    Medicare Part B Imaging Services: Rapid Spending Growth and Shift
    to Physician Offices Indicate Need for CMS to Consider Additional
    Management Practices (13-JUN-08, GAO-08-452).

    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.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-08-452
        ACCNO:   A82365
      TITLE:     Medicare Part B Imaging Services: Rapid Spending Growth
    and Shift to Physician Offices Indicate Need for CMS to Consider
    Additional Management Practices
         DATE:   06/13/2008
      SUBJECT:   Beneficiaries
    	     Cost analysis
    	     Health care cost control
    	     Health care costs
    	     Health care policies
    	     Health care programs
    	     Health care services
    	     Health resources utilization
    	     Managed health care
    	     Medical fees
    	     Medical services rates
    	     Medicare
    	     Monitoring
    	     Payments
    	     Physicians
    	     Program evaluation
    	     Program management
    	     Standards (health care)
    	     Medicare Part B

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    GAO-08-452

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    Report to Congressional Requesters:

    United States Government Accountability Office:

    GAO:

    June 2008:

    Medicare Part B Imaging Services:

    Rapid Spending Growth and Shift to Physician Offices Indicate Need for
    CMS to Consider Additional Management Practices:

    Medicare Part B Imaging Services:

    GAO-08-452:

    GAO Highlights:

    Highlights of GAO-08-452, a report to congressional requesters.

    Why GAO Did This Study:

    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.

    What GAO Found:

    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.

    Figure: Medicare Part B Spending on Imaging by Setting, 2000 and 2006:

    This figure is a combination of two pie charts showing Medicare B
    spending on imaging by setting, 2000 and 2006.

    2000 Medicare Part B imaging spending:

    Physician offices: 58%;
    Hospital settings: 35%;
    Independent Diagnostic Testing Facility: 7%;
    Total: $6.89 billion.

    2006 Medicare Part B imaging spending:

    Physician offices: 64%;
    Hospital settings: 25%;
    Independent Diagnostic Testing Facility: 11%;
    Total: $14.11 billion.

    [See PDF for image]

    Source: GAO analysis of Medicare Part B claims data.

    [End of figure]

    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.

    What GAO Recommends:

    To address the rapid growth in Medicare Part B spending on imaging
    services, GAO recommends that CMS examine the feasibility of expanding
    its payment safeguard mechanisms by adding more front-end approaches,
    such as prior authorization. HHS stated that it would need to examine
    the applicability of prior authorization for Medicare.

    To view the full product, including the scope and methodology, click on
    [http://www.gao.gov/cgi-bin/getrpt?GAO-08-452]. For more information,
    contact A. Bruce Steinwald at (202) 512-7114 or steinwalda@gao.gov.

    [End of section]

    Contents:

    Letter:

    Results in Brief:

    Background:

    In Recent 6-Year Period, Medicare Part B Expenditures for Imaging
    Services More Than Doubled, as Use of Advanced Imaging Services Grew:

    Several Spending Trends Associated with In-Office Imaging Raise
    Concerns about Incentives for Physicians to Overuse Services:

    To Manage Imaging Expenditures, Private Health Care Plans in Our Study
    Use Certain Practices to Constrain Spending Growth:

    Conclusions:

    Recommendation for Executive Action:

    Agency and Professional Association Comments and Our Evaluation:

    Appendix I: Scope and Methodology:

    Appendix II: Medicare Spending on Imaging Services Paid for under the
    Physician Fee Schedule by Modality, 2000 through 2006:

    Appendix III: Medicare Imaging Use by Modality, 2000 and 2006:

    Appendix IV: Characteristics of GAO Sample of Private Plans That
    Actively Manage Imaging Services (February 2008):

    Appendix V: Comments from the Department of Health and Human Services:

    Appendix VI: GAO Contact and Staff Acknowledgments:

    Tables:

    Table 1: Imaging Modalities:

    Table 2: Medicare Physician Fees for Most Commonly Billed Imaging
    Services in 2006, by Imaging Modality:

    Figures:

    Figure 1: Total Medicare Expenditures for Imaging Services Paid under
    the Physician Fee Schedule, 2000 through 2006:

    Figure 2: Factors Associated with Growth in Total Medicare Spending on
    Imaging Services Paid for under the Physician Fee Schedule, 2000
    through 2006:

    Figure 3: Medicare Part B Spending on Imaging by Setting, 2000 and
    2006:

    Figure 4: Share of Total Medicare Part B Revenues Derived from In-
    Office Imaging Services by Physician Specialty, 2000 and 2006:

    Figure 5: Per Beneficiary Spending on In-Office Imaging Services, 2006:

    Figure 6: Steps That Typically Occur in the Prior Authorization
    Process:

    Abbreviations:

    ACR: American College of Radiology:

    AHIP: America's Health Insurance Plans:

