Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices
Published: 2008-06-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Centers for Medicare & Medicaid Services (CMS)--an agency within the Department of Health and Human Services (HHS)--and the Congress, through the Deficit Reduction Act of 2005 (DRA), recently acted to constrain spending on imaging services, one of the fastest growing set of services under Medicare Part B, which covers physician and other outpatient services. GAO was asked to provide information to help the Congress evaluate imaging services in Medicare. In this report, GAO provides information on (1) trends in Medicare spending on imaging services from 2000 through 2006, (2) the relationship between spending growth and the provision of imaging services in physicians' offices, and (3) imaging management practices used by private payers that may have lessons for Medicare. To do this work, GAO analyzed Medicare claims data from 2000 through 2006, interviewed private health care plans, and reviewed health services literature.
section_title: What GAO Found
paragraphs: From 2000 through 2006, Medicare spending for imaging services paid for under the physician fee schedule more than doubled--increasing to about $14 billion. Spending on advanced imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other imaging services such as ultrasound, X-ray, and other standard imaging. GAO's analysis of the 6-year period showed certain trends linking spending growth to the provision of imaging services in physician offices. The proportion of Medicare spending on imaging services performed in-office rose from 58 percent to 64 percent. Physicians also obtained an increasing share of their Medicare revenue from imaging services. In addition, in-office imaging spending per beneficiary varied substantially across geographic regions of the country, suggesting that not all utilization was necessary or appropriate. By 2006, in-office imaging spending per beneficiary varied almost eight-fold across the states--from $62 in Vermont to $472 in Florida. Private health care plans that GAO interviewed used certain practices to manage spending growth that may have lessons for CMS. They relied chiefly on prior authorization, which requires physicians to obtain some form of plan approval to assure coverage before ordering a service. Several plans attributed substantial drops in annual spending increases on imaging services to the use of prior authorization. In contrast, CMS employs an array of retrospective payment safeguard activities that occur in the post-delivery phase of monitoring services and are focused on identifying medical claims that do not meet certain billing criteria. The private plans' experience suggests that front-end management of these services could add to CMS's prudent purchaser efforts.

section_title: Letter
paragraphs: Federal budget experts—including the Comptroller General, the  Congressional Budget Office Director, and the Medicare Trustees—agree  that the Medicare program is unsustainable in its present form. Because  of rising health care costs and the baby boom generation’s aging into  eligibility for Medicare, future program spending is projected to encumber  an untenable share of the government’s resources. In their 2008 annual  report, the Medicare Trustees project that expenditures for Part B, which  covers physician and other outpatient services, will increase over the next  decade at average annual rates that far outpace the national economy’s  growth rate for that period (about 8 percent for Part B, compared with   4.8 percent for the national economy).
Policymakers face a particular dilemma with respect to spending for  imaging services, one of the fastest-growing set of services paid for under  the Medicare Part B physician fee schedule. On the one hand, cutting-edge  imaging technology, such as computed tomography (CT) and magnetic  resonance imaging (MRI) scans, help diagnose and treat life-threatening  diseases like cancer and heart disease; these technologies enable  physicians to perform a wide range of less-invasive medical tests and  procedures and can foster earlier diagnosis, quicker recovery, shorter  hospital stays, and reduced disability than more invasive surgical or other  procedures. On the other hand, in recent years, spending for CT scans,  MRIs, and other imaging services paid for under the Medicare physician  fee schedule has experienced double-digit growth.
In 2005, the Medicare Payment Advisory Commission (MedPAC) reported  to the Congress on growth in the volume (number) of imaging services  provided and the intensity (complexity) of these services—for example,  the greater use of MRIs instead of X-rays in diagnostic testing. The report  attributed this growth to technology advances that improve physicians’  ability to diagnose disease, but it also pointed to two trends suggesting  that not all of this growth may be desirable. First, the site of care has  shifted substantially from hospital inpatient and outpatient settings, where  national Medicare standards relating to patient safety and quality govern  the provision of imaging services, to physician offices, where there is less  quality oversight. Second, the number of imaging services provided across  the country varies threefold—a difference that raises concerns about the  potential overuse of these services in some areas.
MedPAC’s 2005 report included recommendations to the Centers for  Medicare & Medicaid Services (CMS)—the agency within the Department  of Health and Human Services (HHS) that administers Medicare—to  address concerns about quality and efficiency with respect to imaging  services. Certain of the recommendations incorporated approaches similar  to those other health care payers have adopted to constrain rapid growth  in spending on imaging services. CMS adopted some of MedPAC’s  recommendations, and beginning in January 2006, among other things,  reduced physician fees under certain conditions for multiple images taken  during the same session.
The Congress, through the Deficit Reduction Act of 2005 (DRA), also took  action to restrain the growth in spending for Medicare imaging. The DRA  required, among other things, that Medicare payment for certain imaging  services under the Medicare physician fee schedule, including those  services performed in physician offices, not exceed what Medicare pays  for these services performed in hospital outpatient departments. This  provision was effective for services furnished after January 1, 2007. The  DRA changes sparked intense reactions by interest groups with a stake in  Medicare’s payment for imaging services, which included representatives  of imaging manufacturers, diagnostic imaging facilities, physician  specialties, and patient advocacy groups.
In light of these concerns and MedPAC’s findings on imaging services, you  asked us to provide additional data to help the Congress evaluate the  provision of these services in the Medicare program and examine  management practices other payers use to ensure appropriate spending  for these services. In this report, we provide information on (1) trends in  Medicare Part B spending on imaging services from 2000 through 2006,   (2) the relationship between spending growth and the provision of imaging  services in physician offices, and (3) imaging management practices used  by private payers that may have lessons for Medicare.
To determine trends in Medicare spending for imaging services paid for  under the physician fee schedule, we analyzed Medicare Part B claims data  from 2000 through 2006. We examined trends in aggregate spending and by  the six major categories of imaging services. Our spending totals include  the two parts of the imaging service paid under the Medicare physician fee  schedule—the examination itself and the physician’s interpretation of the  examination. CMS refers to the performance of the image examination as  the “technical component” and the physician’s interpretation of the image  as the “professional component.” Our spending totals do not include the  technical component when the image examination is performed in an  inpatient hospital or other institutional setting, as an examination  performed in these settings is paid for under Medicare Part A. In addition,  our spending totals do not include the technical component when an  examination is performed in a hospital outpatient department setting, as  an examination performed in this setting is paid for under Medicare’s  hospital outpatient prospective payment system (OPPS).
To examine the relationship between spending growth and the provision  of imaging services in physician offices, we analyzed Medicare claims data  from 2000 and 2006. We examined the extent to which Medicare Part B  spending on imaging services shifted to physician offices from hospital  settings and how physicians’ shares of their Medicare revenue from  imaging services have changed during this period. We supplemented our  quantitative analyses with interviews with physician specialty groups and  private health care payers and reviewed the health services literature. To  determine the share of Medicare beneficiaries who received any imaging  services or a specific imaging service and, for those beneficiaries, the  average number of services provided, we used Medicare Part B  Physician/Supplier claims data for 2000 and 2006 and Denominator File  data for those same years.
