Mr. Kolb is the President of Breast Health Management, Inc., Bend, OR. He has provided consulting services to R2 Technology, Inc., and holds a small equity position in the company.

Most physicians--and other healthcare providers who must make decisions concerning new medical technologies or techniques--are reluctant capitalists. While the first criteria for the purchase or adoption of the technology/technique is clinical efficacy, to be a sustainable addition it must also meet economic objectives. As one radiology practice manager recently commented to the author: "Our purchase decisions are based on how the technology advances our ability to deliver care, not on profitability concerns. Now, tell me about the reimbursement!"

There is nothing wrong with this approach. In fact, it is healthy. The appropriate allocation of scarce resources is a serious challenge in today's demanding healthcare environment. It is important to first determine the clinical benefit that will be conferred by a new technology or technique and then weigh that benefit against its cost and the return on the required investment or effort. Obviously, expensive technologies that present substantial clinical benefit but do not provide reimbursement to reasonably amortize the costs involved present a difficult challenge. There are, however, technologies like the computer-aided detection (CAD) technology for mammography that present a clear-cut decision. The analysis that follows will illustrate the decision process, using the ImageChecker system (R2 Technology, Los Altos, CA) as its example, since this currently is the only FDA-approved CAD technology.

The clinical decision

For several years, radiologists have known that double reading had the potential to reduce the false-negative rate in screening mammography. ^1-3 Methods for double reading vary from protocols that are designed only to increase the sensitivity of the review to those that also employ a consensus review in an effort to control the work-up or recall rate. Studies of the various methods have shown an increase in the cancer detection rate of up to 15%. ⁴ Unfortunately, double reading entails a significant additional investment in physician time and, equally important given the current shortage of breast radiologists, practical difficulties in implementation.

Throughout the 1990s, CAD was being developed and was gaining the interest of radiologists who saw it as a potential answer to the staffing issues posed by double reading. In mid-1998, the U.S. Food and Drug Administration (FDA) approved the ImageChecker. In its labeling statement approval, the FDA found that "for every 100,000 cancers currently detected by screening mammography, the use of the ImageChecker could result in early detection of an additional 20,500 breast cancers." ⁵

The sensitivity of the ImageChecker had been established in the clinical documentation presented to the FDA and had been supported by subsequent publications. ^6-8 But Freer and Ulissey ⁹ established that the ImageChecker could be integrated into clinical practice without unduly increasing the recall rate. A complete discussion of the Freer study is beyond the scope of this article; however, its conclusion is important. (For more detail, see the discussion with Freer and Ulissey on page 17 of this supplement.) To quote directly from the study of 12,860 women, "the authors observed the following: a) an increase in recall rate from 6.5% to 7.7%; b) no change in the positive predictive value for biopsy at 38%; c) a 19.5% increase in the number of cancers detected; and d) an increase in the proportion of early-stage (0 and 1) malignancies detected from 73% to 78%." ⁹

Simply stated, while use of the ImageChecker can be expected to increase the recall rate slightly, the increase is reflected in increased diagnosis of cancers, and those cancers will predominately be early-stage. This finding not only proves its clinical efficacy, but establishes it as a cost-effective technology insofar as its impact on procedural volumes and utilization are concerned.

The financial impact

With the clinical efficacy and utilization impact of CAD, the technology must be examined from a financial perspective. To do this properly, it is important to examine the additional costs that will be incurred, and then compare these costs with the expected additional revenue that will be generated by the technology.

The purchase of a CAD system represents a large capital expenditure, with essentially no supply cost (there is some cost for bar code supplies; however, these are reused and are therefore not considered as a variable cost). The only other significant costs are maintenance and any additional labor that may be required to accomplish the digitization process. Table 1 includes the basic assumptions for the model that the author utilized to analyze the ImageChecker.

In addition to the assumptions presented in Table 1, the author assumed that, at the volumes that would be analyzed, the model of ImageChecker selected would require 0.5 full-time equivalent (FTE) of a technical aide to digitize the mammographic images. Actual practice has shown that little additional time is required for this function; however, the model has been developed from an intentionally financially conservative perspective.

Because the costs are, for all intents and purposes, fixed, the additional cost increment added by the ImageChecker varies directly with volume (within the capacity of a given unit or number of units). Table 2 illustrates the cost per mammogram reviewed at varying annual volumes within the capacity of the equipment modeled. It should be noted that CAD review is an all-or-nothing proposition. Selective use of CAD on only a portion of screening mammograms would create significant standard-of-care issues.

Notice the variation on Table 2 between the columns for each daily volume. This model has assumed starting volume equivalents as shown, with a growth rate of 5% per year. The increased cost that occurs in year 2 is due to the maintenance/update charges that are assumed to commence in year 2.

The revenue picture is not as clear as the cost side. Congress legislated reimbursement for CAD (effective from April 1, 2001 to December 31, 2001) equivalent to $15.00 ($4.80 professional/$10.20 technical) in excess of the statutory screening mammography fee. The Center for Medicare and Medicaid Services (CMS--formerly the Healthcare Finance Administration) recently announced an increase in CAD reimbursement for 2002 to an expected rate of approximately $19.50 ($3.44/16.07). ¹⁰ (The 2001 Medicare conversion rate is used in this computation, and the conversion rate is expected to increase for 2002. The reimbursement code is Gxxx4.) The American Medical Association also recently announced the issuance of a separate CPT code for CAD, 76085, which will be used as an add-on code with the screening mammography code (76092).