    AMIC: Access to Medical Imaging Coalition:

    BESS: Medicare Part B Extract Summary System:

    BETOS: Berenson-Eggers Type of Service:

    CMS: Centers for Medicare & Medicaid Services:

    CPT: current procedural terminology:

    CT: computed tomography:

    DRA: Deficit Reduction Act of 2005:

    FDA: Food and Drug Administration:

    FEHBP: Federal Employees Health Benefits Program:

    HCPCS: Healthcare Common Procedure Coding System:

    HHS: Department of Health and Human Services:

    IAC: Intersocietal Accreditation Commission:

    IDTF: independent diagnostic testing facility:

    MedPAC: Medicare Payment Advisory Commission:

    MRI: magnetic resonance imaging:

    NRC: Nuclear Regulatory Commission:

    OPPS: Medicare hospital outpatient prospective payment system:

    PET: positron emission tomography:

    RBM: radiology benefits manager:

    RVU: relative value unit:

    United States Government Accountability Office:

    Washington, DC 20548:

    June 13, 2008:

    The Honorable Gordon H. Smith:
    Ranking Member:
    Special Committee on Aging:
    United States Senate:

    The Honorable John D. Rockefeller IV:
    Chairman:
    Subcommittee on Health Committee on Finance:
    United States Senate:

    Federal budget experts--including the Comptroller General, the
    Congressional Budget Office Director, and the Medicare Trustees--agree
    that the Medicare program is unsustainable in its present
    form.[Footnote 1] Because of rising health care costs and the baby boom
    generation's aging into eligibility for Medicare, future program
    spending is projected to encumber an untenable share of the
    government's resources. In their 2008 annual report, the Medicare
    Trustees project that expenditures for Part B, which covers physician
    and other outpatient services,[Footnote 2] will increase over the next
    decade at average annual rates that far outpace the national economy's
    growth rate for that period (about 8 percent for Part B, compared with
    4.8 percent for the national economy).

    Policymakers face a particular dilemma with respect to spending for
    imaging services, one of the fastest-growing set of services paid for
    under the Medicare Part B physician fee schedule. On the one hand,
    cutting-edge imaging technology, such as computed tomography (CT) and
    magnetic resonance imaging (MRI) scans, help diagnose and treat life-
    threatening diseases like cancer and heart disease; these technologies
    enable physicians to perform a wide range of less-invasive medical
    tests and procedures and can foster earlier diagnosis, quicker
    recovery, shorter hospital stays, and reduced disability than more
    invasive surgical or other procedures. On the other hand, in recent
    years, spending for CT scans, MRIs, and other imaging services paid for
    under the Medicare physician fee schedule has experienced double-digit
    growth.

    In 2005, the Medicare Payment Advisory Commission (MedPAC) reported to
    the Congress on growth in the volume (number) of imaging services
    provided and the intensity (complexity) of these services--for example,
    the greater use of MRIs instead of X-rays in diagnostic
    testing.[Footnote 3] The report attributed this growth to technology
    advances that improve physicians' ability to diagnose disease, but it
    also pointed to two trends suggesting that not all of this growth may
    be desirable. First, the site of care has shifted substantially from
    hospital inpatient and outpatient settings, where national Medicare
    standards relating to patient safety and quality govern the provision
    of imaging services, to physician offices, where there is less quality
    oversight. Second, the number of imaging services provided across the
    country varies threefold--a difference that raises concerns about the
    potential overuse of these services in some areas.[Footnote 4]

    MedPAC's 2005 report included recommendations to the Centers for
    Medicare & Medicaid Services (CMS)--the agency within the Department of
    Health and Human Services (HHS) that administers Medicare--to address
    concerns about quality and efficiency with respect to imaging services.
    Certain of the recommendations incorporated approaches similar to those
    other health care payers have adopted to constrain rapid growth in
    spending on imaging services. CMS adopted some of MedPAC's
    recommendations, and beginning in January 2006, among other things,
    reduced physician fees under certain conditions for multiple images
    taken during the same session.[Footnote 5]

    The Congress, through the Deficit Reduction Act of 2005 (DRA), also
    took action to restrain the growth in spending for Medicare imaging.
    The DRA required, among other things, that Medicare payment for certain
    imaging services under the Medicare physician fee schedule, including
    those services performed in physician offices, not exceed what Medicare
    pays for these services performed in hospital outpatient
    departments.[Footnote 6] This provision was effective for services
    furnished after January 1, 2007. The DRA changes sparked intense
    reactions by interest groups with a stake in Medicare's payment for
    imaging services, which included representatives of imaging
    manufacturers, diagnostic imaging facilities, physician specialties,
    and patient advocacy groups.