To examine the management practices used by private payers to manage  spending on imaging services, we selected a combination of 17 national  and regional private health plans known to be active in managing imaging  benefits. We also interviewed radiology benefits managers (RBM)— organizations hired by private payers to manage radiology services for  their enrollees. We also conducted interviews with CMS officials and  several companies that contract with Medicare to process, review, and pay  Medicare Part B claims.
We examined the reliability of the claims data used in this report by  performing appropriate electronic data checks and checks for obvious  errors such as missing values and values outside of expected ranges. We  also interviewed officials who were knowledgeable about the data,  including CMS and Medicare contractor officials. We determined that the  claims data we used were sufficiently reliable for purposes of our analysis,  as they are used by the Medicare program as a record of payments to  health care providers. As such, they are subject to routine CMS scrutiny.  Appendix I provides more detailed information on our methodology.
We conducted our work from January 2007 through May 2008 in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: Medical imaging services, grouped into six major modalities, use different  types of imaging equipment and media for creating an image. Physicians  bill for providing these services under the Medicare physician fee  schedule, which, for payment purposes, divides an imaging service into  two components: the technical component, which pays for the  performance of the imaging examination, and the professional component,  which pays for the physician’s interpretation of the image. Recently, CMS  implemented two payment changes in 2006 and 2007 that reduce physician  payments for certain imaging services.
subsections: section_title: Imaging Services Fall into Six Modalities
paragraphs: Medical imaging is a noninvasive process used to obtain pictures of the  internal anatomy or function of the anatomy using one of many different  types of imaging equipment and media for creating the image. Imaging  tests fall into six modalities: CT, MRI, nuclear medicine, ultrasound, X-ray  and other standard imaging, and procedures that use imaging. Depending  on the service, imaging equipment uses radiation, sound waves, or  magnets to create images. X-rays and other standard imaging services, CT,  and certain nuclear medicine services, such as positron emission  tomography (PET), use radiation; ultrasound uses sound waves; MRI uses  magnets and radio waves. For certain X-rays, CTs, and MRIs, contrast  agents, such as barium or iodine solutions, are administered to patients  orally or intravenously. By using contrast, sometimes referred to as “dye,”  as part of the imaging examination, physicians can view soft tissue and  organ function more clearly. Table 1 provides further details on each  imaging modality.
Imaging equipment using radiation poses more potential risk to patients  than other imaging mediums. The amount of radiation patients are  exposed to varies based on whether the image is obtained by X-ray or CT.  CTs emit the largest amount of radiation, but estimates of the radiation  dose—or the amount of radiation absorbed—from a diagnostic CT  procedure can vary by a factor of 10 or more, depending on the type of CT  procedure, patient size, and the CT system and its operating technique. For  example, the typical dose in a CT of the abdomen is about five times that  of the head, and about eight times that of an X-ray of the spine.
section_title: Physicians Bill for Imaging Services under the Medicare Physician Fee Schedule
paragraphs: Medicare generally covers medically necessary services provided by  physicians operating within the scope of practice allowed by their state  licensure, without regard to their specialty or specific qualifications. All  diagnostic tests are required to be provided under at least general  physician supervision—that is, a physician is responsible for the training  of the technical staff performing the test, and the maintenance of the  necessary equipment and supplies.
Medicare’s physician fee schedule in 2006 included more than 7,000  services—together with their corresponding payment rates. About 900 of  these services are associated with imaging. Each imaging service on the  fee schedule has three relative value units (RVU), which correspond to the  three components of physician payment: (1) physician work—the financial  value of physicians’ time, skill, and effort that are associated with  providing the service, (2) practice expense—the costs incurred by  physicians in employing office staff, renting office space, and buying  supplies and equipment, and (3) malpractice expense—the premiums paid  by physicians for professional liability insurance.
Each RVU measures the relative costliness of providing a particular  service. For example, in 2006, the three RVUs for performing and  interpreting a standard chest X-ray summed to .74. In contrast, the RVUs  for CT of the head/brain without dye summed to 6.15, indicating that this  service, on average nationally, consumed more than eight times more  resources than the standard chest X-ray. To determine Medicare payment  for a particular service, the sum of the RVUs is multiplied by a conversion  factor, which is a dollar amount that translates each service’s RVUs into a  payment rate. For example, in 2006, Medicare paid $233, on average  nationally, for physicians performing and interpreting a CT of the  head/brain without dye (6.15 multiplied by a conversion factor of  $37.8975). Some items paid under the physician fee schedule that are used  in the provision of imaging services—such as radiopharmaceuticals—do  not have RVUs associated with them. Instead, these items are priced  locally by Medicare’s Part B contractors and billed separately from the  imaging services paid for under the Medicare physician fee schedule.
Physicians under the Medicare physician fee schedule can be paid for  performing the imaging examination—the technical component—and  interpreting the image examination—the professional component. The  payment for the technical component is intended to cover the cost of the  equipment, supplies, and nonphysician staff and is generally significantly  higher than the payment for the professional component, which is  intended to cover the physician’s time in interpreting the image and  writing a report on the findings. Medicare allows physicians to bill for  these services separately because performing and interpreting the  examination could be done by different physicians and in different  settings. If the same physician performs and interprets the examination,  the physician can submit a global bill to Medicare. The same rules apply  under the physician fee schedule if the imaging services are completed by  radiologists in independent diagnostic testing facilities (IDTF)—facilities  that are independent of a hospital and physician office or “free-standing”  and only provide outpatient diagnostic services.
When the imaging examination is performed in an institutional setting,  such as a hospital or skilled nursing facility, the physician can bill  Medicare only for the professional component, while payment for the  technical component is covered under a different Medicare payment  system, according to the setting in which the service is provided. For  example, the technical component of an imaging examination in a hospital  inpatient setting is bundled into a facility payment paid under Medicare  Part A, whereas the technical component of an examination in a hospital  outpatient department is paid under Medicare’s hospital outpatient  payment system, which is financed through Part B.
section_title: CMS Recently Implemented Two Payment Changes Related to Imaging Services
paragraphs: In recent years, CMS has implemented two payment changes to the way  Medicare pays for imaging services under the physician fee schedule.  Starting January 1, 2006, CMS reduced physician payments when multiple  images are taken on contiguous body parts during the same visit. CMS  adopted a recommendation made by MedPAC in 2005 as a way to ensure  that fee schedule payments took into account efficiencies, such as savings  from technical preparation and supplies, which occur when multiple  imaging services are furnished sequentially. Physicians receive the full  fee for the highest paid imaging service in a visit, but fees for additional  imaging services are reduced by 25 percent. The reduction is applied only  to the technical component.
