Radiologix issues Medicare cut revenue reduction update

Feb 8, 2006

Diagnostic imaging center operator Radiologix discussed the impact of Medicare imaging cuts in a statement today. Beginning January 1, 2007, Radiologix said it will be reimbursed for the technical component for imaging services (excluding diagnostic and screening mammography) at the lesser of reimbursement under the Medicare Part B physician fee schedule or the Hospital Outpatient Prospective Payment System (HOPPS) schedule.

The company also said it will see a 25% reduction in reimbursement from the Centers for Medicare and Medicaid Services (CMS) for multiple images on contiguous body parts this year, and an additional 25% reduction in 2007.

The Dallas-based firm stated that it believes the implementation of the reimbursement reductions contained in the Deficit Reduction Act (DRA) of 2005 will have a significant effect on its business, financial condition, and results of operations.

For the fiscal year ended December 31, 2005, Medicare revenue from its imaging centers represented approximately 26% of the firm's total imaging center revenue. If both reimbursement reductions contained in the DRA had been in effect during fiscal year 2005, it estimates that its Medicare revenue would have been reduced by approximately $13.3 million, Radiologix said.

The company estimates that it will see a $1.9 million reduction in revenue and pretax earnings from the DRA reimbursement changes this year, and a $13.3 million reduction in 2007.

Radiologix noted that the estimated shortfall does not include any reductions that would result if commercial payors adopt reimbursement reductions similar to those contained in the DRA. If commercial payors adopt reimbursement reductions similar to those contained in the DRA, it could result in much greater reductions to its estimated revenue and pretax earnings, which could have substantially negative effects on its business, Radiologix said.

By AuntMinnie.com staff writers
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