Springs

Sierra Vista Hospital

Santa Barbara Cottage Hospital

Dominican Santa Cruz Hospital

St. John’s Hospital & Health Center

Santa Monica Radiologic Association

Santa Rosa Radiology

St. Joseph’s Hospital

Medical Center of Tarzana Hospital

Little Company of Mary Hospital

Valley Presbyterian Hospital - Olmstead

Memorial

Community Memorial Hospital of San

Buenaventura

Neuroscan

Computed Neurodiagnostic Center

Queen of the Valley Hospital

H

H

H

H

P

P

H

H

H

H

H

P

P

H

Colorado Springs Neurological Association P

Denver Denver General-Hospital -

Denver Presbyterian Medical Center

Englewood Swedish Medical Center

Pueblo Parkview Episcopal Hospital

Pueblo Drs. Chepousky, Reilly and Husan

Connecticut

Hartford Hartford Hospital

New Haven Yale New Haven Hospital

Delaware

Wilmington Radiologic Associates

District of Columbia

George Washington University

Georgetown University Hospital

Howard University

Florida

H

H

H

H

P

H

H (2)

P

Hospital H

H

H

Clearwater Clinical Neurological Specialties, Inc. P

Ft. Lauderdale Broward General Medical Center H

Ft. Lauderdale EM I Scan Center P

Ft. Lauderdale Holy Cross Hospital H

Ft. Lauderdale North Beach Medical Center H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.
128 ● Appendix I

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Ft. Meyers Medical Computer Scan Service P

Gainesville North Florida Regional Hospital H

Gainesville Shands Teaching Hospital (University of

Hollywood

Jacksonville

Jacksonville

Lakeland

Lauderdale Lakes

Melbourne

Miami

Miami

Miami

Miami

Miami

Miami

Miami Beach

Orlando

Pensacola

Pensacola

Pensacola

Sarasota

South Miami

St. Petersburg

St. Petersburg

Tallahassee

Tampa

Tampa

Tampa

Georgia

Atlanta

Atlanta

Atlanta

Augusta

Decatur

Decatur

East Point

Macon

Savannah

Savannah

Hawaii

Honolulu

Florida)

Memorial Hospital

St. Lukes Hospital

St. Vincent’s Medical Center

Lakeland General Hospital

Florida Medical Center

Melbourne Necrologic

Baptist Hospital of Miami

Brain Tomography Lab

Delta Scan Corporation

Dr. Donald Q. Vining

Drs. Lombardo, Shafey, et al.

Jackson Memorial Hospital

Mt. Sinai Hospital

Florida Hospital

Baptist Hospital

West Florida Hospital

Sacred Heart Hospital

Memorial Hospital

South Miami Hospital

Bayfront Medical Center

St. Anthony’s Hospital

Tallahassee Neurological Foundation

St. Joseph’s Hospital

Tampa General Hospital

University Community Hospital

Grady Memorial Hospital

Computerized Tomography Center

Emory University Hospital

University Hospital

DeKalb General Hospital

Computerized Cranial Services

Atlanta Scan Lab

R-N Partnership-Medical Center of

Central Georgia

Memorial Medical Center

Delta Medical Associates

The Queens Medical Center

H

H

H

H

H

H

P

H

P

P

P

P

H

H

H

H

H

H

H

H

H

H

H

H

H

H

H

P

H

H (2)

H

P

P

H

H

P

H
Appendix I ● 129

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Idaho

Boise

Boise

Idaho Falls

Illinois

Chicago

Chicago

Chicago

Chicago

Chicago

LaGrange

Maywood

Morton Grove

Peoria

Pales Heights

Rockford

Rockford

Springfield

Urbana

Indiana

Evansville

Fort Wayne

Indianapolis

Indianapolis

Iowa

Iowa City

Kansas

Kansas City

Topeka

Wichita

Wichita

Kentucky

Lexington

Lexington

Boise Clinic

St. Alphonsus Hospital

Community Hospital of Idaho Falls

Dr. Val Vasson

Michael Reese Hospital & Medical Center

Northwestern Memorial Hospital

Rush Presbyterian - St. Lukes Medical

Center

University of Chicago Hospitals and

Clinics

Community Memorial General Hospital

Foster G. McGaw Hospital - Loyola

University

Diagnostic Scanning Laboratory

St. Francis Hospital

Neurological institute

Rockford Memorial Hospital

St. Anthony’s Hospital

Memorial Medical Center

Carle Foundation Hospital

Tri-State Cranial Laboratory

Parkview Memorial Hospital

Methodist Hospital

VA Hospital of Indianapolis

University of Iowa Hospital & Clinic

University of Kansas Medical Center

Stormont-Vail Hospital

St. Francis Hospital

Wesley Medical Center

Good Samaritan Hospital

St. Joseph’s Hospital

P

H

H

P

H

H

H (3)

H

H

H

P

H

P

H

H

H (2)

H

P

H

H

H

H

H

H

H

H

H

H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.
130 Appendix 1

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Lexington

Louisville

Louisiana

Bossier City

Lafayette

New Orleans

New Orleans

New Orleans

Shreveport

Maine

Bangor

Portland

Maryland

Annapolis

Baltimore

Baltimore

Bethesda

Chevy Chase

Lanham

Massachusetts

Boston

Boston

Boston

Boston

Boston

Boston

Brookline

Dorchester

Lowell

Springfield

Woburn

Michigan

Ann Arbor

Battle Creek

Birmingham

Detroit

Detroit

Flint

Flint

Grand Rapids

Royal Oak

Southfield

University Hospital H

Kentucky Baptist Hospital H

Northwest Louisiana Diagnostic Center

Our Lady of Lourdes Hospital

Ochsner Foundation Hospital

Tulane Medical Center

Southern Baptist Hospital

Willis-Knighton Memorial Hospital

Eastern Maine Medical Center

Maine Medical Center

P

H

H

H

H

H

H

H

Anne Arundel Hospital H

Johns Hopkins Hospital H

University of Maryland Hospital H

National Institutes of Health H (4)

The Neurology Center P (2)

Doctor’s Hospital H

Boston City Hospital H

Boston VA Hospital H

Dana Cancer Research Center/Sidney Farber H

Lahey Clinic Foundation P

Massachusetts General Hospital H

New England Medical Center (Tufts) H

Drs. Sabin & Mark P

The Carney Hospital H

St. John’s Hospital H

Medical Center of W. Massachusetts H

CAT Scan Lab P

University of Michigan Hospital

Community Hospital Association

M.C.T. Associates

Harper Hospital (United Hospital of

Detroit)