Beginning January 1, 2007, CMS implemented two provisions in the DRA:  it (1) established a cap on the physician fee schedule payments for certain  imaging services at the payment levels established in Medicare’s OPPS and  (2) in certain cases, eliminated the Medicare budget neutrality  requirement, which is designed to ensure that the result of specific  payment changes neither increase nor decrease the total amount of  Medicare payments to physicians beyond a specified amount. The first  provision, in practice, requires that payment for the technical component  of an image in the physician office does not exceed what Medicare pays  for the technical component of the same service performed in a hospital  outpatient department. For example, in 2006, Medicare paid $903 under  the physician fee schedule for an MRI of the brain, yet paid $506 for the  same test under OPPS. Under the DRA payment change, in 2007, Medicare  paid the lesser amount for this examination, regardless of whether it was  performed in a hospital outpatient department or in a physician’s office.  The second provision, excluding the two imaging payment reductions  from the calculation of budget neutrality, results in Medicare savings as a  practical matter. Savings attributed to the 25 percent multiple payment  reduction and the capping of certain payments at the OPPS levels are not  offset by increases for other services under the physician fee schedule.
section_title: In Recent 6-Year Period, Medicare Part B Expenditures for Imaging Services More Than Doubled, as Use of Advanced Imaging Services Grew
paragraphs: From 2000 through 2006, Medicare spending on imaging services paid for  under the Part B physician fee schedule more than doubled. About   80 percent of the spending growth was associated with growth in the  volume and complexity of imaging services. Compared with 2000, in 2006  more beneficiaries obtained imaging services, and average use per  beneficiary also increased.
subsections: section_title: Medicare Spending on Imaging Increased across the Six Imaging Modalities but Grew Faster for Advanced Imaging Services
paragraphs: Medicare spending on imaging services paid for under the Part B physician  fee schedule more than doubled from 2000 through 2006, increasing to  about $14 billion. (See fig. 1.) This increase represents a growth rate of   13 percent a year on average, compared to 8.2 percent for all Medicare  physician-billed services during that period. Although spending increased  each year since 2000, the rate of growth slowed in 2006. In that year, CMS  implemented a payment change for imaging that reduced physician fees by  25 percent for additional imaging services involving contiguous body parts  imaged during the same session. (See app. II for total expenditures for  imaging services paid for under the physician fee schedule and  expenditures by imaging modality for each year from 2000 through 2006.)
Advanced imaging services—CT, MRI, and nuclear medicine—saw the  highest growth rates. Spending on these advanced imaging modalities  increased almost twice as fast, at an average annual rate of 17 percent, as  spending on services in the three other imaging modalities—ultrasounds,  standard imaging (mostly X-rays), and procedures that use imaging.
The faster-growing advanced imaging services are more complex and  therefore more costly. Medicare pays physicians more for both the  technical component and the professional component for these services,  on average, than it pays for other imaging services. (See table 2.) The  payment is higher, in part, because advanced imaging equipment is more  costly to obtain and requires more skilled technicians to operate. For  example, in 2006, Medicare paid $1,118 for the most commonly physician- billed MRI imaging test—an “MRI brain without and with dye”—of which  $995 was for performing the examination. In contrast, Medicare paid $28  for the most commonly performed standard imaging service, a chest X-ray.
As a result of faster growth in the more expensive services, advanced  imaging accounted for 54 percent of total imaging expenditures, up from  43 percent in 2000. In dollar terms, spending on advanced imaging  increased from about $3 billion to about $7.6 billion, with spending on MRI  services accounting for nearly half of this increase. In contrast, spending  on ultrasounds, standard imaging (mostly X-rays), and procedures that use  imaging grew more slowly, from about $4 billion to about $6.5 billion.
section_title: Most Spending Growth on Imaging Services Associated with Volume and Complexity Increases
paragraphs: Overall, 77 percent of Medicare’s spending from 2000 through 2006 on  imaging services paid for under the physician fee schedule was associated  with the growth in volume and complexity of imaging services (as  measured by growth in RVUs) rather than other factors. Compared with  2000, in 2006 more beneficiaries obtained imaging services and average  use per beneficiary also increased. The proportion of Medicare  beneficiaries receiving at least one imaging service increased from   63 percent to 66 percent during this period. Moreover, beneficiaries’  average annual use of imaging services from 2000 through 2006 increased  about 25 percent, from 5.6 to 7 imaging services, for those who received at  least one imaging service. More complex advanced imaging modalities  generally showed the fastest growth. For the same period, the proportion  of beneficiaries using CT scans increased 39 percent, and use of CT scans  on a per beneficiary basis increased 22 percent. (See app. III for  beneficiaries’ use of imaging services for 2000 compared with 2006.)
Several factors account for the rest of the growth in Medicare spending for  imaging services. Growth in ancillary items, such as radiopharmaceuticals,  which are required to provide certain imaging tests, represents 7 percent  of the spending growth. Physicians bill separately for these items. Growth  in the number of beneficiaries and changes in Medicare’s physician fees  from 2000 through 2006 account for another 16 percent of the spending  growth (see fig. 2).
Contrasting explanations have been offered for why imaging use and use  of advanced imaging services, in particular, have grown rapidly during this  period. In interviews with physician specialty organizations that use  imaging services, representatives cited the following as contributors to  imaging growth: technological innovation (such as equipment becoming  smaller and more portable), patient demand influenced by direct-to- consumer advertising, defensive medicine to protect physicians from  malpractice suits, and an increase in clinical applications.  Representatives from physician specialty organizations also stated that  older invasive diagnostic procedures are being replaced in some cases  with new less invasive imaging procedures that are less costly, reduce  patients’ discomfort, and reduce patients’ recovery time. While  representatives from private health plans and the companies they contract  with specifically to manage imaging services concurred that some of these  factors were key contributors to growth, they cited two other factors for  the growth in spending. First, they noted that the ability of physicians to  refer patients to their own practices for imaging was a major spending  driver. Second, they noted that primary care physicians often lacked  knowledge about the most appropriate test to order for a patient, and  therefore tended to order a significant portion of imaging tests that would  be considered unnecessary based on clinical guidelines.
section_title: Several Spending Trends Associated with In-Office Imaging Raise Concerns about Incentives for Physicians to Overuse Services
paragraphs: From our analysis of data from the 6-year period, we observed several  trends regarding spending growth and the provision of imaging services in  physician offices. First, a larger share of Medicare Part B spending for  imaging services has shifted from the hospital settings—where the  institution receives payment for the technical component of the service— to physician offices, where physicians receive payment for both the  technical and professional components of the service. Second, consistent  with this shift, physicians who provided in-office imaging services  obtained an increasing share of their Medicare Part B revenue from  imaging services. Third, in-office imaging spending per beneficiary varied  substantially across geographic regions of the country, suggesting that not  all the spending was necessary or appropriate. These trends raise  concerns about whether Medicare’s physician payment policies contain  financial incentives for physicians to overuse imaging services. In addition,  the increased provision of imaging services in physician offices may have  implications for quality.
subsections: section_title: Imaging in Physician Offices Accounted for Increasing Share of Part B Imaging Spending
paragraphs: We estimate that about one-tenth of the growth in Part B spending on imaging from 2000  through 2006 resulted from this shift in settings.
From 2000 through 2006, spending on imaging increased in both treatment settings.  However, spending in physicians’ offices grew twice as fast—at an average annual rate of  14 percent—compared with spending in the hospital setting which grew at an average  annual rate of 7 percent.
