MRI and CT services are two types of medical imaging that aid in the diagnosis and treatment of myriad diseases and disorders. Medicare reimburses providers for performing the services and, subsequently, interpreting the results. Payment for the performance of the service can be made through different payment systems, depending on where the service is performed. In 2010, 6.8 million MRI and CT services were performed in a physician office or IDTF, representing about 23 percent of all MRI and CT services received by Medicare FFS beneficiaries. CMS has implemented several policies to limit self-referral, and MedPAC and other researchers have proposed further reforms. 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. MRI and CT services are two of the six medical imaging modalities. MRI services use magnets, radio waves, and computers to create images of internal body tissues. CT services use ionizing radiation and computers to produce cross-sectional images of internal organs and body structures. For certain advanced imaging services, 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, providers can view soft tissue and organ function more clearly. MRI and CT services help diagnose and treat many diseases and disorders such as different types of cancer, cardiovascular diseases, and musculoskeletal disorders. They can also reduce the need for more- invasive medical procedures and improve patient outcomes. Medicare payments for advanced imaging services are separated into two components—the technical component (TC) and the professional component (PC). The TC is intended to cover the cost of performing a test, including the costs for equipment, supplies, and nonphysician staff. The PC is intended to cover the provider’s time in interpreting the image and writing a report on the findings. The PC and TC can be billed together, on what is called a global claim. The components can also be billed separately. For instance, a global claim could be billed if the same provider performs and interprets the examination, whereas the TC and PC could be billed separately if the performing and interpreting providers are different. Typically, the Medicare payment for the TC is substantially higher than the payment for the PC. For instance, for a CT of the pelvis with dye billed under the 2010 Medicare physician fee schedule, the TC accounted for 79 percent of the total payment, and the PC accounted for 21 percent. Medicare reimburses providers through different payment systems depending on where the advanced imaging service is performed. When an advanced imaging service is performed in a provider’s office or an IDTF, both the PC and TC are reimbursed under the Medicare physician fee schedule. Alternatively, when the service is performed in an institutional setting, such as a hospital outpatient or inpatient department, the provider is reimbursed under the Medicare physician fee schedule for the PC, while the TC is reimbursed under a different Medicare payment system, according to the setting in which the service was provided. For instance, the TC of an advanced imaging service performed in a hospital outpatient department is reimbursed under the Medicare hospital outpatient payment system, while a service performed in a hospital inpatient setting is reimbursed through a facility payment paid under Medicare Part A. In 2010, Medicare FFS beneficiaries received 30.0 million advanced imaging services, approximately 6.8 million (23 percent) of which were performed in an IDTF or physician’s office. Of the 6.8 million advanced imaging services performed in an IDTF or physician’s office, 2.9 million were MRI services and 3.9 million were CT services. The remaining 23.2 million advanced imaging services were performed in other settings, such as hospital inpatient or outpatient departments, and their associated TCs were billed through different payment systems (see fig. 1). The total expenditures for all advanced imaging services billed under the Medicare physician fee schedule, including TCs and PCs, reached $4.2 billion in 2010. Numerous policies have been implemented or proposed by CMS, MedPAC, or other researchers that are designed to limit self-referral or reduce inappropriate utilization of advanced imaging services. These policies can affect self-referral or advanced imaging utilization through various means such as prohibiting different types of physician self- referral, informing beneficiaries of physician self-referral, mandating accreditation of staff performing MRI and CT services, improving payment accuracy, reducing payments for self-referred services, and ensuring services are clinically appropriate. One type of physician self-referral arrangement that CMS has prohibited is “per-click” self-referral arrangements where, for instance, a physician leases an imaging machine to a hospital, refers patients for imaging services, and then is paid on a per-service basis by the hospital. CMS has also solicited comments on prohibiting self-referral of diagnostic tests provided as an ancillary service in a physician’s office that are not usually provided during an office visit, because a key rationale for permitting self-referral of such services is that receiving a diagnostic service during the same office visit when a physician orders a test is convenient for beneficiaries. MedPAC, in its June 2010 report to Congress, noted that MRI and CT services were performed on the same day as an office visit less than a quarter of the time, with only 8.4 percent of MRI services of the brain being performed on the same day as an office visit. Appendix II lists a select number of such policies in addition to these two policies that have been implemented or put forth by CMS, MedPAC, and other researchers. From 2004 through 2010, the number of self-referred MRI and CT services performed in a provider’s office and non-self-referred MRI and CT services performed in a provider’s office or IDTF increased, with the larger increase for self-referred services. Similarly, expenditures for self- referred advanced imaging services also increased over this period, and this increase was larger than the changes in expenditures for advanced imaging services that were not self-referred. Over the period we reviewed, the share of advanced imaging services that were self-referred also increased overall and across all provider specialties we examined. While the number of self-referred MRI services performed in a provider’s office and non-self-referred MRI services performed in a provider’s office or IDTF both increased from 2004 through 2010, a significantly larger Specifically, the increase occurred among the self-referred services.number of self-referred MRI services increased from about 380,000 services in 2004 to about 700,000 services in 2010—an increase of more than 80 percent (see fig 2). In contrast, the number of non-self-referred MRI services grew about 12 percent over the same time period, from about 1.97 million services in 2004 to about 2.21 million services in 2010. Despite an overall increase during this time, both self-referred and non- self-referred services declined at some point during the years of our study. However, the number of self-referred services grew faster in the earlier years and declined less in the later years than the number of non- self-referred services. Similar to MRI services, the number of self-referred and non-self-referred CT services both increased from 2004 through 2010, with a considerably larger increase occurring in self-referred services. Specifically, the number of self-referred CT services more than doubled from 2004 through 2010, growing from about 700,000 services to about 1.45 million services (see fig. 3). In contrast, the number of non-self-referred CT services increased about 30 percent during these years, from about 1.90 million services to about 2.48 million services. Although the number of both self-referred and non-self-referred CT services increased over the period of our study, the number of non-self-referred CT services decreased from 2009 through 2010. The number of self-referred advanced imaging services increased from 2004 through 2010, even after accounting for change in the number of Medicare FFS beneficiaries. Specifically, the number of self-referred MRI services per 1,000 Medicare FFS beneficiaries grew from 10.8 in 2004 to 20.0 in 2010—an increase of about 85 percent. Similarly, the number of self-referred CT services per 1,000 Medicare FFS beneficiaries more than doubled, growing from about 19.6 in 2004 to 41.2 in 2010. Expenditures for self-referred MRI services grew overall from 2004 through 2010, while expenditures for non-self-referred MRI services declined. Specifically, self-referred MRI expenditures grew about 55 percent during the time of our review, from approximately $239 million in 2004 to about $370 million in 2010 (see fig. 4). In contrast, expenditures for non-self-referred MRI services decreased about 8.5 percent during the same period. Expenditures for both self-referred and non-self-referred MRI services increased rapidly from 2004 through 2006, then decreased sharply in 2007. These declines in 2007 corresponded with the first year of implementation of a DRA provision that reduced fees for certain advanced imaging services. Since the declines in 2007, expenditures for non-self-referred MRI services have declined further while self-referred expenditures have increased. Relative to 2004, expenditures for both self-referred and non-self-referred CT services have grown through 2010, but the increase was larger for self-referred CT services (see fig. 5). Specifically, expenditures for self- referred CT services increased from $204 million in 2004 to about $340 million in 2010, an increase of about 67 percent. In contrast, expenditures for non-self-referred CT services increased from about $609 million in 2004 to about $642 million in 2010, an increase of about 5 percent.