Comparing the 2002 Medicare reimbursement rate with the costs listed in Table 2, it is clear that the breakeven point for CAD is slightly more than 15 mammograms per day. Unfortunately, this also assumes that all payors will reimburse at the Medicare rate and, sadly, that is not the case. As mentioned previously, payors tend to drag out the process of establishing reimbursement for new technologies. While R2 Technology has an organized reimbursement support effort and has been very successful in obtaining reimbursement, obtaining approval happens one company at a time, on a regional and even local level. It is expected that most, if not all, payors will reimburse for CAD within 1 year.

The expectation of rapid reimbursement acceptance is based upon the fact that breast disease has perhaps the highest emotional, political, and media profile of any U.S. healthcare issue. Women make most of the healthcare decisions in the United States, including the selection of a healthcare plan for their families. The issue of CAD reimbursement cannot be hidden. Approximately 60 million women in the United States are eligible for an annual screening mammogram. CAD analysis is a clinically proven, adjunctive study for screening mammography that applies to all screening mammography patients and therefore has a very large constituency.

It is the nature of commercial reimbursement systems to be very tentative in their acceptance of new technologies. These companies are, after all, businesses, and the engine of business is profit, even if that business is medicine. ¹¹ They are also pragmatic and, while they can delay reimbursement for CAD temporarily, there is a very real risk that prolonged denial may have a negative effect on subscriber enrollment. That is a risk that will prove to be too great.

For the sake of analysis, however, assume that commercial payors do not pay for CAD and that the only source of additional CAD revenue is from patients who agree to self-pay a $25 charge for the service. (Standard-of-care/risk-management considerations dictate that all screening mammograms receive the benefit of CAD.) Further assume that only 40% of non-Medicare patients self-pay. Given these assumptions, Table 3 illustrates the net revenue produced, after deducting the incremental cost of CAD, at each volume in excess of a breakeven volume. It is assumed that 30% of the mammography screening population is age 65 or older and enrolled in Medicare.

Despite the relatively dismal assumptions included in the model for Table 3, CAD appears to be cost-effective even at decidedly low volumes. In fact, the lowest volume on Table 3 is just slightly higher than full utilization of one mammography unit operating on a 20-minute screening schedule. Reports from early adopters of the ImageChecker system who have instituted self-payment programs indicate high patient acceptance rates. Increasing coverage by the popular media is likely to increase this acceptance ¹² and strengthen the pressure on payors to provide reimbursement.

What is the reimbursement environment likely to be in a year? Using the term "year" is rather generic. Some areas of the country are adopting CAD rapidly, and may mature earlier than areas in which the adoption, and consequent pressure on payors, is slower. Some areas of the nation also have more aggressive reimbursement environments, and there is wide variation in payment for medical services across the United States. If, however, a few assumptions can be made with respect to reimbursement levels, a picture of the future can be drawn.

Table 4 illustrates the financial results of applying the following assumptions in the author's model.

Charge: $45

Patient insurance coverage:

Medicare: 30%

Commercial coverage: 45%

Self-pay: 5%

Capitated: 20%

Note that the charge for CAD interpretation must be set significantly higher than the Medicare reimbursement rate because a significant percentage of payors will set payment rates as a percentage discounted from the "charge." The charge is almost never paid at the full rate. Commercial insurance is assumed to receive a discount of 40% of charges. Self-pay patients are given a discount of 30% off of charges. The capitated category includes patients for whom a new mammography rate cannot be negotiated or who, for whatever reason, will not pay any additional amount for CAD. While this percentage will undoubtedly decrease over time, it is included at this high level in the interest of maintaining a conservative bias to the financial projections.

Obviously, most practices and centers will fall in the lower end of this spectrum. It is especially important that a practice with 20 patients per day is well above the breakeven point for CAD, because this enables this important technology to be "driven down" to the nation's smaller communities that sometimes are not afforded the benefits of technological advance. This fact also makes it incumbent upon all payors to reimburse at levels that are high enough to make CAD economically viable. Although Table 4 illustrates that there is a substantial economic incentive for the implementation of CAD at the higher volume levels, the majority of mammograms in this nation are delivered to patients by lower volume practices. With a technology of this clinical significance, it is important to protect access for all patients, not just those in larger programs.

Why CAD works economically

From a financial perspective, mammography has always been a marginal procedure. Not only has the reimbursement been low, but federal and state regulations and requirements specific to mammography have driven the cost of delivery to a level at which most practices consider screening mammography to be a financial loss. The recently proposed physician fee schedule governing Medicare fees creates a substantial increase in reimbursement for screening mammography in 2002, but the increases will most likely cover only the cost of delivering and interpreting the mammogram.

In view of the foregoing, it may seem questionable how CAD, a low-reimbursing procedure, can produce such a substantial economic effect. The answer is really fairly simple. A large part of the cost of a mammogram is administrative. The problem with screening mammography is that, almost by definition, the patient receives only the one procedure during a given visit and that all ancillary cost (scheduling, reception, registration, billing, filing, etc.) must be borne by the reimbursement for the one service. Computer-aided detection, other than the costs enumerated in Table 1 and its supporting text, adds nothing to the cost of the patient's visit. Because there is no per-patient cost added, net revenue per patient rapidly increases with volume, and moves straight to the bottom line.

Computer-aided detection passes both the clinical and the financial tests. It is not only a solution for the few high-volume mammography centers in the United States, it can be accommodated in almost every practice that can keep a mammography unit busy. It is truly one of those rare healthcare solutions that benefits everyone it touches. Patients benefit from earlier detection of breast cancers, and therefore decreased mortality from breast cancer. Payors benefit in that the decreased staging of the CAD-detected cancers allows lower morbidity and decreased treatment costs. The community benefits from healthier, more productive women whose cancers have been detected earlier and who can be treated successfully. Finally, providers benefit in that this clinically valuable technology can be provided to patients in a manner that does not detract from the practice or center financially. Opportunities like this are rare--they should be recognized and embraced wherever and whenever possible. *