During the period from 2000 through 2006, radiologists accounted for a  declining share of in-office imaging spending—36 percent in 2000  compared to 32 percent in 2006. Physicians in specialties other than  radiology accounted for an increasing share of in-office imaging—  64 percent in 2000 compared to 68 percent in 2006. Cardiologists’ spending  on imaging services represented the largest share of in-office imaging  spending of physician specialties other than radiology, growing from about  $1.2 billion to about $3.0 billion—29 percent in 2000 compared to   35 percent in 2006. An array of physician specialties—including primary  care, orthopedics, and vascular surgery—accounted for the remainder of  in-office spending.
The growth in spending by physicians in specialties other than radiology is  partly due to an increasing proportion of these physicians billing for in- office services. While still small, this proportion has grown rapidly—more  than doubling from 2000 to 2006 (from 2.9 to 6.3 per 100 physicians), and is  much higher for certain specialties, such as cardiology. For example, the  proportion of cardiologists who billed for advanced in-office services  nearly doubled between 2000 and 2006, rising from about 24 per 100  physicians to about 43 per 100 physicians. Although physicians generally  are prohibited from referring Medicare beneficiaries for imaging services  to an entity with which the physician has a financial relationship, there is  an “in-office ancillary exception.” Under this exception physicians may be  paid by Medicare, for example, if the services are provided by the referring  physicians in the same building where the physicians provide other  services unrelated to the furnishing of imaging services.
MedPAC and others have reported on the recent emergence of leased or  other shared arrangements whereby “in-office” imaging services are  actually delivered at another site.21, 22 For example, physicians may rent an  imaging center’s services (employees and machinery) for a specific day of  the week and refer their patients to that center on that day. The referring  physician bills Medicare for providing the test, in turn paying the provider  or center that actually performed the test a lower fee. In other instances,  physicians may purchase imaging equipment which is then leased to an  imaging center. In this case, the physician refers patients to the imaging  center which bills for the service and then pays the physician a fee.  MedPAC has expressed concerns that such arrangements create financial  incentives that could influence physicians’ clinical judgment, leading to  unnecessary services.
Statement of Glenn M. Hackbarth, J.D., Chairman of MedPAC, at a hearing entitled: “Use  of Imaging Services: Providing Appropriate Care for Medicare Beneficiaries,” on July 18,  2006, for the Subcommittee on Health, Committee on Energy and Commerce, House of  Representative, 109th Cong.
A recent study of imaging providers in California estimated that about 60 percent of  providers billing for in-office imaging did not actually own the imaging equipment, but were  involved in leasing or other arrangements designed to take advantage of the in-office  ancillary exemption. Jean M. Mitchell, “The Prevalence of Physician Self-Referral  Arrangements After Stark II: Evidence from Advanced Diagnostic Imaging,” Health Affairs,  Web exclusive (Apr. 17, 2007).
section_title: Physicians Generated an Increasing Share of Revenue from In-Office Imaging Services
paragraphs: Consistent with these trends, physicians in specialties other than radiology  who billed Medicare for in-office imaging services obtained an increasing  share of their Medicare revenue from imaging services from 2000 to 2006.  For example, cardiologists’ share of Medicare revenue attributable to in- office imaging services increased from about one-quarter in 2000 to over  one-third in 2006 (see fig. 4). During this period, vascular surgeons also  saw a large increase—from 10 percent to about 19 percent—in the share of  their Medicare revenue generated from in–office imaging services. The  same trend was evident for orthopedic surgeons, primary care physicians,  and urologists.
section_title: Substantial Variation of In-Office Imaging Use across Geographic Regions Raises Concerns about Appropriate Use
paragraphs: Substantial variation in imaging use across geographic regions of the  country suggests that not all utilization of in-office imaging services may  be appropriate. We found that per beneficiary spending on imaging  services provided in physician offices varied almost eight-fold across the  states in 2006—from $62 in Vermont to $472 in Florida (see fig. 5).  Physician spending on in-office imaging was the highest in the South,  Northeast, and in certain states in the West. Given the magnitude of the  differences in imaging use across geographic areas, variation is more likely  due to differences in physician practice patterns rather than patient health  status. Further concerns about the appropriateness of imaging use are  raised by research on geographic variation showing that, in general, more  health care services do not necessarily lead to improved outcomes.
The shift in imaging services to physician offices has the potential to  encourage overuse, given physicians’ financial incentives to supplement  relatively lower professional fees for interpretation of imaging tests with  relatively higher fees for performance of the tests. Physician ownership of  imaging equipment can generate additional revenue for a practice, even  after taking into account the high costs of purchasing advanced imaging  equipment. MedPAC has expressed concern about whether Medicare’s  payment methodology overpays physicians for imaging equipment,  because of outdated estimates of equipment use. An analysis published in  2005 of private insurance claims data on X-ray services concluded that  orthopedists, podiatrists, and rheumatologists were two to three times  more likely to order imaging services if the ordering physician also  performed the examination, compared with those who referred patients to  a radiologist. In addition, the authors found that podiatrists and  rheumatologists were also more likely to order more intensive tests.  Another study showed that physicians who refer patients for imaging in  their own office are at least 1.7 to 7.7 times more likely to order imaging  than those physicians in the same specialty who do not self-refer.
section_title: Increasing Provision of Imaging Services in Physician Offices Raises Additional Concerns about Quality
paragraphs: In addition to concerns about incentives for inappropriate use of imaging  services, the shifting of services from hospital and other institutional  settings to physician offices may have implications for quality. Hospitals  must comply with Medicare’s “conditions of participation” rules, which  include general standards for imaging equipment and facilities, staff  qualifications, patient safety, record-keeping, and proper handling of  radioactive materials. In contrast, no comprehensive national standards  exist for services delivered in physician offices other than a requirement  that imaging services are to be provided under at least general physician  supervision—that is, a physician is responsible for the training of the  technical staff performing the imaging service, and the maintenance of the  necessary equipment and supplies. CMS, however, has expanded existing  quality and business performance standards for IDTFs. For example, CMS  has explicitly prohibited hotels and motels from being considered  appropriate sites for an IDTF setting.
Regulatory responsibilities relating to imaging devices and services are  divided among federal agencies as well as the states. The Food and Drug  Administration (FDA) and the Nuclear Regulatory Commission (NRC)  each have regulatory responsibilities for devices that are used to provide  imaging services. For example, FDA is responsible for establishing quality  standards for mammography equipment, and ensuring that manufacturers  of radiation-emitting imaging equipment are in compliance with applicable  performance standards. While FDA does not regulate the practice of  medicine, such as the establishment of patient radiation dose limits, it is  responsible for ensuring that medical imaging systems are safe and  effective. NRC does not regulate medical products, but does oversee the  medical uses of nuclear materials used by physicians, hospitals, and others  through licensing, inspection, and enforcement programs. Regarding  licensing, in many cases NRC has transferred this authority to the states.  While all states have radiation control boards that monitor the use of  radiation by imaging facilities, they do not regulate nonradiation imaging  such as MRI or ultrasound, nor do they monitor the quality of imaging.  Their primary mission is to ensure patient safety. In addition, officials  from the Conference of Radiation Control Program Directors, Inc.—whose  primary membership is made up of radiation professionals in state and  local government who regulate the use of radiation sources—told us that  states vary in the comprehensiveness of their rules as well as their ability  to monitor compliance, often lacking the resources to perform all of their  functions. Further, officials from the American Society of Radiologic  Technologists told us that states also vary in their licensure requirements  for imaging providers—some do not have any licensure or certification  laws for radiology technologists, and most states also allow technicians to  perform advanced imaging without additional training. In a 2007 report we  recommended that CMS require sonographers—technologists that perform  ultrasound examinations—paid by Medicare to be credentialed or work at  accredited facilities.
