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Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices

GAO-08-452 Published: Jun 13, 2008. Publicly Released: Jul 14, 2008.
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The Centers for Medicare & Medicaid Services (CMS)--an agency within the Department of Health and Human Services (HHS)--and the Congress, through the Deficit Reduction Act of 2005 (DRA), recently acted to constrain spending on imaging services, one of the fastest growing set of services under Medicare Part B, which covers physician and other outpatient services. GAO was asked to provide information to help the Congress evaluate imaging services in Medicare. In this report, GAO provides information on (1) trends in Medicare spending on imaging services from 2000 through 2006, (2) the relationship between spending growth and the provision of imaging services in physicians' offices, and (3) imaging management practices used by private payers that may have lessons for Medicare. To do this work, GAO analyzed Medicare claims data from 2000 through 2006, interviewed private health care plans, and reviewed health services literature.

From 2000 through 2006, Medicare spending for imaging services paid for under the physician fee schedule more than doubled--increasing to about $14 billion. Spending on advanced imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other imaging services such as ultrasound, X-ray, and other standard imaging. GAO's analysis of the 6-year period showed certain trends linking spending growth to the provision of imaging services in physician offices. The proportion of Medicare spending on imaging services performed in-office rose from 58 percent to 64 percent. Physicians also obtained an increasing share of their Medicare revenue from imaging services. In addition, in-office imaging spending per beneficiary varied substantially across geographic regions of the country, suggesting that not all utilization was necessary or appropriate. By 2006, in-office imaging spending per beneficiary varied almost eight-fold across the states--from $62 in Vermont to $472 in Florida. Private health care plans that GAO interviewed used certain practices to manage spending growth that may have lessons for CMS. They relied chiefly on prior authorization, which requires physicians to obtain some form of plan approval to assure coverage before ordering a service. Several plans attributed substantial drops in annual spending increases on imaging services to the use of prior authorization. In contrast, CMS employs an array of retrospective payment safeguard activities that occur in the post-delivery phase of monitoring services and are focused on identifying medical claims that do not meet certain billing criteria. The private plans' experience suggests that front-end management of these services could add to CMS's prudent purchaser efforts.


Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services To address the rapid growth in Medicare Part B spending on imaging services, the CMS should examine the feasibility of expanding its payment safeguard mechanisms by adding more front-end approaches to managing imaging services, such as privileging and prior authorization.
Closed – Implemented
Until recently, CMS lacked authority to test the use of prior authorization in demonstration projects involving the furnishing of advanced diagnostic imaging services to Medicare beneficiaries, which GAO recommended as a mechanism CMS should consider to strengthen its front-end payment safeguards in June 2008. The President's fiscal year 2014 budget included a legislative proposal to adopt prior authorization for advanced imaging. Subsequently, Congress passed legislation, the Protecting Access to Medicare Act of 2014, that requires the Department of Health and Human Services (HHS) to determine, on an annual basis beginning in 2017, up to 5 percent of the total number of ordering professionals who are outliers and to apply prior authorization for applicable imaging services ordered by such professionals for an appropriate period of time. Beginning January 1, 2020, the Act requires HHS to apply prior authorization to outlier ordering professionals without regard to the 5 percent limitation. Outlier ordering professionals are defined as those with low adherence to applicable "appropriate use criteria," which the Act requires HHS to establish by November 15, 2015, in consultation with, and developed or endorsed by, statutorily specified stakeholders. CMS's implementation of the new statutorily required prior authorization program for advanced imaging services should enable the agency to go beyond its traditional methods of managing benefit payments toward becoming a value-based purchaser of health services.

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