Henry Ford Hospital

Scanner Diagnostic Associates

Flint Osteopathic Hospital

Kent Radiologic Institute

William Beaumont Hospital

Southfield Radiology

H

H

P

H

H

P

H

P

H

P
Appendix 1 ● 131

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Minnesota

Minneapolis

Minneapolis

Minneapolis

Minneapolis

Minneapolis

Rochester

Rochester

St. Paul

Mississippi

Jackson

Jackson

Missouri

Columbia

Columbia

Creve Coeur

Kansas City

Kansas City

Kansas City

Springfield

St. Louis

St. Louis

St. Louis

St. Louis

St. Louis

Montana

Billings

Nebraska

Omaha

Nevada

Las Vegas

Las Vegas

Reno

Reno

New Hampshire

Hanover

Abbott-Northwestern Hospital Corporation

Methodist Hospital

Metropolitan Medical Center

North Memorial Medical Center

University of Minnesota Hospital

Mayo Foundation

St. Mary’s Hospital of Rochester

St. Paul Radiology Group

Mississippi Baptist Hospital

University of Mississippi Medical Center

Boone County Hospital

University Medical Center

Neurological Scanning Center

Menorah Medical Center

St. Mary’s Hospital

St. Luke’s Hospital

L.E. Cox Medical Center

DePaul Hospital

St. Luke’s Hospital East

St. Luke’s Hospital West

University Clinic

Washington University

Eastern Radiological Association

Bishop Clarkson Memorial Hospital

Desert Springs Hospital

Sunrise Hospital

Washoe Medical Center

Computerized Diagnostic Lab

Mary Hitchcock Memorial Hospital

H

H

H

H

H

P (2)

H

P

H

H

H

H

P

H

H

H

H

H

H

H

H (2)

H (4)

P

H

H

H

H

P

H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.
132 ● Appendix I

Appendix I—Cont.

Type of

State/City Name of Facility Facility

New Jersey

East Orange

Fairlawn

Summit

New Mexico

Albuquerque

Albuquerque

New York

Albany

Bayside

Brooklyn

Buffalo

Buffalo

Buffalo

Buffalo

East Meadow

Flushing

Johnson City

Manhasset

Mineola

New York

New York

New York

New York

New York

New York

New York

New York

New York

Plainview

Rochester

Rochester

Syracuse

Syracuse

North Carolina

Chapel Hill

Charlotte

Durham

Greensboro

Raleigh

Winston-Salem

Computerized Axial Tomography of Essex

Bergen Passiac Tomography Center

Overlook Hospital

Bernalillo County Medical Center

(University of New Mexico)

X-ray Associates (Scanner Partnership)

Albany Medical Center

Dr. Rabiner

Nuclear Diagnostic Laboratory

E.J. Meyer Memorial Hospital

Buffalo General Hospital

Children’s Hospital

Millard Fillmore Hospital

Nassau County Medical Center

Drs. Soffin and Karlin

Charles S. Wilson Memorial Hospital

North Shore University Hospital

Nassau Computed Tomography Center

Columbia Presbyterian Medical Center

Drs. Kaplan & Rabner

Memorial Sloan Kettering

Montefiore Hospital

Mount Sinai Hospital

New York Hospital

New York University Medical Center

St. Vincent’s Hospital

St. Luke’s Hospital

Computerized Radiological Services

Strong Memorial Hospital

Westfall Park Medical Center

Crouse Irving Medical Center

Upstate Medical Center

North Carolina Medical Center Memorial

Hospital

Charlotte Memorial Hospital and Medical

Center

Duke University

Piedmont Neuro-Diagnostic Lab

Wake County Medical Center

North Carolina Baptist Hospital

P

P

H

H

P

H

P

P

H

H

H

H (2)

H

P

H

H

P

H

P

H

H

H

H

H

H

H

P

H

P

H

H

H

H

H

P

H

H
Appendix 1 . 133

Appendix I—Cont.

Type of

State/City Name of Facility Facility

North Dakota

Fargo

Ohio

Akron

Akron

Beachwood

Cincinnati

Cleveland

Cleveland

Columbus

Columbus

Dayton

Euclid

Lorain

Toledo

Toledo

Youngstown

Zanesville

Oklahoma

Oklahoma City

Oklahoma City

Tulsa

Tulsa

Oregon

Eugene

Medford

Portland

Pennsylvania

Allentown

Danville

Greensburg

Hershey

Philadelphia

Philadelphia

Philadelphia

Philadelphia

Philadelphia

Philadelphia

Philadelphia

Neuropsychiatric Institute Hospital H

Akron City Hospital

Neuro-Radiology, Inc.

Drs. Sachs & Ross & Associates

Cincinnati General Hospital

(University of Cincinnati)

Cleveland Clinic

Drs. Hill & Thomas

Ohio State University Hospitals

Riverside Methodist

Kettering Medical Center

Euclid Clinic Foundation

Lorain Community Hospital

St. Vincent Hospital Medical Center

The Toledo Hospital

Computer Cerebral Scanning, Inc.

Bethesda Hospital

H

P

P

H

H (3)

P

H

H

H

P

H

H

H

P

H

Baptist Medical Center H

St. Anthony’s Hospital H

St. Francis Hospital H

St. John’s Hospital & School of Nursing H

Sacred Heart General H

Rogue Valley Memorial Hospital H

Good Samaritan Hospital & Medical Center H (2)

Allentown and Sacred Heart Hospital Center H

Geisinger Medical Center H

Westmoreland Hospital Association H

Milton Hershey Medical Center H

Albert Einstein Medical Center H

Episcopal Hospital H

Hahnemann Hospital H

Hospital of the University of Pennsylvania H

Pennsylvania Hospital H

Temple University Hospital H

Thomas Jefferson University Hospital H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.
134 Appendix 1