Although physicians can seek to have their facility accredited—a process  by which facilities and providers are recognized as meeting certain quality,  safety, and performance thresholds by one of the three primary  accreditation organizations for imaging—officials we interviewed from  these organizations estimated that very few physician offices are  accredited. Studies of the provision of imaging tests in this setting  showed quality concerns in several areas such as staff credentials, poor  image quality, failure to monitor radiation exposure, and inadequately  maintained equipment. Officials from some of the health plans,  accreditation organizations, and other industry groups that we interviewed  indicated similar concerns. For example, a health plan official told us that  25 percent of facilities in its network, including physician offices, failed  credentialing, most commonly because of a lack of a board certified  radiologist on staff, or problems with imaging equipment. Two of the three  primary accreditation organizations told us that general problems  encountered during the accreditation process of facilities, including  physician offices, related to failure of staff to keep up with professional  education requirements, lack of documentation of quality assurance  policies, poor quality of the images, and incomplete or inadequate  interpretation. The third accreditation organization told us that the failure  rate for initial applications was about half, although the majority of  reapplicants passed after correcting deficiencies. Typically, the main  deficiency was equipment that needed to be recalibrated, and a lack of  quality control programs. The officials from this organization were  concerned about the implications for quality of the vast majority of  providers who did not apply for accreditation, given a 50 percent initial  failure rate for providers self-selecting to apply for accreditation.
section_title: To Manage Imaging Expenditures, Private Health Care Plans in Our Study Use Certain Practices to Constrain Spending Growth
paragraphs: Similar to Medicare, private health plans in recent years have experienced  rapid growth in imaging services, particularly in advanced imaging. We  examined a sample of 17 private health care plans which were selected  because they were known to take steps to actively manage imaging  services. Most of the plans in our study contracted with companies called  radiology benefits managers (RBM) to perform imaging management  activities on their behalf. Officials of the plans or the RBMs they use told  us that prior authorization, which requires physicians to obtain some form  of plan approval before ordering a service, was the practice most  important to managing their physicians’ use of imaging services. Other  practices they noted included privileging, by which a plan limits its  approval for ordering certain imaging services to physicians in certain  specialties, and profiling, which entails a statistical analysis of medical  claims data measuring an individual physician’s use of services relative to  a desired benchmark.
With respect to managing the growth in Medicare physician expenditures  on imaging services, CMS does not employ the practices used by the plans  in our study. The agency’s focus is largely on physician billing practices,  and its management activities therefore occur at a point when services  have already been ordered and performed. CMS conducts profiling  activities, but these are consistent with the agency’s focus on identifying  improper billing rather than on targeting services showing high spending  growth rates. CMS officials indicated that approaches such as prior  authorization would likely require significant administrative resources,  and that the agency would have to consider any specific initiatives in light  of its existing legal authority.
subsections: section_title: Plans’ Management of Imaging Services Relies Mostly on Prior Authorization
paragraphs: All the health plans in our study used prior authorization, the practice of  determining whether to grant physicians approval to order some or all  imaging services before they are delivered, to manage spending on imaging  services. This practice was in addition to retrospective payment  safeguards commonly used to identify medical claims that do not meet  certain billing criteria. Under prior authorization, plans only pay  physicians for imaging services rendered that have received plan approval.  Almost all of the plans—16 of 17—conducted their prior authorization  activities through an RBM. The steps plans typically use in the prior  authorization process are shown in figure 6.
For example, prior authorization is typically used by RBMs for physicians  requesting imaging services for lower back pain, a common condition for  which physicians inappropriately request MRIs. Typically, the process  works as follows: A physician requests an MRI of the lumbar spine with  contrast for a patient with symptoms of lower back pain and no other  symptoms. In considering this request, the RBM’s nurse manager follows a  protocol of questions based on the ACR clinical guidelines for “acute low  back pain, uncomplicated.” Such questions could include “How long has  the patient had symptoms? Have you tried conservative management?”  These questions are aimed at discouraging the use of advanced imaging at  the condition’s onset, unless certain other symptoms or conditions are  present. The physician has the option of consulting with one of the RBM’s  board-certified radiologists or its medical director if there is disagreement  with the initial decision to deny a request. If the physician still disagrees  with the decision and proceeds with the request, the RBM will likely deny  it. Alternatively, if the physician’s request for an MRI of the lumbar spine  with contrast is made for a patient with low back pain and the other  specified symptoms or conditions, the RBM waives conservative  management and approves the request.
The plans in our study varied in their prior authorization policies. For  example, officials we interviewed from almost all of the plans reported  that they targeted prior authorization for technologically complex or high- cost imaging tests, but varied in what specific tests were included under  their programs. In addition, to determine the appropriateness of a given  diagnostic test or procedure, most plans relied on criteria developed by  the American College of Cardiology or the ACR, but they also customized  these criteria to their specifications. Three of the plans used a variant of  prior authorization, called prior notification, which requires the physician  to contact the plan prior to sending a patient for an imaging scan. If the  plan determines that another test is more appropriate, based on clinical  guidelines or other criteria, the plan can make this suggestion to the  physician, but the physician has ultimate discretion to choose among  options.
Plan officials reported significant decreases in utilization after  implementing a prior authorization program. For example, several of the  plan officials we interviewed reported that annual growth rates were  reduced to less than 5 percent after prior authorization; these annual  growth rates had ranged for these plans from 10 percent to more than   20 percent before prior authorization programs were implemented. The  biggest utilization decreases occurred immediately after implementation.  One plan’s medical director said that prior authorization was the plan’s  most effective utilization control measure, because it requires physicians  to attest to the value of ordering a particular service based on clinical  need. Plan officials noted that there were costs associated with  implementing a prior authorization program. Under a typical arrangement,  plans paid a per-member per-month fee to an RBM to conduct prior  authorization on their behalf.
The plan and RBM officials we spoke with indicated that outright denial  rates for requests to order imaging services were low, primarily because  requesting physicians typically agree to a more clinically appropriate test  or decide to forgo the test after they are shown countervailing evidence.  These officials also contended that a spillover effect exists with respect to  future ordering. That is, the interaction between plans and physicians that  occurs during the prior authorization process enables physicians to make  more educated decisions about what services to order for future patients  with the same condition. The net effect has been to reduce unnecessary  utilization to levels that are lower than they would have been in the  absence of prior authorization.