    In light of these concerns and MedPAC's findings on imaging services,
    you asked us to provide additional data to help the Congress evaluate
    the provision of these services in the Medicare program and examine
    management practices other payers use to ensure appropriate spending
    for these services. In this report, we provide information on (1)
    trends in Medicare Part B spending on imaging services from 2000
    through 2006, (2) the relationship between spending growth and the
    provision of imaging services in physician offices, and (3) imaging
    management practices used by private payers that may have lessons for
    Medicare.

    To determine trends in Medicare spending for imaging services paid for
    under the physician fee schedule, we analyzed Medicare Part B claims
    data from 2000 through 2006. We examined trends in aggregate spending
    and by the six major categories of imaging services.[Footnote 7] Our
    spending totals include the two parts of the imaging service paid under
    the Medicare physician fee schedule--the examination itself and the
    physician's interpretation of the examination. CMS refers to the
    performance of the image examination as the "technical component" and
    the physician's interpretation of the image as the "professional
    component." Our spending totals do not include the technical component
    when the image examination is performed in an inpatient hospital or
    other institutional setting, as an examination performed in these
    settings is paid for under Medicare Part A. In addition, our spending
    totals do not include the technical component when an examination is
    performed in a hospital outpatient department setting, as an
    examination performed in this setting is paid for under Medicare's
    hospital outpatient prospective payment system (OPPS).

    To examine the relationship between spending growth and the provision
    of imaging services in physician offices, we analyzed Medicare claims
    data from 2000 and 2006. We examined the extent to which Medicare Part
    B spending on imaging services shifted to physician offices from
    hospital settings and how physicians' shares of their Medicare revenue
    from imaging services have changed during this period. We supplemented
    our quantitative analyses with interviews with physician specialty
    groups and private health care payers and reviewed the health services
    literature. To determine the share of Medicare beneficiaries who
    received any imaging services or a specific imaging service and, for
    those beneficiaries, the average number of services provided, we used
    Medicare Part B Physician/Supplier claims data for 2000 and 2006 and
    Denominator File data for those same years.

    To examine the management practices used by private payers to manage
    spending on imaging services, we selected a combination of 17 national
    and regional private health plans known to be active in managing
    imaging benefits. We also interviewed radiology benefits managers
    (RBM)--organizations hired by private payers to manage radiology
    services for their enrollees. We also conducted interviews with CMS
    officials and several companies that contract with Medicare to process,
    review, and pay Medicare Part B claims.

    We examined the reliability of the claims data used in this report by
    performing appropriate electronic data checks and checks for obvious
    errors such as missing values and values outside of expected ranges. We
    also interviewed officials who were knowledgeable about the data,
    including CMS and Medicare contractor officials. We determined that the
    claims data we used were sufficiently reliable for purposes of our
    analysis, as they are used by the Medicare program as a record of
    payments to health care providers. As such, they are subject to routine
    CMS scrutiny. Appendix I provides more detailed information on our
    methodology.

    We conducted our work from January 2007 through May 2008 in accordance
    with generally accepted government auditing standards.

    Results in Brief:

    From 2000 through 2006, Medicare Part B spending for imaging services
    paid for under the physician fee schedule more than doubled--increasing
    to about $14 billion. Spending on CT scans, MRIs, and nuclear medicine,
    which are generally more complex and therefore more costly, rose
    faster--17 percent a year, on average--than ultrasound, X-ray and other
    standard imaging, and procedures that use imaging--which grew at an
    average 9 percent annually. Overall, about 4 of every 5 dollars of the
    spending growth for imaging services was associated with the growth in
    volume and complexity of imaging services rather than other factors,
    such as changes in physician fees or beneficiary population increases.

    Our analysis of the 6-year period showed certain trends linking
    spending growth to the provision of imaging services in physician
    offices. First, the proportion of Medicare spending on imaging services
    performed in-office--where physicians receive payment for both the
    technical and professional components of the service--rose from 58
    percent to 64 percent. Second, physicians obtained an increasing share
    of their Medicare revenue from imaging services. For example, in 2006
    cardiologists obtained 36 percent of their total Medicare revenue from
    in-office imaging, compared with 23 percent in 2000. Third, during the
    6-year period, in-office imaging spending per beneficiary varied
    substantially across geographic regions of the country, suggesting that
    not all utilization was necessary or appropriate. In 2006, in-office
    imaging spending per beneficiary varied almost eight-fold across the
    states--from $62 in Vermont to $472 in Florida. Together these trends
    raise concerns about whether Medicare's physician payment policies
    embody financial incentives for physicians to overuse imaging services.
    While some of this growth may represent appropriate increases in
    clinical applications of imaging to diagnose and treat diseases and
    medical conditions of Medicare beneficiaries, the increased provision
    of imaging services in physician offices also has potential
    implications for quality. Several studies we reviewed have shown
    quality concerns such as inadequate staff credentials, poor image
    quality, failure to monitor radiation exposure, and inadequately
    maintained equipment.