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Pittsburgh

Pittsburgh

Pittsburgh

Pittsburgh

Pittsburgh

Reading

Scranton

Rhode Island

Providence

Providence

South Carolina

Charleston

Columbia

Greenville

South Dakota

Sioux Falls

Tennessee

Chattanooga

Knoxville

Knoxville

Knoxville

Knoxville

Memphis

Memphis

Memphis

Nashville

Texas

Amarillo

Austin

Austin

Corpus Christi

Dallas

Dallas

El Paso

El Paso

El Paso

Fort h Worth

Forth Worth

Galveston

Harlingen

Houston

Allegheny General Hospital

Children’s Hospital

Montefiore Hospital

St. Francis General Hospital

Western Pennsylvania Hospital

Reading Hospital

Community Medical Center

Drs. F. Conklin and Khodarahmi

Rhode Island Hospital

Medical University Hospital of the Medical

University of South Carolina

Richland Memorial Hospital

Greenville General Hospital

McKennan Hospital

Baroness Erlanger Hospital

East Tennessee Baptist Hospital

Ft. Sanders Presbyterian Hospital

St. Mary’s Memorial Hospital

University of Tennessee

City of Memphis Hospital

Baptist Memorial Hospital

Methodist Hospital

Vanderbilt University Hospital

Northwest Texas Hospital

Brackenridge Hospital

Austin Neuro-Diagnostic

Memorial Medical Center

Baylor University Medical Center

St. Paul Hospital

Providence Memorial Hospital

Sierra Medical Center

C-T Diagnostic Center

Harris Hospital

St. Joseph Hospital

University of Texas Medical Branch

Hospital

Delta Medical Electronics

St. Joseph’s Hospital

H

H

H

H

H

H

H

P

H

H

H

H

H

H

H

H

H

H

H

H

H

H

H

H

P

H

H (2)

H

H

H

P

H

H

H

P

H
Appendix I 135

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Houston

Houston

Lubbock

San Antonio

San Antonio

San Antonio

Temple

Waco

Utah

Salt Lake City

Salt Lake City

Salt Lake City

Salt Lake City

Vermont

Burlington

Virginia

Norfolk

Richmond

Richmond

Roanoke

Vienna

Winchester

Washington

Seattle

Seattle

Seattle

Spokane

Tacoma

West Virginia

Charleston

Wisconsin

Lacrosse

Madison

Madison

St. Luke’s Episcopal Hospital

The Methodist Hospital

Methodist Hospital

Santa Rosa Medical Center

Southeast Baptist Hospital (Baptist

Memorial Hospital System)

SW Texas Methodist Hospital

Scott & White Memorial Hospital

Hillcrest Baptist Hospital

Latter Day Saints Hospital

St. Mark’s Hospital

University of Utah Hospital

Western Neurological Association

University of Vermont Medical Center

Hospital

Norfolk General Hospital

Medical College of Virginia and

Virginia Commonwealth University

St. Lukes Hospital

Roanoke Memorial Hospital

Drs. Kirschner, Buckley, Chung, and Mero

Winchester Memorial Hospital

Providence Medical Center

Swedish Hospital & Medical Center

Virginia Mason Hospital

Sacred Heart Medical Center

Tacoma General Hospital

Charleston Area Medical Center

Gunderson Clinic

Madison General Hospital

University of Wisconsin Hospital

H

H (2)

H

H

H

H

H

H

H

H

H

P

H

H

H

H

H

P

H

H

H

H

H

H

H

P

H

H

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.

q .5-703 0 - 78 - 10
——.— —.—

136 Appendix 1

Appendix I—Cont.

Type of

State/City Name of Facility Facility

Marshfield Marshfield Clinic P

Milwaukee Columbia Hospital H

Milwaukee Lutheran Hospital of Milwaukee H

Milwaukee Milwaukee County Medical Complex H

Milwaukee St. Lukes Hospital H

Milwaukee Neurodiagnostic Associates Neuro-Center P

Wyoming

(None)

Key: Hospitals are denoted by H; clinics and private offices are denoted by P. For institutions with more than

one CT scanner, the number is indicated in parentheses.

Source: Data collected by OTA Health Program. See “Method of the Study,” appendix Vlll.
Appendix II

THEORETICAL CAPACITY AND ACTUAL

OUTPUT OF A CT SCANNER

The theoretical capacity of a CT scanner is the number of scans that it can

produce per time period and is a function of several variables. The most important

variables are scanning speed (determined by machine design), hours of operation per

day, and time spent per patient examination. Because all of these factors, except

scanning speed, may vary during use, estimated theoretical capacity may differ from

actual output. In particular, the number of hours per week considered full utilization

has ranged from 40 or 50 to 80 hours.

Early calculations of capacity were based on the fact that head scans were scheduled at hour intervals. The Colorado Radiological Society made the lowest known

estimate of operational capacity on this basis, 1,800 examinations per year (109).

This figure assumes 1 hour per scan, 40 hours per week, and allows for holidays and

“downtime.” Different manufacturers estimated different numbers of scans possible

per 8-hour day in 1975 and 1976, with ranges from 10 to almost 30 per 8-hour day,

or 2,600 to 7,800 examinations per year (assuming 260 days of operation per year).

The Philadelphia Comprehensive Health Planning Agency estimated an operational

capacity of 4000 examinations per year (assuming 16 patients per day) (582). Thus,

theoretical capacity, assuming an hour per head scan, could range from below 2,000

examinations per year with a 40-hour week to about 4,000 examinations per year

with an 80-hour week. One hour per head scan continues to be valid, as indicated by

Evens and Jest (158), which found that head scans done on body scanners take an

average of 32 minutes without contrast material and 53 minutes with contrast

(presumably a noncontrasted scan followed by a contrasted scan).

Few data on actual operation levels of CT head scanners have been collected,

and most surveys have been limited to older and slower machines. The following

yearly numbers of examinations per machine (uncorrected for case mix) have been

reported for 1975 and 1976: Evens and Jest, 3,276 (29); Buenger and Huckman,

3,260 (264); Genessee Valley Health Planning Council, 3,000 (577); Health Planning

Council of Rhode Island, 3,000 (584); Tri-State Area Health Planning Council, Inc.,

2,900 (556); and Podell, 3,100 (425). Most machines in these surveys were available

more than 8 hours a day, 5 to 5.4 days a week (29, 159, 440).

These results do not translate directly to CT body scanners. In 1977, Evens and

Jest (158) found that an abdominal scan takes 50 minutes without contrast material

and 77 minutes with contrast, and a pelvic scan takes 44 minutes without contrast

material and 62 with contrast. Thus, if a body scanner performed only body scans

and used contrast material on all examinations, and if one assumes that all scans

were of the abdomen, the average time per scan would be 77 minutes. Operating 50

hours a week and 50 weeks a year, such a body scanner could perform about 2,000

137
138 ● Appendix 11

contrasted abdominal scans per year. To achieve 2,500 scans would require operation

for about 64 hours per week.

