Passed by Congress in 2005, the Deﬁcit Reduction Act of 2005 (DRA) placed limits on reimbursements for the technical component of imaging services performed in the ofﬁce setting. Effective January 2007, under DRA, imaging services performed in the ofﬁce are now reimbursed at a level equal to the lesser of the amount provided under the Medicare Physician Fee Schedule or the amount payable to hospitals under the Outpatient Prospective Payment System (Table 1). With several months of decreased reimbursement now behind them, independent imaging centers are beginning to feel the effects of this policy.
Passed by Congress in 2005, the Deficit Reduction Act of 2005
(DRA) placed limits on reimbursements for the technical component
of imaging services performed in the office setting. Effective
January 2007, under DRA, imaging services performed in the office
are now reimbursed at a level equal to the lesser of the amount
provided under the Medicare Physician Fee Schedule or the amount
payable to hospitals under the Outpatient Prospective Payment
System (Table 1). With several months of decreased reimbursement
now behind them, independent imaging centers are beginning to feel
the effects of this policy.
"The biggest effect, obviously, is diminished reimbursement,"
said David H. Stemerman, MD, Medical Director, Open High-Field MRI
and CT of Westchester, an independent imaging center that offers
magnetic resonance (MR) imaging, computed tomography (CT),
ultrasound, and bone densitometry in Larchmont, NY. "Consequently,
it means having to work a lot harder to maintain the same amount of
According to a study commissioned by the Access to Medical
Imaging Coalition (AMIC)-a consortium that includes the American
College of Radiology, physicians, patients, and manufacturers-and
performed by The Moran Company (Arlington, VA), "the majority of
those procedures whose payment is affected by the DRA caps would be
paid, under those caps, an amount less than the estimated cost of
performing the procedure in the office setting."
Specifically, the report found that in 2007, 155 of 174 (89%) of
the DRA-capped procedures for which complete data were available at
the time of the study will be paid at rates below the estimated
cost of performing the study. And the problem is only expected to
increase. The same report found that by 2010, 99% of these
procedures would be reimbursed below cost.
In addition to the federal cuts, some private payers are
decreasing payments to independent imaging centers as well. "I
can't attest that they are matching what the federal system did,"
said Stemerman, "but private payers definitely have cut their
reimbursement. In some cases, some of the reimbursements don't even
cover our costs. Yet the cost of supplies has not diminished
proportionally. We're bringing in less, and our costs are getting
So what can imaging centers do to remain viable in this era of
decreased income? Most experts agree: imaging centers need to look
for ways to reduce costs and maximize income. "Cost reduction is
key," said Tim Jablonski, Vice President of Marketing at Codonics,
Inc., Middleburg Heights, OH, a manufacturer of medical imagers.
"Focus on the areas that give you the biggest return on investment.
Be more competitive. Drive more referral business and concentrate
on the 'cash cow' services."
The first thing that most imaging centers must do is to conduct
a thorough review of their entire practice to look for areas in
which greater efficiencies can be achieved. "We spend a lot of time
finding ways to work more efficiently with less, or we just cut out
services altogether," said Stemerman. He noted that his
organization has looked at all aspects of the business, even down
to the cost of their phone service. "We're now working with a cable
phone system because it is so much cheaper than traditional phone
service. Until this point, we never gave it a second thought," he
Other overhead costs, such as staffing, have also come under the
knife at Stemerman's center. "We work with less staff or less
expensive staff, such as part-time students instead of full-time
administrators or secretaries," he said.
Imaging centers must also thoroughly review their imaging
workflow and search for potential cost savings there as well. For
Stemerman's group, this meant converting almost entirely to digital
imaging, with all studies stored on a PACS and output to CDs, DVDs,
and/or paper, thereby eliminating the bulk of the cost for film and
film processing. "We have nearly eliminated the use of film because
it was too expensive," he explained. "We couldn't afford it. So we
converted to a digital system, giving patients and doctors CDs
because the cost is phenomenally cheaper."
Currently, Stemerman noted, approximately 90% of their studies
are completely digital, with film printed only at the specific
request of the referring physician or the patient. "We will print
film only by request or under special circumstances, such as when
somebody doesn't have a computer," he said.