    Similar to Medicare, private health plans in recent years have
    experienced rapid growth in imaging services, particularly in advanced
    imaging. To manage expenditures for these services, private health care
    plans in our study used certain management practices that have helped
    constrain their spending growth on imaging services. The private plans
    adopted a prospective, or preapproval, orientation toward managing
    physicians' use of imaging services that was in addition to
    retrospective payment safeguards used to identify medical claims that
    do not meet certain billing criteria. For their prospective approach,
    they relied chiefly on prior authorization, which requires physicians
    to obtain some form of plan approval to assure coverage before ordering
    imaging services--generally, advanced imaging services. Plans approve
    requests based on consistency with recommended clinical guidelines,
    including those developed by physician specialty societies. Several
    plans attributed substantial drops in annual spending increases on
    imaging services to the use of prior authorization. To a lesser extent,
    the plans used privileging, by which a plan limits its approval for
    ordering certain imaging services to physicians in certain specialties,
    and profiling, which entails a statistical analysis of medical claims
    data measuring an individual physician's use of services relative to a
    desired benchmark. In contrast, CMS's management practices are not
    oriented toward controlling spending prospectively through preapproval
    practices. Instead, CMS employs, through its claims administration
    contractors, an array of retrospective payment safeguards, which are
    activities that occur in the post-delivery phase of monitoring
    services. Although the agency has the tools to do profiling, it
    currently has no policies in place specifically to profile physicians'
    use of imaging services. CMS's profiling and other review activities
    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, in addition to retrospective safeguards,
    could add to CMS's prudent purchaser efforts.

    To address the rapid growth in Medicare Part B spending on imaging
    services, we recommend that CMS examine the feasibility of expanding
    its payment safeguard mechanisms by adding more front-end approaches to
    managing imaging services, such as using privileging and prior
    authorization. In its written comments on a draft of this report, HHS
    stated that Medicare contractors, through post-payment claims review,
    have identified imaging services as an area that poses a high risk to
    the Medicare Trust Fund, and are continuing to conduct ongoing medical
    review and provider education in this area. The department raised
    concerns about the administrative burden of implementing prior
    authorization, as well as its applicability for Medicare. HHS stated
    that the use of proprietary systems to deny payment for imaging
    services may not be feasible under Medicare's claims appeals process,
    which usually requires an explanation of the basis for the denial. It
    noted that these circumstances may limit the effectiveness of radiology
    benefits managers and prior authorization as a policy tool. We do not
    dispute HHS's reservations about prior authorization, and agree that
    these concerns will require careful examination within the context of
    Medicare statutes and regulations. Because we believe that post-payment
    claims review alone is inadequate to manage one of the fastest growing
    parts of Medicare, addressing these concerns should be incorporated
    into CMS's feasibility analysis of adding front-end approaches to its
    prudent purchasing efforts.

    In oral comments, two organizations representing a broad array of
    industry and other stakeholders, offered contrasting views on prior
    authorization. Specifically, officials from America's Health Insurance
    Plans (AHIP)--a trade group representing about 90 percent of health
    insurers--suggested prior authorization was primarily a tool to improve
    quality and ensure appropriate use rather than strictly a cost-cutting
    measure. Representatives of the Access to Medical Imaging Coalition
    (AMIC)--a diverse group of stakeholders including imaging providers,
    manufacturers and patient advocacy groups--suggested prior
    authorization had been tried and proven unfeasible for Medicare.

    Background:

    Medical imaging services, grouped into six major modalities, use
    different types of imaging equipment and media for creating an image.
    Physicians bill for providing these services under the Medicare
    physician fee schedule, which, for payment purposes, divides an imaging
    service into two components: the technical component, which pays for
    the performance of the imaging examination, and the professional
    component, which pays for the physician's interpretation of the image.
    Recently, CMS implemented two payment changes in 2006 and 2007 that
    reduce physician payments for certain imaging services.

    Imaging Services Fall into Six Modalities:

    Medical imaging is a noninvasive process used to obtain pictures of the
    internal anatomy or function of the anatomy using one of many different
    types of imaging equipment and media for creating the image. Imaging
    tests fall into six modalities: CT, MRI, nuclear medicine, ultrasound,
    X-ray and other standard imaging, and procedures that use imaging.
    Depending on the service, imaging equipment uses radiation, sound
    waves, or magnets to create images. X-rays and other standard imaging
    services, CT, and certain nuclear medicine services, such as positron
    emission tomography (PET), use radiation; ultrasound uses sound waves;
    MRI uses magnets and radio waves. For certain X-rays, CTs, and MRIs,
    contrast agents, such as barium or iodine solutions, are administered
    to patients orally or intravenously. By using contrast, sometimes
    referred to as "dye," as part of the imaging examination, physicians
    can view soft tissue and organ function more clearly. Table 1 provides
    further details on each imaging modality.