If a body scanner were used as the Evens and Jest survey of 1977 (158) indicates,

performing 59 percent of its scans of the head and 41 percent of the rest of the body

(mostly the abdomen), a scanner’s theoretical capacity would be higher. The body

scanners in the Evens and Jest survey operated an average of 46 hours per week (52

hours minus 6 hours “downtime”). Contrasted head scans required 53 minutes per

scan and contrasted abdominal scans 77 minutes. If all scans were contrasted and the

machine was operational 50 weeks a year, the theoretical capacity would be about

2,200 examinations per year. Since 68 percent of head scans and 65 percent of

abdominal scans were contrasted, the capacity of a body scanner, operating the

stated number of hours, would be higher, about 2,500 examinations per year. These

calculations may underestimate the capacity of a body scanner-, since they use the

average time of abdominal examinations for the 41 percent of examinations other

than the head. Abdominal examinations accounted for an average of only 29 percent

of all examinations, but required the longest time per examination (158).

These theoretical calculations may be compared to actual experience. In a 1975

survey, Buenger (80) found that institutions performed scans an average of 12.5

hours per day. The American Hospital Association reported similar figures in its

1976 survey of 41 hospitals (29). In a 1976 survey Evens and Jest (159) found the

average operating time of 98 machines was 11.8 hours per day, and 90 of the 98

scanners were available 24 hours a day for emergencies. These machines were

primarily head scanners. In 1977, the Evens and Jest survey of body scanners found

that the usual body scanner operated 5.2 days per week and 10 hours a day (158).

However, only 32 patients per week were examined on those body scanners. That

number may be compared to the earlier Evens and Jest survey of primarily head

scanners which found 58 patients a week being examined (159).

Although downtime can reduce the level of output, it has not seriously limited

CT scanners. Downtime is reported to average 2.4 to 7.0 hours a week and is expected

to decrease as staff gain experience with CT scanners (82, 159).

The National Guidelines for Health Planning are based on a theoretical capacity

of 2,500 examinations per year, regardless of type of examination (582). It appears

from the 1977 Evens and Jest survey that many body scanners in this country will

not reach the standard (158). One purpose of the Guidelines is to assure full

utilization of existing scanners before allowing additional scanners in a particular

area. The Guidelines do not take into account some of the complexities described

above, but do allow adjustment of the standards by HSAs and State health planning

agencies to allow for such factors.
Appendix III

INTERIM PLANNING GUIDELINES

FOR COMPUTERIZED TRANSAXIAL

TOMOGRAPHY (CTT) (Published by the

Regional

Philadel

Comprehensive Health Planning Council, Inc.,

phia, Sept. 25, 1974

CONTENTS

Page

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CTT Scanners-Developments and Distribution to Date . . . . . . . . . . . . . . . . . . . . . .

Problem Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The EMI Scanner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Patterns of Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table I- Patterns of Utilization in

Institutions Operating EMI Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table II- Information on In-Patient Neurosurgical

and Neurological Daily Census and

1

2

4

4

6

7

Annual Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Physical Design Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Estimate of Need . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Table III- Neurological Survey Questionnaire

Results - Number of Hospitals by

Frequency Per Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Table IV- Neurosurgical Survey Questionnaire

Results -Ratio of Selected Procedures

to Brain Scanning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Guidelines for Planning ................................................................................................................18

Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
140 ● Appendix III

GUIDELINES FOR PLANNING

The CTT scanner represents a major technological advancement in the field of

medicine. This instrument will create dramatic changes in the utilization of certain

traditional studies used to diagnose diseases of the brain, and its potential for scanning

other parts of the body are enormous. There is no doubt that a CTT scanner makes

possible faster and more accurate test results, however, the equipment is complicated,

expensive, and in limited supply. Therefore, its benefits to the community can best be

realized through development of this vital new diagnostic service on a regionalized

basis with cooperative arrangements among several institutions to support maximum

utilization.

I. It is recommended that a hospital considering acquisition of this type of

equipment have the following service capabilities:

A. The hospital must have an active neurosurgical service. This requires that the

hospital has a geographically full-time* board certified neurosurgeon, and

at least 50 intracranial procedures should be performed annually.

B. The hospital must have an active neurological service. This requires that the

hospital has a geographically full-time* board certified neurologist.

C. The institution must have on staff a qualified neuroradiologist. It is recommended that the definition adopted by the American Society of Neuroradiology be used as a guide in determining the radiologist’s qualifications:

1. At least 50 percent of the radiologist’s time must be spent in the field

of neuroradiology.

2. The radiologist must have trained for 2 years in neuroradiology; or

The radiologist must have trained 1 year in neuroradiology and have 2

years experience devoting at least 50 percent of time in neuroradiology; or

The radiologist must have 4 years of experience devoting at least 50

percent of time in neuroradiology.

II. In addition the following “primary” and “secondary” criteria are recommended:

A. Primary Criteria (in order of priority)

1. Number of brain scans and skull X-rays performed annually (at least

1,000 radioisotope brain scans must be done currently).

2. Number of cerebral arteriograms/angiograms and pneumoencephalograms performed annually.

3. Size of the inpatient neurological and neurosurgical services (average

daily census and annual admissions for each service).

*This requires that the physician’s private office be located at or near the hospital and that his full-time

commitment is to that hospital.
Appendix III ● 141

B. Secondary Criteria (no priority)

I. Ability to offer patient utilization beyond an 8-hour day.

2. Geographic proximity to neighboring hospitals.

3. Research capability.

III. The CTT scanner utilization level should be a minimum of eight patients per

day.

IV. An applicant requesting Council support must submit financial data stating

charges, sources of income, and expenses connected with the project’s

operation.

V. Further, an applicant must submit letters of agreement to utilize the scanner

services from area hospitals. These letters are to be signed by the hospital

administrator or director and written on the hospital’s stationery.
Appendix IV

ESTIMATES OF ANNUAL EXPENSES OF OPERATING

ACT SCANNER

Health Planning Genessee Region Health Buenger and Indiana Podell Evens and

Category Council, R.I. Planning Council, N.Y. Bassa

Jest

1975 (532) 1975 (524) 1976 (76) 1976 (501) 1975 (387) 1976 (144)

Thousands of Dollars

Direct expenses

Equipment . . . . . . . . .

Interest . . . . . . . . . . . .

Maintenance

of scanner . . . . . . . .

Other maintenance

and remodeling . . .

Miscellaneous . . . . . .

Nonphysician staff .

Supplies . . . . . . . . . . .

Indirect expenses . . . . . .

Technical expenses . .

Professional expenses h

Total expenses . . . . .

(Patients examined

per year . . . . . . . . . . . .

8 4

b

90’ 76d

117 b 8 0

b 102 b,e

— — — 28 — —

17 23 3 20 40 25

— 1 1 13 . 10

1 2 3 10 — .

