Manufacturers expect growth in PET equipment sales

Lower reimbursement portends little effect

As the Centers for Medicare and Medicaid Services (CMS) takes a second look at its proposed reduction in Medicare reimbursement for outpatient PET exams, manufacturers are weighing in on the pending rule. Few expect much effect on bottom line sales, regardless of the final decision.

CMS had proposed a whopping 41% cut, from $2331 to $1375 per PET scan, effective Jan. 1. The agency has since backpedaled, stating that a final decision would be posted by April 1. Experts expect the final cut to be smaller than the one proposed earlier this year, although it may still be sizable.

CTI, a major manufacturer of PET systems, expects sales to increase substantially in 2002, no matter what CMS decides. One reason for the optimism is that Medicare rates will be confined to hospital facilities, said Ken Manning, CTI director of marketing.

"About 70% of our business in the last few years has been nonhospital-based-imaging clinics, mobile providers-so in that regard it's not that big a deal," he said. "But that percentage in the future will be shifting toward a 50-50 split. For that reason, we're a little concerned."

Manning said a lower CMS rate would put pressure on manufacturers to provide higher-throughput systems. It may also strain mobile service companies, whose scheduling efficiency could be stretched to cover expenses.

"We think the real costs associated with this procedure are around $1600 to $1700," he said. "Of course, that leaves no room for profit."

Manning expects the Medicare rate to climb back eventually to a point approaching previous levels, perhaps as early as 2003. In the meantime, if practitioners can achieve just a modest profit under the new reimbursement scheme, the number of PET scans will likely increase, as providers strive to make money through increased procedure volume. This would encourage the purchase of newer PET products that allow faster throughput, while the lower reimbursement rate would discourage some customers from buying systems at all. The two responses conceivably could balance each other out, leaving the market for PET scanners largely unchanged.

Siemens executive Barbara D. Franciose expects little short-term negative impact from a change in the Medicare rate. Franciose, president of Siemens Nuclear Medicine Group, predicts an increase in the sale of Siemens PET equipment during 2002. Her optimism would not have been dulled even if the proposed cut had taken effect Jan. 1.

"At $1375 per scan, we believe you can break even with four to five scans per day," she said. "It would not have been catastrophic."

The PET market will grow during 2002, according to Franciose, but probably at a slower rate than it might have under the existing reimbursement rate. At Siemens, sales are way up, and the company expects to sell more than 100 PET systems during 2002. Sales growth will be slower if the reimbursement rate is cut substantially, Franciose said.

Those hardest hit by a substantial decrease in reimbursement will be practitioners working in centers that perform relatively few procedures. For them, maintaining profitability may be difficult.

"In some areas (of the U.S.), PET won't be affordable," Franciose said. "I'm a little worried about remote areas."

Franciose added that Siemens is working with hospitals to help them increase PET productivity. The company also has full-time lobbyists encouraging CMS to set reimbursement at a reasonable rate.

Similarly, CTI is working with the PET Coalition, an organization of industry manufacturers and healthcare providers, which is appealing to CMS for greater reimbursement for the scans.

To boost sales in the long term, CTI and other equipment developers are focusing R&D on the development of higher-throughput systems. Such systems would enable providers to perform more procedures in a given amount of time, thus increasing profitability.