    Table 1: Imaging Modalities:

    Imaging modality: CT;
    Description: An imaging modality which uses ionizing radiation and
    computers to produce cross-sectional images of internal organs and body
    structures.

    Imaging modality: MRI;
    Description: An imaging modality which uses magnets, radio waves, and
    computers to create images of internal body tissues.

    Imaging modality: Nuclear medicine;
    Description: The use of radioactive materials in conjunction with an
    imaging modality to produce images that show both structure and
    function within the body.

    Imaging modality: Ultrasound;
    Description: An imaging modality which uses high-frequency sound waves
    to create images of internal body organs and blood flow.

    Imaging modality: X-ray and other standard imaging;
    Description: Imaging modalities which use ionizing radiation to produce
    images of bones and tissue. For example, the most common standard
    imaging modalities are X-rays and mammography.

    Imaging modality: Procedures that use imaging;
    Description: Medical procedures that incorporate the use of an imaging
    modality which provides the physician with information at the time the
    procedure is performed. For example, using ultrasound to localize a
    needle when performing a biopsy.

    Source: GAO analysis of medical literature.

    [End of table]

    Imaging equipment using radiation poses more potential risk to patients
    than other imaging mediums. The amount of radiation patients are
    exposed to varies based on whether the image is obtained by X-ray or
    CT. CTs emit the largest amount of radiation, but estimates of the
    radiation dose--or the amount of radiation absorbed--from a diagnostic
    CT procedure can vary by a factor of 10 or more, depending on the type
    of CT procedure, patient size, and the CT system and its operating
    technique. For example, the typical dose in a CT of the abdomen is
    about five times that of the head, and about eight times that of an X-
    ray of the spine.

    Physicians Bill for Imaging Services under the Medicare Physician Fee
    Schedule:

    Medicare generally covers medically necessary services provided by
    physicians operating within the scope of practice allowed by their
    state licensure, without regard to their specialty or specific
    qualifications. All diagnostic tests are required to be provided under
    at least general physician supervision--that is, a physician is
    responsible for the training of the technical staff performing the
    test, and the maintenance of the necessary equipment and supplies.

    Medicare's physician fee schedule in 2006 included more than 7,000
    services--together with their corresponding payment rates. About 900 of
    these services are associated with imaging. Each imaging service on the
    fee schedule has three relative value units (RVU), which correspond to
    the three components of physician payment: (1) physician work--the
    financial value of physicians' time, skill, and effort that are
    associated with providing the service, (2) practice expense--the costs
    incurred by physicians in employing office staff, renting office space,
    and buying supplies and equipment, and (3) malpractice expense--the
    premiums paid by physicians for professional liability insurance.

    Each RVU measures the relative costliness of providing a particular
    service. For example, in 2006, the three RVUs for performing and
    interpreting a standard chest X-ray summed to .74.[Footnote 8] In
    contrast, the RVUs for CT of the head/brain without dye summed to
    6.15,[Footnote 9] indicating that this service, on average
    nationally,[Footnote 10] consumed more than eight times more resources
    than the standard chest X-ray. To determine Medicare payment for a
    particular service, the sum of the RVUs is multiplied by a conversion
    factor, which is a dollar amount that translates each service's RVUs
    into a payment rate. For example, in 2006, Medicare paid $233, on
    average nationally, for physicians performing and interpreting a CT of
    the head/brain without dye (6.15 multiplied by a conversion factor of
    $37.8975). Some items paid under the physician fee schedule that are
    used in the provision of imaging services--such as
    radiopharmaceuticals--do not have RVUs associated with them. Instead,
    these items are priced locally by Medicare's Part B contractors and
    billed separately from the imaging services paid for under the Medicare
    physician fee schedule.

    Physicians under the Medicare physician fee schedule can be paid for
    performing the imaging examination--the technical component--and
    interpreting the image examination--the professional component. The
    payment for the technical component is intended to cover the cost of
    the equipment, supplies, and nonphysician staff and is generally
    significantly higher than the payment for the professional component,
    which is intended to cover the physician's time in interpreting the
    image and writing a report on the findings. Medicare allows physicians
    to bill for these services separately because performing and
    interpreting the examination could be done by different physicians and
    in different settings. If the same physician performs and interprets
    the examination, the physician can submit a global bill to Medicare.
    The same rules apply under the physician fee schedule if the imaging
    services are completed by radiologists in independent diagnostic
    testing facilities (IDTF)--facilities that are independent of a
    hospital and physician office or "free-standing" and only provide
    outpatient diagnostic services.