36 40 59 58 75 49

15 20 25 37 24 38

34 f 2 85 7 100 1129

187 177 252 290 319 337

72 130 — — 60 —

259 307 — — 379 —

3,000 3,000 3,828 2,900 3,000 2,600)

Dollars

Average technical

cost per exam . . . . . . 62 59 66 100 106 130

Average professional

cost per exam . . . . . . 24 43 — — 20 —

Average total cost

per exam . . . . . . . . . . . 86 102 — — 126 —

a Actual experience of one hospital.

b Straight-line, 5-year depreciation.

c Straight-line, 4-year depreciation has been changed to 5-year here.

d Rental charge.

e Includes new equipment of $25,000 per year to update the scanner.

f Indirect costs estimated as 15 percent of direct costs.

9 Indirect costs estimated as 50 percent of direct costs.

h Based on 1 radiologist except for reference 577 which used 1.3 radiologist.

143
Appendix V

CALCULATION OF NET EXPENDITURES

FOR CT SCANNING’, 1976

Low High

Average charge, CT examination . . . . . . . . . . . . . . . . . . . . . $ 240 $ 260

Total examinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,200 981,000

Charges for all CT examinations . . . . . . . . . . . . . . . . . . . . . . 204,048,000 255,060,000

Hospital day expensesd 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,459,287 143,286,042

Inpatient physician chargese 

. . . . . . . . . . . . . . . . . . . . . . . . . . 7,917,322 27,852,976

Total gross CT expenditures . . . . . . . . . . . . . . . . . . . . . 293,424,609 426,199,018

Reduced radionuclide brain scansf 

. . . . . . . . . . . . . . . . . . . . 139,000 139,000

Charges g 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,603,000 17,375,000

Hospital day expensesh

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,797,520 0

Inpatient physician chargese . . . . . . . . . . . . . . . . . . . . . . . . . . 2,098,900 0

Reduced expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,499,420 17,375,000

Reduced pneumoencephalograms . . . . . . . . . . . . . . . . . . . . 35,750 16,250

ChargesJ 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,507,500 3,250,000

Hospital day expensesk 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,878,840 5,049,200

Inpatient physician chargese 

. . . . . . . . . . . . . . . . . . . . . . . . . . 7,557,550 490,750

Reduced expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,943,890 8,789,950

Reduced arteriograms’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 22,500

Charges” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,175,000 4,500,000

Hospital day expensesn 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,982,400 6,991,200

Inpatient physician chargese 

. . . . . . . . . . . . . . . . . . . . . . . . . . 2,718,000 679,500

Reduced expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,875,400 12,170,700

Total reduced expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,318,710 38,335,650

Net expenditures on CT Scanning . . . . . . . . . . . . . . . . . . . . $180,105,899 $387,863,368

a Basedon charges, notcosts, of procedures, except for hospital day expenses.

b Sources: 29, 265.

c Based on327 machines as of June 1976 (274 machines in hospitals) and output of 2,600-3,000 annual examlnatlons per machine (159,425,577,584).

d Based on 46-51 percent of hospital examinations on inpatients, an inpatient wait of 1.6-2.2 days, and

adjusted hospital expensesof $155.36 per day (29,82,159,241).

e Based on 1 to2 physician visits per hospital day byan Internist charging $15,10 fora follow-up hospital

Vlslt (507),

f Est!rnated35 percent dechnein 1.1 million scans in 1973 (265).

g From $125 to$177 pernuclide scan (296,375).

h From O to 1 day stay for 50 percent of patients.

‘ Estimated decline of65 percent. Estimates of the absolute number of pneumoencephalograms before CT

scanning range from 55,0000r5 percentof radionuclide brain scans in 1973 t025,000 (265,425,582).

‘From $200to $210 per pneumoencephalogram (296,375).

k From 2 to 7 days stay and all patients as inpatients.

1 Estimated decllneof20 percent (265).

m From $200 to$230 per artenogram (296,375).

n From 2t04days stay and all patientsas inpatients.

145
Appendix VI

FEDERAL DEPARTMENTS AND AGENCIES

WITH DIRECT INVOLVEMENT

IN CT SCANNING

Various aspects of CT scanning come under the jurisdiction of different Federal

departments and agencies. Many of these agencies are part of the Department of

Health, Education, and Welfare, but other agencies and departments also are

involved. Federal programs and their involvement with CT scanning are listed in

table 22 and described below.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (HEW)

Public Health Service (PHS)

Office of Health Practice Assessment (OHPA)

As described in chapter 6, the Public Health Service, as part of an interagency

agreement, gives advice to the Medicare program on its reimbursement when

requested to do so. That function is currently carried out by the Office of Health

Practice Assessment in the Office of the Assistant Secretary for Health.

Food and Drug Administration (FDA)

The Bureae of Radiological Health (BRH) has jurisdiction over the performance of CT

scanners under the Radiation Control for Health and Safety Act of 1968. C T

scanners must meet the diagnostic X-ray machine standards for safe performance

which became effective August 1, 1974. Owners of CT scanners must report to BRH

when a new machine is installed or an existing machine modified. BRH develops tests

to measure radiation output from CT scanners and patient dose levels. BRH has

contracted with George Washington University Medical Center to develop radiation

dose data using an EMI head scanner,

The Bureau of Medical Devices (BMD) has regulatory control over these medical

devices, as described in chapter 3 of this report. Two of its classification panels have

Jurisdiction over CT scanners: the Radiology Panel and the Neurology Panel.

The Bureau of Drugs has no direct involvement with scanners, but does regulate

drugs (contrast materials) used in conjunction with CT scanning. At least one such

new drug application has been submitted.

147
—

148 ● Appendix VI

Table 22.—Federal Departments and Agencies With

Direct Involvement in CT Scanning

Department of Health, Education, and Welfare

Public Health Service

Office of Health Practice Assessment

Food and Drug Administration

Bureau of Radiological Health

Bureau of Medical Devices

Bureau of Drugs

National Institutes of Health

Health Resources Administration

Bureau of Health Planning and Resources Development

National Council on Health Planning and Development

Health Services Administration

The Health Care Financing Administration

Department of Labor

Department of Defense

Veterans Administration

Department of Energy

National Aeronautics and Space Administration

Environmental Protection Agency

Department of Commerce

Domestic and International Business Administration

National Bureau of Standards

The National Council on Radiation Protection and Measurements

The National Science Foundation

National Institutes of Health (NIH)

As noted in appendix I, NIH has four operational CT scanners. These machines

are used both for NIH patients and for clinically oriented research. Extramurally,

NIH is supporting about 100 research projects using CT scanning. The largest

number of these are funded by the National Cancer Institute (NCI). NCI is itself

funding a large collaborative clinical trial of the efficacy of CT scanning. The

National Institute of Neurological and Communicative Disorders and Stroke held an

International Symposium on Computerized Axial Tomography on October 12-15,

1976.

