MRI Payment Cuts Having Dramatic Effect on Radiology Groups

CMS cut MRI joint codes by 30 percent, thanks to three policy changes, and more cuts are expected. Here’s how the cuts are affecting practices.

If you wonder why your practice has been busy but income is dropping this year, here’s another place to look: MRI extremity joint codes. On January 1, CMS cut both the lower extremity joint MRI (CPT code 73721) and upper extremity joint MRI (CPT code 73221) payment by 30 percent. And more decreases are on the way.

The cuts caught the radiology world by surprise.

“The organizations and physicians are shocked and surprised by the change,” said Mike Mabry, executive director of the Radiology Business Management Association. “The MRI joint codes are high volume - it’s one of the more common MRIs that practices do. A 30 percent hit on two fairly commonly performed scans is fairly noticeable.”

Where do the cuts come from?

The cuts, Mabry said, are comprised of three policy changes: the fourth and final transition year to the AMA’s Physician Practice Information Survey (PPIS) data, a change in interest rate calculation, and a new scan time for the affected MRI codes.

The most meaningful change is the altered scan time. CMS estimates how long a machine is used when billing for a specific code. Previously CMS estimated that the MRI machines were occupied for 63 minutes to complete a joint scan. The new estimate is 33 minutes. “For a procedure like MRI that is very capital intensive, cutting the scan time in half really impacts the equipment cost component of the relative value,” Mabry said. “That’s the real reason why (payment) dropped.“

While the whole process for an MRI may still take the same amount of time, CMS changed the definition of when the machine is totally occupied for the patient. The previous definition was broader, and included time for the patient to dress. By narrowing the definition of what was included, CMS shrunk the time allocated for that code, resulting in a lower payment.

In terms of the interest rate component, Mabry explained that CMS calculates the equipment cost and financing, and historically that was paid at 11 percent. For its 2013 proposed payment schedule rule, CMS suggested a sliding scale interest rate methodology based on the Small Business Administration.  This accounts for the prime rate, loan duration, procedure cost and equipment cost. “Where we had an 11 percent assumption, the new numbers were in the 5.5 to 8 percent range, based on prime, which is about 3 to 3.75 percent,” Mabry said. This change resulted in a 5 percent to 10 percent pay cut for these procedure codes, he said.

Timing 

The cuts were all effective January 1, 2013, Mabry said, though the three components making up the decrease were rolled out at different times. The move to the PPIS data set is in its fourth and final year of transition. PPIS uses practice expenses per hour data, gathered from past American Medical Association research, to figure relative value units for payment. The interest rate change was announced in June 2012 in the proposed rule for the 2013 fee schedule.

The big shock was the change in scan time. This was not included in the proposed rule and was revealed in November’s final ruling. This is standard, said Mabry, since changes to the relative values aren’t announced until the final rule comes out.

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How practices are dealing with it

The cuts have been difficult for radiology practices. “This year in MRI, the cuts have been very dramatic,” said David J. Marichal, chief technology officer at Radiology and Imaging Specialists in Florida. He explained that the MRI machine is a fixed cost, and facilities like his are extending their work hours, including nights, to get as many patients into their system as they can. “The more we do in a period of time, the more it will mitigate those high fixed costs.”

High fixed costs include buying a new, cutting edge MRI machine and extended service contract in December 2011, he said. While his practice is able to shoulder the decrease, he said smaller practices might not. When looking at the profit and loss statements for his practice’s different imaging facilities, the volume has gone up, but revenues are down. “It just seems wrong. It has definitely affected us,” he said.

Marichal said he worries the procedure cuts will affect their ability to provide patients with the best technology. “That’s harder to do when you experience these dramatic cuts,” he said. “As a private practice, we’ve always had great technology and great professional interpretation as a package. I worry, are we going to be able to keep up as these things progress?”

He also questioned whether manufacturers were going to be able to continue selling the machines at current prices, since research and development costs remain. “Are the Philips and Siemens and GEs of the world going to lower their prices? They’re going to have to be more efficient when bringing it to market to sell it at a price point where customers could afford it,” Marichal said.

These CPT code decreases hit the outpatient facilities, not the hospitals. “The 30 percent applies to entities that are paid according to the Medicare physician fee schedule - it’s a technical fee component,” said Mabry. Hospitals, plus imaging centers affiliated with a hospital and paid according to hospital outpatient prospective payment system (HOPS), won’t be impacted.

More cuts to come

While these cuts are painful, there are more to come, said Mabry. “On top of the changes this year, these two codes along with CT and MRI codes in general, will get cut more in the coming years, as part of the Taxpayer Relief Act,” he said. That act contained a provision increasing the assumption rate for CT and MRI from 75 percent in 2011, to 90 percent in 2014, said Mabry.

Mabry explained that this is Medicare’s equipment calculation rate, where they assume a piece of equipment is used a certain amount of time. For most equipment, CMS assumes it’s used 50 percent of the time. But for CT and MRI machines that cost more than $1 million, the rate is currently 75 percent, and will rise to 90 percent. He estimated that the 90 percent rate will decrease payments for MRI and CT procedures by around 10 percent.

Mabry warned that CMS is likely to revist various assumptions for other procedures going forward. CMS is undertaking revalidation projects and hiring consultants to look at relative value units, which could result in additional changes in the next one to three years.

“Chances are that those carry significant risk for radiology payment under the Medicare fee schedule,” he said.  “What we’re seeing with the joint codes could be the tip of the iceberg.”