    When the imaging examination is performed in an institutional setting,
    such as a hospital or skilled nursing facility, the physician can bill
    Medicare only for the professional component, while payment for the
    technical component is covered under a different Medicare payment
    system, according to the setting in which the service is provided. For
    example, the technical component of an imaging examination in a
    hospital inpatient setting is bundled into a facility payment paid
    under Medicare Part A, whereas the technical component of an
    examination in a hospital outpatient department is paid under
    Medicare's hospital outpatient payment system, which is financed
    through Part B.[Footnote 11]

    CMS Recently Implemented Two Payment Changes Related to Imaging
    Services:

    In recent years, CMS has implemented two payment changes to the way
    Medicare pays for imaging services under the physician fee schedule.
    Starting January 1, 2006, CMS reduced physician payments when multiple
    images are taken on contiguous body parts during the same visit. CMS
    adopted a recommendation made by MedPAC in 2005 as a way to ensure that
    fee schedule payments took into account efficiencies, such as savings
    from technical preparation and supplies, which occur when multiple
    imaging services are furnished sequentially.[Footnote 12] Physicians
    receive the full fee for the highest paid imaging service in a visit,
    but fees for additional imaging services are reduced by 25 percent. The
    reduction is applied only to the technical component.

    Beginning January 1, 2007, CMS implemented two provisions in the DRA:
    it (1) established a cap on the physician fee schedule payments for
    certain imaging services at the payment levels established in
    Medicare's OPPS and (2) in certain cases, eliminated the Medicare
    budget neutrality requirement, which is designed to ensure that the
    result of specific payment changes neither increase nor decrease the
    total amount of Medicare payments to physicians beyond a specified
    amount. The first provision, in practice, requires that payment for the
    technical component of an image in the physician office does not exceed
    what Medicare pays for the technical component of the same service
    performed in a hospital outpatient department. For example, in 2006,
    Medicare paid $903 under the physician fee schedule for an MRI of the
    brain, yet paid $506 for the same test under OPPS. Under the DRA
    payment change, in 2007, Medicare paid the lesser amount for this
    examination, regardless of whether it was performed in a hospital
    outpatient department or in a physician's office. The second provision,
    excluding the two imaging payment reductions from the calculation of
    budget neutrality, results in Medicare savings as a practical matter.
    Savings attributed to the 25 percent multiple payment reduction and the
    capping of certain payments at the OPPS levels are not offset by
    increases for other services under the physician fee schedule.[Footnote
    13]

    In Recent 6-Year Period, Medicare Part B Expenditures for Imaging
    Services More Than Doubled, as Use of Advanced Imaging Services Grew:

    From 2000 through 2006, Medicare spending on imaging services paid for
    under the Part B physician fee schedule more than doubled. About 80
    percent of the spending growth was associated with growth in the volume
    and complexity of imaging services. Compared with 2000, in 2006 more
    beneficiaries obtained imaging services, and average use per
    beneficiary also increased.

    Medicare Spending on Imaging Increased across the Six Imaging
    Modalities but Grew Faster for Advanced Imaging Services:

    Medicare spending on imaging services paid for under the Part B
    physician fee schedule more than doubled from 2000 through 2006,
    increasing to about $14 billion. (See fig. 1.) This increase represents
    a growth rate of 13 percent a year on average, compared to 8.2 percent
    for all Medicare physician-billed services during that period.[Footnote
    14] Although spending increased each year since 2000, the rate of
    growth slowed in 2006. In that year, CMS implemented a payment change
    for imaging that reduced physician fees by 25 percent for additional
    imaging services involving contiguous body parts imaged during the same
    session.[Footnote 15] (See app. II for total expenditures for imaging
    services paid for under the physician fee schedule and expenditures by
    imaging modality for each year from 2000 through 2006.)

    Figure 1: Total Medicare Expenditures for Imaging Services Paid under
    the Physician Fee Schedule, 2000 through 2006:

    This figure is a multiple line graph showing total medicare
    expenditures for imaging services paid under the physician fee
    schedule, 2000 through 2006. The lines represent all imaging, advanced
    imaging (CT, MRI, and nuclear medicene), and other imaging (ultrasound;
    X-ray, and other standard imaging; and procedures that use imaging).
    The X axis represents the year, and the Y axis represents dollars in
    millions.

    Fiscal year: 2000;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $3.94;
    Advanced imaging (CT, MRI, and nuclear medicine): $2.95;
    All imaging: $6.89.

    Fiscal year: 2001;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $4.51;
    Advanced imaging (CT, MRI, and nuclear medicine): $3.78;
    All imaging: $8.3.

    Fiscal year: 2002;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $4.77;
    Advanced imaging (CT, MRI, and nuclear medicine): $4.2;
    All imaging: $8.97.

    Fiscal year: 2003;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $5.37;
    Advanced imaging (CT, MRI, and nuclear medicine): $5.02;
    All imaging: $10.39.

    Fiscal year: 2004;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $6.05;
    Advanced imaging (CT, MRI, and nuclear medicine): $6.05;
    All imaging: $12.11.