Health Resources Administration (HRA)

The Bureau of Health Planning and Resources Development (BHPRD) carries out the

provisions of P.L. 93-641, the National Health Planning and Resources Devel-
Appendix VI ● 149

opment Act. Health Systems Agencies (HSAs) and State Health Planning and Development Agencies (S HPDAs) are responsible for local and State health planning

activities respectively.

The responsibilities of HSAs include: developing the health systems and annual

implementation plans (corresponding to short- and long-term plans, respectively);

providing technical and financial assistance for developing health resources; reviewing proposed Federal grants for health projects; assisting the State level review of new

health services and proposed facilities; reviewing the appropriateness of existing

facilities and services; and making their findings available to the State agency. The

functions of the SHPDAs include preparing a State health plan, administering the

certificate-of-need program and reviews under section 1122 (if the State had entered

into an appropriate contract with HEW), reviewing existing institutional health services and facilities, and publishing findings on their appropriateness.

The Bureau of Health Planning and Resources Development (BHPRD) is

responsible for providing technical assistance and policy guidance (through the

issuance of regulations) to these agencies. Technical assistance takes two forms: one is

general guidance on the implementation of P.L. 93-641; the other is the development

of recommended criteria and standards for reviewing and ruling on applications for

capital expenditures or services, P.L. 93-641 established 10 Centers for Health

Planning to provide technical assistance in the form of training of HSA and SHPDA

board members and staff, and direct consultations with HSAs and SHPDAs for

specific projects.

National Council on Health Planning and Development. Under the National Health

Planning and Resources Development Act of 1974, HEW is required to establish a

National Council on Health Planning and Development composed of 15 members. Six

of the 12 are at-large members, and 6 are representatives of HSAs and SHPDAs. The

Council met for the first time on December 10,1976. The functions of the Council are

to advise, consult with and make recommendations to the Secretary of HEW with

respect to the development of national guidelines, the implementation and administration of P.L. 93-641, and the evaluation of new medical technology for the organization, delivery, and equitable distribution of medical services.

Health Services Administration (HSA)

HSA provides CT scanning when necessary through its direct service programs,

including Public Health Service Hospitals and the Indian Health Service.

The Health Care Financing Administration (HCFA)

HCFA administers the Medicare program, which funds medical services mainly

for the elderly. Medicare presently reimburses for CT head scanning and has been

requested to reimburse for CT body scanning; that request is still under considerate ion.

HCFA does not make decisions regarding direct coverage of CT scanning by the

Medicaid program, but does provide matching funds to the State programs that might

include reimbursement for CT scanning. X-ray services are mandated under the

Medicaid program, and the required State plan might or might not include CT

scanning. In addition, Medicaid reimbursement is on a “cost-related” basis: if purchase
150 ● Appendix VI

of a CT scanner increases a hospital’s costs; inpatient charges may be increased for all

patients, and Medicaid payments increase.

HCFA also administers the Professional Standards Review Organizations

(PSRO ) program, a peer review program concerned with quality of care and with

utilization of services and facilities. HCFA is developing guidelines for the relationship

between PSROs and State planning agencies and Health Systems Agencies. HCFA encourages PSROs to provide technical assistance to such programs about the distribution and use of CT scanners, and such assistance already has been given in a few local

areas. HCFA is not presently developing any materials relating to appropriate use of

CT scanners for PSRO programs.

HCFA also staffs the National PSRO Council, which has the following functions:

(1) to advise the Secretary of HEW on the administration of the law;

(2) to provide for the development and distribution, among Statewide

Professional Standards Review Councils and PSROs, of information and data which

will assist such councils and organizations in carrying out their duties and functions;

such information includes regional norms of medical care;

(3) to review the operations of statewide councils and PSROs to determine their

effective and comparable performance; and

(4) to make or arrange for studies and investigations designed to lead to recommendations to the Secretary of HEW and to the Congress on how to improve the

program.

The PSRO Council also must approve local norms and standards of care. Thus,

the PSRO Council may disapprove such norms and standards if they are not adequate.

DEPARTMENT OF LABOR

The Occupational Safety and Health Administration (OSHA) has responsibility

for ensuring the safety of the workplace. Thus, it has jurisdiction over medical

settings where employees may be exposed to X-rays. General guidelines, dating back

several years, set standards for allowable radiation exposure, and employers must

ensure that this dose is not exceeded.

THE DEPARTMENT OF DEFENSE (DOD)

The Department of Defense operates hospitals and clinics to provide medical

care for active duty and retired members of the Army, Navy, Air Force, and Marines.

Acquisition of an expensive technology such as a CT scanner must be approved by

the Department of Defense Health Council, which includes the Surgeons General of

the Army, Navy, and Air Force, and the Assistant Secretary of Defense for Health
Appendix VI . 151

Affairs. Because local levels are expected to coordinate their requests with civilian

facilities, local HSAs are also usually consulted.

Military hospitals and clinics have been using the CT scanning facilities of

civilian institutions for some time and paying fees out of operating budgets. A

decision has been made to purchase six scanners, two for each of the uniformed services. One of these was operational as of July 1, 1977. DOD also funds health

research but is not supporting research related to CT scanning.

THE VETERANS ADMINISTRATION (VA)

The Veterans Administration operates a system of medical care facilities,

including 171 hospitals. Care is planned centrally, but such planning responds to

local level requests. The Radiology Service of the VA makes all decisions concerning

CT scanning, with the assistance of an advisory committee including the directors of

Medicine, Surgery, Neurosurgery, and Neurology, VA’s policy is to purchase a CT

scanner only after the local Health Systems Agency (HSA) has certified it as needed,

although such HSA review is not required by law.

Six VA hospitals had operational CT scanners by July 1977; five were being

installed, and three more scanners were on order. In addition, local VA hospitals pay

for scanning by civilian institutions out of operating budgets. VA also funds health

research. A research project in Boston will link four satellite hospitals to the area VA

hospital’s CT equipment to evaluate sharing of such equipment, permitting a

radiologist in the central hospital to read the scans.

DEPARTMENT OF ENERGY (DOE)

As the primary agency in energy research, development, and demonstration,

DOE encourages peaceful uses of atomic energy, including radioisotopes and radiation. For this reason, ERDA (now DOE) funded a project at the University of California at Los Angeles to conduct research on the CT scanner—focused both on instrument development and imaging techniques.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA)

NASA has a medical science program which supports research in medical

applications. The program is presently supporting two projects related to CT

imaging of the heart. Other projects to improve the technology of radiology are also

being supported, especially to achieve higher sensitivity of X-rays with lower

radiation doses,

~5.703 0-78 - U
152 ● Appendix VI

THE ENVIRONMENTAL PROTECTION AGENCY (EPA)

EPA has broad responsibilities for protecting public health from radiation

hazards. These responsibilities include the development of national guidelines in

radiation protection. EPA also carries out research on environmental hazards.