An official at one plan told us about the plan’s experience using RBM- performed prior authorization. To control rapid spending growth, the plan  contracted with an RBM in the late 1990s to perform prior authorization  for advanced imaging services. After 3 years, when expenditures for these  services stopped growing, the plan discontinued using the RBM for prior  authorization, assuming that a lasting change had been achieved in  physicians’ ordering of the services. However, over the subsequent 3 years,  annual growth in imaging services climbed to more than 10 percent, on  average. In 2006, the plan reinstated the RBM’s prior authorization  program and 6 months after implementation, growth had again declined to  single digits.
To a lesser extent, plans in our study used privileging and profiling to  manage utilization and spending on health care services in general, which  include imaging services in particular. Over one-third of the plans used  privileging, a practice which limits, according to specialty, a plan’s pool of  physicians who can order certain imaging services. For example, one plan  in our study allowed orthopedic surgeons to perform CT scans of body  joints, but did not allow endocrinologists to perform these scans. One of  the RBMs we interviewed permitted ear, nose, and throat physicians to  perform CT scans of the sinuses, head, or neck but none below the neck.  Plan and RBM officials told us that their privileging rules were based on  established medical practice guidelines and research and that physicians  received advance notice of the plan’s privileging rules—that is, which  specialties were permitted to perform specific services. Plans enforced  adherence to these rules through their claims adjudication systems: if a  physician was not privileged to order or perform a specific imaging  service, the plans would not pay for the images taken or interpreted.  Typically, radiologists were allowed to perform all imaging services  because of their imaging-specific education and training.
Profiling is a practice that is carried out through a statistical analysis of  paid claims. Eight of the plans in our study used profiling to collect  information about individual physicians’ ordering history and provision of  imaging services. Using this information, the plans compare a physician’s  practice patterns against a benchmark, or norm, based on the practice  patterns of the plan’s other physicians in the same specialty. Typically, the  plans inform physicians of their relative performance based on these  profiling analysis results and provide additional education to physicians  who order inappropriately or order at rates higher than their peers. An  official at one RBM we interviewed noted that in addition to the  contemporary peer comparisons, the firm’s profiling activities include  longitudinal analyses to determine if a physician’s ordering of services has  increased over time relative to the physician’s peers regionally and  nationally. The official noted that after implementing its profiling program,  the RBM observed a reduction in the number of images ordered by  physicians who provide high-technology imaging in their own offices.  Prior to profiling, these physicians provided three to five times more  imaging services than their counterparts who referred the imaging services  to other practitioners or facilities.
section_title: CMS’s Management Activities, Focusing on Improper Billings, Have a Retrospective Rather Than Prospective Orientation
paragraphs: Unlike the private plans in our study, CMS’s management practices are not  oriented toward controlling spending prospectively—that is, through  preapproval practices, such as prior authorization and privileging. Instead,  CMS employs, through its claims administration contractors, an array of  retrospective payment safeguards, or activities, that occur in the post- delivery phase of monitoring services. These activities are designed to  achieve payment accuracy; in fact, CMS evaluates contractors’  performance in terms of a payment error rate.
In general, the contractors responsible for administering Part B payments  are required to perform ongoing data analyses and take action on the  services or physicians that present the greatest risk of improper payments.  The contractors use various techniques, such as profiling, to examine  unexplained increases in utilization, abnormally high utilization of services  by an individual physician relative to the physician’s peers, and other  indicators of aberrancies. Some of the analyses result in recovering  overpayments from individual physicians who have been found to bill the  program inappropriately. They have also resulted in producing the  evidence needed to modify coverage or payment policies at the local  contractor level—referred to as a local coverage determination. For  example, with respect to imaging services, one contractor that had  conducted reviews of echocardiograms, nuclear medicine, and PET and  CT scans, modified its coverage policies for these services by limiting the  number of times the services could be billed for an individual patient  within a certain time frame.
In a 2007 report, we concluded that CMS’s existing physician profiling  and educational outreach activities, while focused largely on improper  billing practices and potential fraud, put the agency in a favorable position  to adopt profiling as a strategy to curb inappropriate spending resulting  from physicians’ inefficient practices. As with the private plans we  reviewed for this study and the health care payers in our 2007 study, a  consequence of profiling for efficiency could be to achieve physician  compliance with clinical practice standards and, in doing so, reduce  inappropriate ordering and use of services. In response to our  recommendation to adopt an efficiency-oriented profiling program, CMS  commented that this program fit into efforts the agency was pursuing to  improve quality and efficiency in Medicare.
To that end, CMS has contracted with a firm to develop efficiency  measures for certain anatomically-specific imaging services with an  anticipated completion date of December 2008. These measures are to be  based on clinical evidence and are designed to provide the agency, in the  firm’s words, “the ability to more effectively manage the rapid diffusion of  new technologies and patient-driven demand.” The firm plans to test these  measures and provide insight into their development and use. In the case  of lumbar MRI, for example, the plan is to track physicians’ behavior with  respect to the conventionally accepted use of this service—namely, that  the service is not typically indicated unless the patient has received a  period of conservative therapy. Using a coding system, the firm will track  whether the physician (1) provided documentation that the patient had a  trial of conservative therapy prior to the MRI, (2) provided no  documentation or conservative therapy prior to the MRI, or   (3) documented that the patient did not require conservative therapy. The  codes, in this instance, are intended to capture whether appropriate  evidence-based guidelines were adhered to.
CMS officials indicated that approaches, such as prior authorization,  would likely require significant administrative resources. In addition, they  stated that they were not aware of any statutory provision either explicitly  authorizing or prohibiting the use of such approaches. Accordingly, they  stated that if they were to pursue prior authorization, they would need to  evaluate any specific initiatives in light of CMS’s overall authority with  respect to the Medicare program.
section_title: Conclusions
paragraphs: The rapid increase in Medicare spending on imaging services paid for  under the physician fee schedule from 2000 to 2006 poses challenges for  CMS in managing the spending growth on these services. While much of  this growth may be appropriate, the pace of increase and shift towards  more costly advanced imaging; a shift towards providing imaging in  physician offices, where there is generally less oversight; broader use of  imaging by physician specialties other than radiologists; and the  substantial variation of in-office imaging spending per beneficiary across  geographic regions of the country raise concerns. Our examination of  private plans—selected because they were known to take steps to actively  manage imaging services—provides examples of practices to constrain  spending growth. Unlike CMS, the private plans in our study had  management practices oriented toward controlling spending prospectively  rather than solely focusing on activities that occur after the imaging  service has been provided to the beneficiary. Specifically, our examination  of these plans found a common thread that requiring prior authorization of  certain imaging services, such as advanced imaging services, was effective  for them in reducing spending growth in this area.