    Fiscal year: 2005;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $6.38;
    Advanced imaging (CT, MRI, and nuclear medicine): $7.12;
    All imaging: $13.5.

    Fiscal year: 2006;
    Other imaging (ultrasound; X-ray and other standard imaging; and
    procedures that use imaging): $6.53;
    Advanced imaging (CT, MRI, and nuclear medicine): $7.57;
    All imaging: $14.11.

    [See PDF for image]

    Source: GAO analysis of Medicare Part B claims data.

    Note: Expenditures include fees for physicians' interpretation of
    imaging services in hospital settings, and fees for interpretation and
    provision of services in physician offices and independent diagnostic
    testing facilities. When the imaging examination is performed in an
    institutional setting, such as a hospital or skilled nursing facility,
    the physician can bill Medicare only for interpreting the examination,
    while payment for performing the examination is covered under a
    different Medicare payment system.

    [End of figure]

    Advanced imaging services--CT, MRI, and nuclear medicine--saw the
    highest growth rates. Spending on these advanced imaging modalities
    increased almost twice as fast, at an average annual rate of 17
    percent, as spending on services in the three other imaging modalities-
    -ultrasounds, standard imaging (mostly X-rays), and procedures that use
    imaging.

    The faster-growing advanced imaging services are more complex and
    therefore more costly. Medicare pays physicians more for both the
    technical component and the professional component for these services,
    on average, than it pays for other imaging services. (See table 2.) The
    payment is higher, in part, because advanced imaging equipment is more
    costly to obtain and requires more skilled technicians to operate. For
    example, in 2006, Medicare paid $1,118 for the most commonly physician-
    billed MRI imaging test--an "MRI brain without and with dye"--of which
    $995 was for performing the examination. In contrast, Medicare paid $28
    for the most commonly performed standard imaging service, a chest X-
    ray.

    Table 2: Medicare Physician Fees for Most Commonly Billed Imaging
    Services in 2006, by Imaging Modality:

    Imaging modality: MRI;
    Most commonly billed imaging test: MRI brain without and with dye;
    Fee for performing the test: $995;
    Fee for interpreting the test: $123;
    Total fee: $1,118.

    Imaging modality: Nuclear medicine;
    Most commonly billed imaging test: Heart image (3D), multiple;
    Fee for performing the test: $471;
    Fee for interpreting the test: $77;
    Total fee: $548.

    Imaging modality: CT;
    Most commonly billed imaging test: CT of the head/brain without
    contrast;
    Fee for performing the test: $189;
    Fee for interpreting the test: $44;
    Total fee: $233.

    Imaging modality: Ultrasound;
    Most commonly billed imaging test: Doppler echo examination, heart;
    Fee for performing the test: $69;
    Fee for interpreting the test: $20;
    Total fee: $90.

    Imaging modality: X-ray and other standard imaging;
    Most commonly billed imaging test: Chest X-ray;
    Fee for performing the test: $19;
    Fee for interpreting the test: $9;
    Total fee: $28.

    Imaging modality: Procedures that use imaging;
    Most commonly billed imaging test: Injection for coronary X-ray;
    Fee for performing the test: [A];
    Fee for interpreting the test: [A];
    Total fee: $22.

    Source: GAO analysis of Medicare Part B claims data.

    [A] The physician fee schedule does not include separate fees for
    performing and interpreting this imaging procedure.

    [End of table]

    As a result of faster growth in the more expensive services, advanced
    imaging accounted for 54 percent of total imaging expenditures, up from
    43 percent in 2000. In dollar terms, spending on advanced imaging
    increased from about $3 billion to about $7.6 billion, with spending on
    MRI services accounting for nearly half of this increase. In contrast,
    spending on ultrasounds, standard imaging (mostly X-rays), and
    procedures that use imaging grew more slowly, from about $4 billion to
    about $6.5 billion.

    Most Spending Growth on Imaging Services Associated with Volume and
    Complexity Increases:

    Overall, 77 percent of Medicare's spending from 2000 through 2006 on
    imaging services paid for under the physician fee schedule was
    associated with the growth in volume and complexity of imaging services
    (as measured by growth in RVUs) rather than other factors. Compared
    with 2000, in 2006 more beneficiaries obtained imaging services and
    average use per beneficiary also increased. The proportion of Medicare
    beneficiaries receiving at least one imaging service increased from 63
    percent to 66 percent during this period. Moreover, beneficiaries'
    average annual use of imaging services from 2000 through 2006 increased
    about 25 percent, from 5.6 to 7 imaging services, for those who
    received at least one imaging service. More complex advanced imaging
    modalities generally showed the fastest growth. For the same period,
    the proportion of beneficiaries using CT scans increased 39 percent,
    and use of CT scans on a per beneficiary basis increased 22 percent.
    (See app. III for beneficiaries' use of imaging services for 2000
    compared with 2006.)