Under Federal Radiation Council authority, which was transferred to this

agency in 1970, EPA has been studying the hazards of exposure to ionizing radiation,

including radiation from medical and dental X-rays. EPA presently has an Interagency Working Group on Medical Radiation, which is developing broad guidelines on

diagnostic radiology for Federal medical care facilities. The Working Group is developing recommendations on the qualifications of medical personnel who prescribe and

operate X-ray equipment, the description of adequate X-ray equipment, and the

principles which minimize patient exposure without sacrificing diagnostic quality.

The guidelines being developed are expected to cover routine radiographic procedures, but have not yet considered the CT scanner. The Public Health Service of

HEW, although furnishing technical assistance, has declined a request from EPA to

participate in the Interagency Working Group.

DEPARTMENT OF COMMERCE

Domestic and International Business Administration

Nonprofit institutions, including nonprofit hospitals, are permitted to import

scientific instruments duty-free. The Department determines whether a piece of

equipment qualifies as a scientific instrument, and it has classified scanners made by

EMI, Ltd. as scientific instruments.

National Bureau of Standards (NBS)

In order to set standards for a variety of technologies, NBS develops measuring

instruments of many types. To evaluate structural materials with nondestructive

methods, NBS has developed ultrasonic imaging devices. NBS and NIH will cooperate on comparing ultrasonic devices with CT scanners. NBS may attempt to develop

CT scanning devices that use ultrasound instead of X-ray.

THE NATIONAL COUNCIL OF RADIATION PROTECTION AND

MEASUREMENTS

This Council is a nonprofit corporation chartered by Congress and made up of

nationally recognized scientists. The Council collects, analyzes, and disseminates

information and recommendations about radiation protection and measurement.

Council recommendations provide the scientific basis for radiation control, and they
Appendix VI ● 153

are used by Federal Government organizations such as the Nuclear Regulatory

Commission, the Public Health Service, and the Environmental Protection Agency.

The Council has not produced any reports specifically related to CT scanning, but

does have general reports concerning equipment design and use, protection of

patients, and similar topics that bear upon CT scanners.

THE NATIONAL SCIENCE FOUNDATION (NSF)

NSF supports medical research under several different programs. Presently, it is

supporting three projects related to CT scanning, two to improve imaging by CT

scanners, and one to attempt imaging by ultrasound.
Appendix VII

INTERNATIONAL VIGNETTES

CT scanners have been installed and used in other countries at lower rates than

in the United States. Although medical systems and policies in these countries are

different from those in the United States, the primary factor limiting use of CT

scanners appears to be financial.

BRITAIN

The British National Health Service plans medical services within an annual

budget approved by the British Parliament. Because the budget is fixed, there is

considerable competition for funds among various activities within the Health

Service. In addition, Britain’s financial problems have heightened pressures on the

Health Service. Therefore, new technologies are examined with some care before

widespread diffusion occurs, especially if the technology is as expensive as a CT

scanner.

The British Department of Health and Social Security (DHSS) supported the development of the prototype EM I head scanner that was installed in 1971. Because initial clinical tests were promising, two more first-production head scanners were

purchased with DHSS Research and Development funds (494). Evaluations continued

to be promising, so three more scanners were purchased. In 1976, the Department was

informed of the evaluations conducted with common protocols, and a national policy

was adopted to locate one head scanner in each Regional Health Authority area.

Consequently, each major neurological/neurosurgical unit serving a million people or

more will have a head scanner. In October 1976, 18 head scanners were operational in

Britain (England, WaIes, and Scotland), with another 14 on order, to serve a population

of about 58 million. By mid-1977, about 30 brain scanners were operational.

In June 1975, the first body scanner was installed for evaluation purposes at a

Medical Research Council center (494). Promising initial results led to the purchase of

two more units, with five more on order in October 1976. According to a DHSS

report, “The whole body scanner has not yet been established so definitively.

Nevertheless its promise in the diagnosis and monitoring of therapy of malignant

disease along with the signposts of its potential value in the investigation of other

lesions merits support for more widespread evaluation in a number of centres of

excellence” (494). However, subsequent diffusion of body scanners was not so

rational. By April 1977, 11 EMI whole body scanners were installed or on order in the

United Kingdom, and only three of those were official health service acquisitions, The

other eight were donated by philanthropists or charities, or purchased with

endowment funds. *

* This information was furnished by Barbar Stocking, Nuffie]d provincial Hospitals Trust, London.

155
156 ● Appendix VII

As indicated, the head scanner has undergone rather extensive evalution. Use of

head scanners in Britain and the United States appears to be quite similar.

Evaluations indicate that installing an EMI scanner into an existing neurological/neurosurgical unit leads to increased costs. DHSS recognizes that the benefit

to patients is not easily calculated, but assumes that as a more effective diagnostic tool,

the CT head scanner “must represent a significant advance in an area of medicine

which is associated with a high rate of death, disability, and long-term morbidity”

(494).

Planning for body scanning has proceeded differently. Full evaluations have not

been done, and scanners have been purchased with private funds. Thus, the goals of

proper evaluation and geographic access to body scanners have been problematic in

Britain.

CANADA

Under the national health insurance program in Canada, each province establishes minimum benefits and standards and receives about 50 percent of its funding

out of Federal tax revenues. During the past 2 years, rising costs of medical care have

considerably restricted the funds available for new technology. The Federal Government has recently negotiated a new basis for its participation in provincial programs, which probably will continue the financial restrictions.

In February 1976, eight CT scanners were operational in Canada, seven of which

were head scanners (399). Two more head scanners and five more body scanners were

on order. The Canadian Ministry of Health reports that all of these units were

installed as of December 1976, and that no others have been ordered because of

financial restrictions. Thus, nine head scanners and six body scanners, all located in

hospitals, were serving the Canadian population of 23 million, that is, one scanner

per 1.5 million population,

The Ministry of Health of the province of Ontario, with a population of about 8

million, evaluated the CT scanner in February 1976, noting that Ontario had four

operational scanners and three more on order (401). A Task Force on the Placement

of Instruments for Computerized Axial Tomography of the Ontario Ministry of

Health analyzed patterns of use of existing machines (401). Its recommendations

included the following:

(1)

(2)

(3)

All CT scanners acquired should have combined head and body scanning

capability;

The number of CT scanners should be increased to 1 per 500,000 population;

CT scanners should be installed only within University Hospitals or University Affiliated Hospitals.

