Summary

Rapid spending growth for Medicare Part B--which covers physician and other outpatient services--has heightened concerns about the long-range fiscal sustainability of Medicare. Medicare Part B expenditures are expected to increase over the next decade at an average annual rate of about 8 percent, which is faster than the projected 4.8 percent annual growth rate in the national economy over this time period. As we noted in our June 2008 report, spending on physician imaging services has been one of the fastest-growing sets of services paid for under the Medicare Part B physician fee schedule (PFS), the payment system used to determine fees for Medicare physician-billed services. From 2000 through 2006, Medicare spending for physician imaging services doubled from about $7 billion to about $14 billion--an average annual increase of 13 percent, compared to an 8 percent increase in spending for all Medicare physician-billed services over the same time period. We also found that by 2006 about two-thirds of spending on physician imaging services occurred in physician office settings--an indicator of a shift toward providing imaging services in physicians' offices as opposed to providing such services in hospital or other institutional settings. In our June 2008 report, we also noted that the growth in Medicare spending on imaging services has been more rapid among what are known as advanced imaging modalities--computed tomography (CT), magnetic resonance imaging (MRI), and nuclear medicine--when compared with the growth in spending among other, less advanced imaging modalities such as x-ray or ultrasound. Congress has recently acted to address the rapid growth in spending on imaging services. Under a provision in the Deficit Reduction Act of 2005 (DRA), Medicare fees for certain imaging services covered by the physician fee schedule may not exceed what Medicare pays for these services under Medicare's hospital outpatient prospective payment system (OPPS), which is used to pay for hospital outpatient services. The OPPS cap sparked intense reaction from the imaging provider community. Specifically, physician organizations and imaging manufacturers have suggested that reduced fees as a result of the cap may inhibit physicians' willingness to provide imaging services for Medicare beneficiaries, which in turn could affect Medicare beneficiary access to such services. Congress asked us to provide them with information on the impact of the DRA provision on utilization and spending on physician imaging services in Medicare's fee-for-service (FFS) program. In this report we 1) examine the extent to which fees for performing imaging tests were affected by the OPPS cap in 2007 and 2) analyze trends in expenditures and utilization for physician imaging services under Medicare FFS through 2007.

In 2007, the OPPS cap reduced the fee for the performance of about one in four physician imaging tests overall, and fees for advanced tests were more likely than other imaging tests to be paid at the OPPS rate. All advanced imaging modalities had a higher percentage (about 65 percent) of tests paid at the OPPS rate than other imaging modalities (about 13 percent). In particular, nearly all MRIs and CTs were paid at the OPPS rate. Among advanced imaging tests, the fee reductions because of the OPPS cap varied extensively. For example, among the three most commonly performed MRIs subject to the cap, fee reductions ranged from about 21 to 40 percent. From 2000 through 2006 both expenditures for and utilization of Medicare physician imaging services increased, but in 2007 expenditures declined while utilization continued to rise. From 2000 to 2006, on a per-beneficiary basis--a measure which accounts for the change in size of Medicare's FFS population--expenditures increased 11.4 percent per year and in 2007 declined 12.7 percent. The implementation of the OPPS cap had the greatest impact on the decline in Medicare physician imaging expenditures in 2007, although other factors also contributed to this trend. Per-beneficiary utilization rose 5.9 percent per year from 2000 to 2006 and continued to increase in 2007, although at a slower rate of 3.2 percent. In comparing the changes from 2006 to 2007 in per-beneficiary utilization of tests paid at the OPPS rate with tests paid at the PFS rate, we found that the volume of imaging tests subject to the cap grew almost four times faster than the volume of those not subject to the cap. In commenting on a draft of this report, CMS noted that our finding of significant reductions in spending for imaging services in 2007 was consistent with its own estimate. CMS also stated it was pleased that our findings suggested that overall beneficiary access to imaging services was maintained and remains concerned about the high volume of imaging services.