Earlier this month, the Medicare Payment Advisory Commission (MedPAC), an independent congressional agency established by the Balanced Budget Act of 1997, issued its annual report to Congress. Among other policy issues, the report addresses MedPAC’s concerns about the increase in the use of ancillary services, such as diagnostic imaging and other tests.

MedPAC notes that diagnostic imaging has “seen significant growth in recent years and reached high, and possibly inappropriate, levels of utilization.” While recognizing that diagnostic testing enables physicians to diagnose and treat illness with greater speed and precision, the report cites “strong evidence that physicians who own imaging equipment generate more service volume.” This rapid volume growth “contributes to Medicare’s growing financial burden on taxpayers and beneficiaries [...] and raises questions about inappropriate use.”

According to MedPAC, the higher volume of diagnostic testing results from the combination of physician self-referral of ancillary services and the higher volume rewards of the fee-for-services payment system. Because the development of new payment systems is several years away, the report recommends several interim policies for adoption by the Department of Health and Human Services (DHHS).

  • MedPAC’s first recommendation is that DHHS should accelerate and expand efforts to combine into a single payment rate, multiple discrete services that are often furnished together during the same patient encounter by the same provider. For instance, when a physician performs the professional component of two MRI studies during the same patient encounter, the physician is likely to review the patient’s records and discuss the findings with the referring physician only once, but the current valuation of physician work assumes that each activity is performed twice. MedPAC suggests that these services be “bundled” for payment purposes.
  • Secondly, MedPAC suggests that with congressional authorization, DHHS should account for efficiencies that occur in an imaging study’s professional component when multiple imaging services are provided to the same patient by a single practitioner. MedPAC notes that since certain activities are not done twice, such as reviewing the patient’s medical history and reviewing the final report, payment rates for the professional component of multiple imaging studies that are performed on the same patient in the same session by the same practitioner should be reduced.
  • The third recommendation is to reduce the physician work component of imaging and other diagnostic tests that are ordered and performed by the same practitioner. For instance, where the practitioner who performs the diagnostic test is the same practitioner who ordered the test, it is likely that the practitioner has already reviewed the patient’s medical records and the indications for the test, prior to ordering the test. MedPAC suggests that it would be appropriate to remove these duplicate activities from the payment rate for tests that are ordered and performed by the same practitioner.  

In addition to these recommendations, MedPAC recommends that a prior notification and prior authorization program be established for practitioners who order substantially more advanced diagnostic imaging services than their peers. Certain “outlier” physicians who order imaging inappropriately would be required to participate in a prior authorization program where the Centers for Medicare & Medicaid Services (CMS) or a CMS contractor would review and approve requests to order imaging services before the services are provided.

MedPAC warns that if its recommendations and delivery system reforms fail to stem the growth of ancillary services and their inappropriate use, MedPAC “may revisit options to narrow the in-office ancillary services exception.” Also, the report observes that “policymakers may want to consider expanding [the prior authorization] program to other services that are experiencing rapid spending growth, such as physical therapy and radiation therapy.” Based on MedPAC’s recommendations, it appears that CMS will continue to look for ways to reduce the use of diagnostic testing by physicians by targeting the fee-for-service payment system and the in-office ancillary services exception.