Installing a CD/DVD burner for imaging studies can provide many
benefits to an imaging center, according to Jablonski. "First and
foremost, it offers reduced cost alternatives to film. You can send
fewer films along with a CD or DVD that contains the entire study
and still reduce your expenses for what you are sending to the
When considering image output, it's important to look at the
total cost of operating the system, he added. "Imaging centers must
consider the cost of the equipment, the consumables, and servicing
and support of that equipment throughout its entire lifespan. The
equation is easy. Take the cost of the imager plus how many films
per year you will use times the cost of film; add that to the
service cost per year, and you have the total cost of printing," he
explained. "You amortize all these costs into each patient's study.
The lower your overhead, the more competitive you are going to be;
and the more competitive you are, the better the return will be on
Jablonski also recommends that imaging centers consider
equipment size and service concerns when choosing imagers. "I would
draw a parallel to the cellular phone industry: years ago we had
phones that were the size of a brick and did very little; today we
have phones that are very small and do much more. Our impression at
Codonics is that smaller is better in the imaging center
environment. When you look at the cost equation, a 400- or
500-pound machine is very difficult to service, requiring repairmen
to come onsite, whereas a 60-pound machine can be swapped if
anything happens, and you get instant uptime."
In addition to trimming costs, it's essential that imaging
centers optimize every revenue opportunity through increased
referrals and maximum uptime on their imaging systems. "We are
constantly looking for additional referrals," said Stemerman. "We
spend a lot of time marketing ourselves. It's similar to running an
airline: if the plane doesn't fly, it loses money. If our magnet
isn't operating, it's lost revenue."
Take-home CDs/DVDs and color paper printouts of images can also
be used as marketing tools, Jablonski noted. "In many cases, the
user can provide a better marketing presentation to the referring
physician," he said. "For example, if you previously sent a 4-film
study on a typical CT exam, you might send only 1 film and a paper
print, which is much easier for the referring physician to use to
communicate the diagnosis to the patient. You can also send a CD or
DVD containing the entire study. That whole package could cost less
than half of what 4 films would cost. In addition, referring
physicians see that as more value because they can communicate
better with their patients and provide them with very high-tech
images. It becomes a point of differentiation when one imaging
center provides those tools and another doesn't."
CDs and DVDs can be used as a marketing tool for patients as
well. "If a person like me has an executive study done, for
example, or a 64slice CT of my heart, I'm seeing those images in
color on the postprocessing workstation at the imaging center,"
Jablonski said. "If they then send me home with a film, I can hold
it up to the light to show my family, but if they handed me a color
picture of what was on the screen and I can take that home and show
my family and friends, that is a very different thing. Imaging
centers can be very smart in differentiating themselves and driving
more business by giving patients marketing tools such as CDs and
Once those patients have been referred and arrive at the imaging
facility, it's important that the center receive maximum payment
for the services rendered. "We've hired a person to abso-lutely
confirm that when a patient comes in, we will get reimbursed for
that study," said Stemerman. "That takes a lot of time and effort.
When we first opened up, we just trusted that we would get
reimbursed, but we've gotten burned so many times that now we
cannot just trust. For every time slot, for every patient who comes
in, it's important that we get paid."
Diminished revenues for imaging centers are also expected to
decrease their ability to purchase new technology. "Already there
have been things that I've wanted to do that have been put on hold
indefinitely," explained Stemerman. "We had broader plans that we
completely brought to a halt. We're making what we have work,
rather than putting ourselves out there even more and risking even
greater problems. I can't speak for equipment manufacturers
directly, but I suspect they must be hurting a little bit too."
Jablonski noted that he is already seeing the effects of DRA in
the number of new systems being acquired in the field. "When we are
talking about the new systems being sold by the major
manufacturers, where a peripheral like ours is included, fewer of
those systems are being acquired."
Purchasing new equipment can put quite a strain on an imaging
center, even during the best of times, Stemerman noted. "When
purchasing new equipment, the time to pay off the lease is very
aggressive, meaning that it is very short and the monthly payments
are very high," Stemerman explained. "That puts a tremendous burden
on the purchaser, especially on small groups like mine, to make
sure that every month we make that number."
In addition to the lease payment, Stemerman noted, there is also
the pressure of paying the monthly service fee. "In the next few
years, I think manufacturers are going to see that the service fee
is going to catch up," he said. "It's not all directly related to
the DRA, but it's all just accumulating; everyone is just chipping
away at an already sick system."
While some experts still hope for legislative relief to the
concerns of DRA, most believe that these cuts will remain in place
for the foreseeable future. Therefore, independent imaging centers
will need to learn to do more with less. "As business is shrinking
because of DRA, these are the key areas in which to concentrate,"
concluded Jablonski. "Decrease your costs, increase your business,
and focus on the studies that provide the greatest income."