Over the past 15 years, medicine has seen some of the most
profound changes, both in technology and administrative operations.
While rapid growth in the medical imaging area is being enhanced by
new modalities, reimbursement for medical and imaging services has
progressively decreased. On the in-patient side, during the early
1980s we became concerned that the introduction of diagnostic
related groups (DRGs) would lead to significant decrease in volume
and revenue for medical imaging departments.
The response to DRGs was a shift to outpatient examinations. For
example, in our department, prior to DRGs, 25% of imaging studies
were done on outpatients and 75% on an in-patient basis. Today,
those numbers have flipped around, with the vast majority of
studies being done on an outpatient basis.
Additionally, as the general population has aged, the percentage
of Medicare patients in a given practice has inched up perceptibly.
In our practice over the last several years, the number of Medicare
patients has increased from about one-third to better than one-half
of the patients we see. No one has felt terribly insecure about
this because as managed care came on the scene, Medicare became an
excellent payer by comparison. The steep discounts accorded to
managed care were in part recouped from the high volume of Medicare
studies performed at a less discounted rate. Currently, we are
about to see yet another change in medical economics, this being a
profound change in the hospital outpatient reimbursement structure
for not only radiology, but all other hospital services as
Congress has mandated that, effective January 1, 1999, the
Healthcare Financing Administration (HCFA) implement a new
reimbursement system, known as ambulatory payment classes (APCs).
These ambulatory payment classes are part of a transition to a
system that is similar to the DRG system for in-patients. Each APC
will encompass a number of procedures that were formerly billed
independently, by CPT code. Further, each APC will have its own RVU
value and there will be a conversion factor that permits the APC to
be translated into monetary reimbursement. The APC system, as it
has been developed, is an attempt to have resource utilization
determine reimbursement. The cost of equipment involved, the cost
of pharmaceuticals involved, the cost of time, and all other costs
(except physician costs) are factored into this system.
The implications of an APC system are highly significant.
Separate billing for radiographic contrast and radiopharmaceuticals
will be eliminated. These costs are to be bundled into the APC
itself. However, because each APC encompasses a number of CPT
codes, there is significant room for error. The data being used by
HCFA is derived from blended cost reports submitted by hospitals in
1996. At present, this data is already two years out-of-date. In
addition, we are well aware that some Medicare intermediaries
(local carriers) have incorrectly coded much of the material that
goes into HCFA as a whole. There are significant errors in this
data, as typified by the reported performance of examinations for
which pharmaceuticals are no longer available.
The hospital community has been strangely quiet on the
implementation of this system. In May, the Healthcare Financing
Administration was scheduled to publish in the Federal Register its
proposal for the APC system. Following publication, the public has
60 days to file comments with the Healthcare Financing
Administration concerning the proposal. We urge you to obtain a
copy of this proposal and to judge its potential impact on your
department's operations. With Medicare representing up to a 60%
discount in some settings, further discounting could be financially
disastrous for your hospital operation.
Some physician groups have taken the stance that because this is
a hospital problem, they are not directly involved. Nothing could
be further from the truth. If the medical imaging departments do
not continue to be financially viable within an institution,
capital funds will not be available to purchase or upgrade imaging
systems. At a time when new technology is at the most exciting
level it has been in 30 to 40 years, medical imaging progress could
grind to a halt.
In or about October 1998, the Healthcare Financing
Administration will publish a final ruling, implementing APCs as of
January 1, 1999. This will be a four-year phased-in process using
25% APC payment and 75% existing system payment in year 1, 50-50 in
year 2, etc.
As physicians, we have the obligation to offer the best service
we can to the patients in our care. Potentially, the implementation
of the APC system will have tremendous effects on the quality of
care we can offer. While the HCFA feels that Medicare patients
would still receive the same care as non-Medicare patients, we know
that if economic pressures exist at the hospital level, patients
without adequate reimbursement for services may be shunted to other
We urge you to pay close attention and raise with your hospital
administration the issues concerning APCs and how they will affect
your institution. Advanced planning in this situation is vital, as
a readjustment in services may likely occur when APCs are
implemented. Staffing, the replacement policies for equipment, and
perhaps the number of radiologists required will all be impacted by
this proposal. As we often tell people requesting stat studies,
"lack of advance planning does not constitute an emergency."
Dr. Henkin is Professor of Radiology and Director of Nuclear
Medicine at Loyola
University Medical Center in Maywood, IL. He is also a member of
advisory board of this journal.