Medicare's equipment utilization rate: What it means for radiologists
Article Thumbnail ImageJuly 14, 2009 -- Last week, the U.S. Centers for Medicare and Medicaid Services (CMS) issued a proposed rule for the Medicare Physician Fee Schedule (MPFS) that suggested the equipment use rate for imaging be changed from the current rate of 50% to 90%. Sounds like a dramatic shift, and it could be, if it's finalized. But many radiologists are unclear about what exactly the equipment utilization rate is and how changes to it can affect their practice.
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Simply put, the equipment utilization rate represents CMS' estimate of the amount of time imaging equipment is in use in outpatient settings: Under the 50% rate, a piece of equipment is estimated to be used 25 hours during a 50-hour workweek.

The factor is a key component of the formula Medicare uses to calculate reimbursement for the technical component for all its services, including cost per scan in diagnostic imaging. It's based on the supply and demand principle -- the more imaging equipment is used, the lower CMS sets its reimbursement levels, and vice versa.

"Reimbursement and equipment utilization are inversely related," said Michael Mabry, executive director of the Radiology Business Management Association (RBMA) in Fairfax, VA. "When utilization goes up, Medicare's reimbursement per scan goes down."

Who is most affected by changes in the utilization rate? Radiologists working in freestanding centers rather than hospitals, and those working in freestanding centers with a heavy focus on procedures that use high-cost ($1 million or more) imaging equipment such as MR and CT.

The problem with CMS' proposal to raise the rate from 50% to 90% is that no one can agree on exactly how often imaging equipment is being used per work week, Mabry said. The Medicare Payment Advisory Commission (MedPAC) has recommended a 90% use rate for equipment more than $1 million, but has taken fire for using data from only six centers in six geographical areas. The House Tri-Committee bill -- a healthcare reform bill released in June that represents a collaboration of three House healthcare committees -- suggests a use rate of 75%.

"CMS sees utilization growth in Medicare, in imaging as well as other services, and the thought is that if there's so much growth, then that 50% use assumption must be wrong," said Pam Kassing, senior director of health economics and policy at the American College of Radiology (ACR) in Reston, VA. "They're trying to slow down high-volume procedures, and they think that if they cut the reimbursement, utilization will decrease."

The effect of this kind of change on the daily practice of your average imaging facility would depend on a number of factors, including a center's patient mix, whether it's a single-modality facility -- and whether that single modality is CT or MR -- and whether the center is urban or rural.

"We're getting reports that the technical component could go down by about 40% for procedures affected by this proposal," Mabry said. "And if third-party payors follow Medicare's lead, the effect will be even worse."

Increasing the use rate to 90% would decrease global reimbursement amounts by 15% to 20%, according to Steve Renard, president and CEO of Diagnostic Radiology Services in San Diego.

"It's the straw that will break the camel's back, considering that most centers right now function with a 20% margin," Renard said.

More research is necessary before making a drastic change like this, Mabry said. RBMA conducted a survey this past spring of its members that included information from 46 facilities.

"Radiologists and radiology organizations need to communicate to CMS and to Congress that a 90% equipment utilization rate isn't workable," he said. "Imaging centers will be put in financial jeopardy if this increase is finalized."

By Kate Madden Yee
AuntMinnie.com staff writer
July 14, 2009

Related Reading

CMS pitches 90% use rate in proposed 2010 MPFS rule, July 1, 2009

Radiology rallies to fight more reimbursement cuts, July 1, 2009

ACR lobbies against RBMs, utilization rate changes, June 26, 2009

Siemens' Miller defends imaging in House testimony, June 26, 2009

U.S. House bill would increase utilization factor to 75%, June 23, 2009

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