Reported uses and rate of use of CT scanners in Ontario are quite similar to those

in the United States. Toronto General Hospital, in 1975, calculated its cost per

procedure to be approximately $86 (Canadian), including $20 (Canadian) for depreciation over a 5-year period (399). In November 1976, a representative of Toronto

General Hospital indicated that the cost had risen to about $95 (Canadian) per scan.
Appendix Vll ● 157

Other Canadian hospitals are depreciating their CT equipment over a 10-year period.

In Ontario, funds for CT scanning are provided within the budget for a department of

radiology, and there is usually no financial incentive for the hospital or the radiologists

to perform scans.

In December 1976, three CT scanners were operational in the Province of

Quebec, which has a population of about 6 million. Three more scanners were on

order. A document prepared for the Provincial government stated that existing scanners had been installed to evaluate their use and impact (401). The document suggested that widespread diffusion in Quebec should depend upon demonstrated

diagnostic advantages leading to a measurable reduction in mortality and morbidity

or contribution to a proportional reduction in the cost of other diagnostic techniques.

SWEDEN

All of Sweden’s 8.2 million citizens are insured for medical benefits, including

physician care, hospitalization, and partial reimbursement for prescription drugs and

dental care. The organization of medical care is highly decentralized, with hospital care

almost entirely provided by county and municipal hospitals. The Central Government makes relatively little financial contribution to either capital funding or daily

operation of these hospitals.

In July 1976, Sweden had two operational CT scanners, and three more were on

order, to be operational before January 1977 (280). One hospital with a CT head

scanner, Karolinska Institute in Stockholm, reported a decline in number of pneumoencephalograms, from 900 to about 200 during 1968-1974 (280). However, because

the CT scanner was not installed until 1973, its specific impact was not clear.

Karolinska Institute also reported a modest decline in number of cerebral angiograms

since 1972, but the impact of the head scanner was uncertain. The other hospital,

Emea General Hospital, has had its head scanner only since 1975, but reported a considerable reduction in both pneumoencephalograms and cerebral angiograms (280).

Sweden performed a total of 2,400 pneumoencephalograms and 11,700 cerebral

angiograms in 1975 at some 80 radiology departments (280). The total number of

pneumoencephalograms has been dramatically reduced in Sweden, but most of the

reduction preceded installation of any CT scanner (see table 23).

Swedish planners examined the use of the two operational scanners and

concluded that improved diagnoses and potential financial savings justify a modest

expansion in the use of CT scanners (280). They noted that, in addition to the cost of

the replaced diagnostic procedures, the indirect costs of neurodiagnostic procedures

are large. Patients must remain in bed for about 3 days after a pneumoencephalogram,

and they must be hospitalized for about a week for a complete neuroradiological examination. Therefore, the planners argued that CT scanning of outpatients is costeffective.
—

158 Appendix VII

Table 23.—Numbers of CerebraI Angiographic and

Pneumoencephalographic Examinations in Various Swedish

Hospital Categories

Regional

hospitals . . . . . . .

County hospitals .

Local hospitals . . .

Total . . . . . . . . .

Cerebral

Pneumoencephalographic Angiographic

Examinations Examinations

1972 I 1973

— 1,900

— 1,000

— 400

3,850 I 3,300

1974 1975 1972 1973 1974 1975

1,800 1,700 — 6,600 6,700 6,900

700 550 —

3,500 3,400 3,300

250 150 — 1,500 1,500 1,500

2,750 I 2,400 I 11,700 I 11,600 I 11,600 I 11,700

Source: 280.
Appendix VIII

METHOD OF THE STUDY

GENERAL DATA COLLECTION

Information for this study was obtained in a number of ways:

•. Medical literature. Journals of radiology, neurology, and health planning were

searched for relevant articles. Computerized literature searches, using the

MEDLINE-MEDLARS system of the National Library of Medicine, were

conducted periodically to ensure complete, up-to-date information. All literature on CT scanning listed in MEDLINE through May 1977 was reviewed.

● State planning agencies and health departments. Documents on CT scanning prepared

by State and local health planning agencies were obtained from a variety of

sources. In addition, each State health planning agency was contacted by

telephone and asked to send to OTA information, policy statements, and

guidelines on CT scanning.

● Federal agencies. Federal agencies with involvement in CT scanning were

contacted. Information was summarized and returned to the agencies for

verification, correction, and additions.

● Consultants. J. Lloyd Johnson Associates, Chicago, had collected information

about CT scanners on order and CT scanners approved by planning agencies

but not yet ordered. OTA contracted with Johnson Associates for a summary of

that data.

DOCUMENTATION OF LOCATION OF CT SCANNERS

No public program has compiled a list of CT scanners by type, location, date of

installation, and type of facility served. The list in appendix I was compiled from a variety of sources, including the following:

(1) The Food and Drug Administration, which requires reporting of installation

of CT scanners by date and type of machine. This information was helpful,

although incomplete.

(2) The Commerce Department, which maintains a list of nonprofit institutions

seeking duty-free import of CT scanners. (At present, this policy applies only

to medical institutions purchasing scanners from EMI Ltd.)

(3) The General Electric Company, which surveyed existing machines in certain

parts of the country and furnished this information to OTA.

159
160 Appendix VIII

(4)

(5)

(6)

(7)

Pfizer, which furnished a list of locations and dates of installation of its

machines.

J. Lloyd Johnson Associates, which had compiled a list of operational machines

for its study. The list was shared with OTA staff, allowing cross-checking

with other lists.

Staff papers from planning agencies in several States, which listed installed

and ordered machines.

Scientific literature, especially from university medical centers, which often

mentioned machine type and date of installation.

When any question arose, facilities were contacted individually by telephone for

clarification.

REVIEW PROCESS

In response to a request by the staff of the Senate Committee on Finance, OTA

staff first prepared a brief memorandum on CT scanners. It summarized the initial

data collected and highlighted some of the issues to be studied. About 200 copies of the

memorandum were circulated for review to individuals and groups inside and outside

of government. A first draft report was later written and circulated for review to the

Health Advisory Committee, the Technology Assessment Advisory Council, and

about 100 interested individuals and groups. Many helpful suggestions were received,

including additional research possibilities. As a result of these reviews, considerable

new research was carried out. Another draft report was then prepared and reviewed

by many of the same individuals and groups and also by additional reviewers. The final

report was written in accordance with the comments received.
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