Given the pressures of a fiscally unsustainable Medicare program, CMS  has undertaken several initiatives aimed at improving its performance as a  purchaser of health care services. With respect to rapidly growing imaging  services, the experience of the private plans in our study suggests that the  benefits of front-end management of these services exceeded their costs.  We believe CMS may be able to improve its prudent purchaser efforts by  adopting strategies such as prior authorization and privileging. To do this,  CMS would need to assess the feasibility of using these approaches for  imaging services under the Medicare Part B program, including the costs  or staffing resources needed to carry out these activities and the potential  savings that might accrue from these activities. Moreover, CMS would also  need to assess any specific activities in light of its authority under the  Medicare program and determine if additional legislation is necessary.
section_title: Recommendation for Executive Action
paragraphs: To address the rapid growth in Medicare Part B spending on imaging  services, we recommend that CMS examine the feasibility of expanding its  payment safeguard mechanisms by adding more front-end approaches to  managing imaging services, such as privileging and prior authorization.
section_title: Agency and Professional Association Comments and Our Evaluation
paragraphs: We obtained written comments on a draft of this report from HHS (see  app. V). We obtained oral comments from representatives of two  organizations, AHIP and AMIC, selected because they represent a broad  array of stakeholders with specific involvement in the imaging industry.
subsections: section_title: HHS Comments
paragraphs: HHS stated that, through ongoing data analysis and evaluation, Medicare  contractors have identified imaging services as an area that poses a high  risk to the Medicare Trust Fund, and are therefore continuing to conduct  ongoing medical review and provider education. We are pleased that CMS  contractors are scrutinizing imaging services through post-payment claims  review; however, as we noted in the draft of this report, we believe that  more front-end approaches to managing these services may also be  desirable.
Regarding our recommendation, HHS raised several concerns about the  administrative burden, as well as the advisability of prior authorization for  the Medicare program. First, the agency said there was no independent  data—other than self-reported—on the success of RBMs in managing  imaging services. Second, it stated that RBMs’ use of potentially  proprietary information, including clinical guidelines and protocols for  approval of services, may be inconsistent with the public nature of  Medicare. Third, the effectiveness of a prior authorization program could  be diminished if a high proportion of denied services were overturned  through Medicare’s statutory and regulatory appeals process. HHS also  raised a question about how prior authorization would fit within its  current post-payment review program.
Regarding the effectiveness of prior authorization and use of RBMs in the  private sector, as we noted in the draft report, all the plans in our study  had implemented some form of a prior authorization program, and all but  one had hired an RBM to manage imaging services for its enrollees. It is  unlikely that these plans—ranging in size from small FEHBP plans to  nationwide private sector plans with up to 34 million covered lives— would incur RBM fees to implement prior authorization unless they  believed it to be effective. As we also noted in the draft report, the use of  prior authorization as a tool to manage imaging is a growing trend in the  private sector. We do not dispute HHS’s reservations about prior  authorization, and agree that these concerns will require careful  examination within the context of Medicare statutes and regulations.
Because we believe post-payment claims review alone is inadequate to  manage one of the fastest growing parts of Medicare, addressing these  concerns should be incorporated into CMS’s feasibility analysis of adding  front-end approaches to its prudent purchasing efforts. If Medicare is to  become a “value-based” purchaser of health services, for the sake of both  its beneficiaries and taxpayers, it should consider going beyond its  traditional methods of managing benefit payments to achieve this result.
section_title: Professional Association Comments
paragraphs: AHIP and AMIC representatives presented contrasting concerns about our  discussion of prior authorization in the draft report. AHIP representatives  characterized prior authorization as primarily an educational tool to  persuade physicians to prescribe imaging studies in conformance with  practice standards, while AMIC representatives characterized it as a cost- cutting tool that achieves savings by imposing burdens on physicians, with  little or no educational benefit. Their views on the value of RBMs as  implementers of prior authorization are similarly contrasting.
Specifically, AHIP representatives’ primary concern was our  characterization of prior authorization as a cost-control measure rather  than a tool used by plans to improve quality and ensure appropriate use of  imaging services by adherence to evidence-based guidelines. Officials we  interviewed from plans and RBMs generally viewed prior authorization as  the most effective tool to reduce inappropriate utilization and spending  growth rather than to improve quality—many of the representatives  described it as a utilization management tool. AHIP representatives said  the draft report did not include provider consultations with radiologists as  another strategy that plans employ. We have revised the report to note that  providers have that option if they disagree with a plan’s initial decision to  disapprove a requested imaging service. AHIP representatives also raised  concerns that the draft report did not give sufficient attention to market  structure incentives, such as leasing arrangements and manufacturers’  attempts to increase acquisition of imaging equipment. Our report does  address the topic of incentives for inappropriate use of imaging; however a  detailed analysis is beyond the scope of our work. AHIP representatives  also provided technical comments, which we incorporated as appropriate.
AMIC representatives raised four principal concerns about the draft  report. First, they stated the draft report should have focused on strategies  such as accreditation (which improves quality), and adherence to clinical  practice guidelines (that result in appropriate use of imaging services),  rather than private sector strategies such as use of RBMs, prior- authorization, and other techniques which focus solely on controlling  costs. Specifically, AMIC representatives expressed several concerns  about RBMs. They stated that the for-profit structure and lack of  transparency in sharing appropriateness guidelines make RBMs  incompatible with the Medicare program. They also contended that there  is no evidence that RBMs improve care or add value, and RBMs involve  physicians in lengthy interactions. Moreover, they stated that prior  authorization had been tried and proven unfeasible for Medicare for lack  of sufficient administrative resources. In the draft report, we noted plans’  increasing use of accreditation to assure quality of imaging services. With  regard to prior authorization and RBMs, we are recommending that CMS  consider the feasibility of these and other front-end approaches. We would  also note that while HHS indicated that prior authorization might be  inconsistent with the Medicare program, the department did not rule it out  as a strategy that had been tried and proven unfeasible for Medicare.
Second, AMIC representatives stated that in emphasizing spending growth  we had failed to recognize the benefits of imaging and its effects in  reducing overall health costs by substituting for more invasive procedures  or treatments. We acknowledged the benefits of imaging throughout the  draft report and noted that while some of this spending growth may be  appropriate, financial incentives inherent in Medicare’s payment policies  for potentially inappropriate use of imaging in physicians’ offices, and  their implications for a fiscally unsustainable Medicare program cannot be  ignored. We are not aware of any peer-reviewed studies that conclusively  show the role of imaging in reducing overall health care costs.
Third, AMIC representatives stated that by focusing only on Part B  spending under the physician fee schedule, the draft report did not  acknowledge growth in imaging across other sites of care such as  hospitals. As we stated in the draft report, Medicare’s physician payment  policies contain financial incentives for physicians to directly benefit from  higher fees paid for the provision of imaging services in their offices, while  receiving lower fees for interpretation of in hospitals. However, we have  added additional information to the report, noting that about two-thirds of  all imaging services were delivered in the hospital setting in 2006, and that  spending on imaging services delivered in physician offices grew twice as  fast compared to spending on services delivered in the hospital setting.
AMIC’s fourth concern was that the draft report did not discuss the  fairness of the payment reductions resulting from the changes mandated in  the DRA. As noted in the draft report, we will examine the effects of  payment changes mandated by the DRA in a separate report.
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section_title: Appendix I: Scope and Methodology
paragraphs: To determine trends in Medicare Part B spending, we analyzed Medicare  claims data from 2000 through 2006 using the Part B Extract Summary  System (BESS)—a data source that aggregates data to the billing code  designated under the Healthcare Common Procedure Coding System  (HCPCS). We extracted claims where the first digit of the Berenson-Eggers  Type of Service (BETOS) code was equal to “I”, indicating the line item  was an imaging service. On the basis of data from the Denominator File— a database that contains enrollment data and entitlement status for all  Medicare beneficiaries enrolled and/or entitled in a given year—we  excluded beneficiaries who had 12 months of enrollment in a health  maintenance organization in a given year. We aggregated the 18 BETOS  categories into six major categories of imaging services, also referred to as  modalities: CT, MRI, nuclear medicine, ultrasound, procedures that use  imaging, and X-rays and other standard imaging. Our spending totals  include two parts of the imaging service paid for by Medicare: (1) the  technical component—the performance of the examination itself, and the  (2) professional component—the physician’s interpretation of the  examination.
We also examined the association between growth in total Part B imaging  spending and various factors, including the growth in the volume and  complexity of services, the number of Medicare fee-for-service  beneficiaries, and Medicare fees for imaging services. To do this, we first  calculated the growth in total Part B spending from 2000 through 2006 and  then estimated the relative contribution of each factor to the growth in  total Part B imaging spending. To estimate the effect of volume and  intensity on the growth in total spending, we totaled the Relative Value  Units (RVU) associated with each imaging service from 2000 and 2006.  Because RVUs for imaging services may change from year to year, we used  RVUs for the most recent year for which data were available, 2006. We  estimated the effect of separately billed items used to deliver imaging  services, such as radioactive agents and iodine supplies, by comparing  total spending on these items in 2000 and 2006. Physicians submit separate  bills for these items and are paid based on prices established by  Medicare’s claims administration contractors. These services are not  assigned RVUs in the physician fees schedule. We compared the number of  Medicare beneficiaries from 2000 to 2006 to determine the effect of their  growth and compared changes in Medicare fees for imaging services using  the Medicare conversion factor in 2000 compared with 2006. To determine  the share of Medicare beneficiaries who received any imaging services  and, for those beneficiaries, the average number of services provided, we  used Medicare Part B Physician/Supplier Claims data for 2000 and 2006  and Denominator File data for those same years.
To supplement our quantitative examination of spending trends and to  understand stakeholder perspectives on these trends, we obtained  information from 19 physician specialty groups, including the American  College of Cardiology and the American College of Radiology. These 19  specialties were chosen because imaging is integral to their practices. In  addition, we interviewed officials from two organizations, the Access to  Medical Imaging Coalition and the Medical Imaging & Technology Alliance  (a division of the National Electrical Manufacturers Association), that  represent a diverse and large number of stakeholders including equipment  manufacturers, physician specialties, patient-advocacy organizations, and  others. We also interviewed representatives from America’s Health  Insurance Plans (AHIP), a trade association that includes about 90 percent  of health insurers, 17 private plans, and five of the largest RBMs that  manage imaging services for health plans.
To examine the relationship between spending growth and the provision  of imaging services in physician offices, we analyzed Medicare claims data  from 2000 and 2006. We first examined the extent to which Medicare   Part B spending on imaging services shifted to physician offices from  Independent Diagnostic Testing Facilities (IDTF) and hospital inpatient,  outpatient, and emergency room settings. To examine geographic  variation in per beneficiary spending on in-office imaging, we divided total  in-office spending for each state by the number of Medicare beneficiaries  for that state. However, since total in-office spending may vary across  states because of Medicare’s geographic price differences, we derived an  adjusted spending total by multiplying the total RVUs for in-office imaging  in each state by the national Medicare physician fee schedule conversion  factor. For this analysis, we excluded data from Hawaii because spending  per beneficiary appeared to be too low compared with other states of  similar size and Medicare beneficiary population.
We also examined how physicians’ share of their Medicare Part B revenue  from imaging services has changed during this period and its relationship  with certain physician specialties. Specifically, by physician specialty, we  examined the number of non-radiologists who submitted bills that  included the provision of the imaging examination, and the share of  overall allowed charges that were attributable to imaging services  provided in physician offices. To do this, we used Medicare Part B claims  data from the National Claims History files and constructed data sets for  100 percent of Medicare claims for physician services performed by  physicians in the first 28 days of April 2000 and April 2006. We established  a consistent cutoff date (the last day of the year) for each year’s data file  and only included those claims for April services that had been submitted  by that date. Because claims continue to accrete in the data files, this step  was necessary to ensure that the earlier year was not more complete than  the later year. If non-radiologist physicians performed imaging  examinations, either billed separately or in conjunction with an  interpretation, and the place of service was “physician’s office,” then they  were deemed to be performing those services in-office. We focused on  non-radiology specialties that had at least 500 individual physicians who  billed Medicare for any service and at least 5 percent of those billed for  any imaging in the period examined, which yielded 297,000 physicians in  2000 and 353,000 in 2006.
To examine the approaches used by private payers that may have lessons  for Medicare in managing spending on imaging services, we selected 17  private payers known to be active in managing imaging benefits that  included a combination of national and regional payers. We selected five  plans because they had publicly presented information to the Congress or  MedPAC on prior occasions about their imaging management practices, or  had descriptions of their programs appear in the medical literature. We  selected six private plans offered to federal employees under the Federal  Employees Health Benefits Program (FEHBP), and six private plans  identified through our interview with AHIP. Appendix IV provides  characteristics of our sample of private plans. We conducted interviews  with, or submitted questions to, these plans. We also interviewed five  radiology benefits managers—organizations hired by private payers to  manage radiology services for their enrollees—to learn about the  management practices that they use to manage spending on imaging  services. To determine what management practices the Centers for  Medicare and Medicaid Services (CMS) uses for imaging services, we  interviewed CMS officials including those from the Office of Clinical  Standards and Quality, the Coverage and Analysis Group, and the Program  Integrity Group, and officials from Medicare Part B contractors that  together process claims for nine different states.
We conducted our work from January 2007 through May 2008 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Medicare Spending on Imaging Services Paid for under the Physician Fee Schedule by Modality, 2000 through 2006
section_title: Appendix III: Medicare Imaging Use by Modality, 2000 and 2006
section_title: Appendix IV: Characteristics of GAO Sample of Private Plans That Actively Manage Imaging Services (February 2008)
paragraphs: Appendix IV: Characteristics of GAO Sample  of Private Plans That Actively Manage  Imaging Services (February 2008)
Approximate  number of  covered lives  1 million  MA, NH, and ME Yes  438,000  MN, ND, SD,  1 million  LA, KY, parts of  1.9 million  PA and NJ  area, IL, and IN  78,000  MO, OH, and CA Yes  34 million  CA, CO, CT, GA,  IL, IN, KY, MA,  ME, MO, NV,  NH, NY, OH, TX,  VA, and WI  UniCare is owned by Wellpoint.
section_title: Appendix V: Comments from the Department of Health and Human Services
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact name above, Jessica Farb and Thomas A. Walke,  Assistant Directors; Todd Anderson; Iola D’ Souza; Hannah Fein;   Julian Klazkin; Emily Loriso; and Richard Lipinski made key contributions  to this report.