    Several factors account for the rest of the growth in Medicare spending
    for imaging services. Growth in ancillary items, such as
    radiopharmaceuticals, which are required to provide certain imaging
    tests, represents 7 percent of the spending growth. Physicians bill
    separately for these items. Growth in the number of beneficiaries and
    changes in Medicare's physician fees from 2000 through 2006 account for
    another 16 percent of the spending growth (see fig. 2).

    Figure 2: Factors Associated with Growth in Total Medicare Spending on
    Imaging Services Paid for under the Physician Fee Schedule, 2000
    through 2006:

    This figure is a vertical bar graph showing factors associated with
    growth in total medicare spending on imaging services paid for under
    the physician fee schedule, 2000 through 2006. The X axis represents
    factors affecting growth, and the Y axis represents contribution to
    total spending.

    Volume and complexity (RVUs): 77;
    Number of Medicare beneficiaries: 11;
    Separately billed ancillary items (no RVUs): 7;
    Medicare physician fee increase: 5.

    [See PDF for image]

    Source: GAO analysis of Medicare Pat B claims data.

    [End of figure]

    Contrasting explanations have been offered for why imaging use and use
    of advanced imaging services, in particular, have grown rapidly during
    this period. In interviews with physician specialty organizations that
    use imaging services, representatives cited the following as
    contributors to imaging growth: technological innovation (such as
    equipment becoming smaller and more portable), patient demand
    influenced by direct-to-consumer advertising, defensive medicine to
    protect physicians from malpractice suits, and an increase in clinical
    applications.[Footnote 16] Representatives from physician specialty
    organizations also stated that older invasive diagnostic procedures are
    being replaced in some cases with new less invasive imaging procedures
    that are less costly, reduce patients' discomfort, and reduce patients'
    recovery time.[Footnote 17] While representatives from private health
    plans and the companies they contract with specifically to manage
    imaging services concurred that some of these factors were key
    contributors to growth, they cited two other factors for the growth in
    spending. First, they noted that the ability of physicians to refer
    patients to their own practices for imaging was a major spending
    driver. Second, they noted that primary care physicians often lacked
    knowledge about the most appropriate test to order for a patient, and
    therefore tended to order a significant portion of imaging tests that
    would be considered unnecessary based on clinical guidelines.

    Several Spending Trends Associated with In-Office Imaging Raise
    Concerns about Incentives for Physicians to Overuse Services:

    From our analysis of data from the 6-year period, we observed several
    trends regarding spending growth and the provision of imaging services
    in physician offices. First, a larger share of Medicare Part B spending
    for imaging services has shifted from the hospital settings--where the
    institution receives payment for the technical component of the
    service--to physician offices, where physicians receive payment for
    both the technical and professional components of the service. Second,
    consistent with this shift, physicians who provided in-office imaging
    services obtained an increasing share of their Medicare Part B revenue
    from imaging services. Third, in-office imaging spending per
    beneficiary varied substantially across geographic regions of the
    country, suggesting that not all the spending was necessary or
    appropriate. These trends raise concerns about whether Medicare's
    physician payment policies contain financial incentives for physicians
    to overuse imaging services. In addition, the increased provision of
    imaging services in physician offices may have implications for
    quality.

    Imaging in Physician Offices Accounted for Increasing Share of Part B
    Imaging Spending:

    A large share of Medicare Part B spending for imaging services has
    shifted to physician offices from institutional settings, such as
    hospital outpatient departments. As a result, physician office settings
    accounted for about two-thirds of spending for imaging services paid
    for under the physician fee schedule in 2006 (about $9 billion),
    compared with 58 percent in 2000 (about $4 billion). In contrast, the
    share of Medicare Part B spending for the professional component for
    imaging in hospital settings--inpatient and outpatient departments and
    emergency rooms--declined from 35 percent to 25 percent during this
    period (see fig. 3). Increased spending in the physician office setting
    resulted from a combination of increased services provided in this
    setting and payment for the technical component of imaging examinations
    that were previously performed and paid for in the hospital
    setting.[Footnote 18],[Footnote 19]

    Figure 3: Medicare Part B Spending on Imaging by Setting, 2000 and
    2006:

    This figure is a combination of two pie charts showing Medicare B
    spending on imaging by setting, 2000 and 2006.

    2000 Medicare Part B imaging spending:

    Physician offices: 58%;
    Hospital settings: 35%;
    Independent Diagnostic Testing Facility: 7%;
    Total: $6.89 billion.

    2006 Medicare Part B imaging spending:

    Physician offices: 64%;
    Hospital settings: 25%;
    Independent Diagnostic Testing Facility: 11%;
    Total: $14.11 billion.

    [See PDF for image]

    Source: GAO analysis of Medicare Part B claims data.

    Notes: Hospital settings include inpatient and outpatient departments
    and emergency rooms. The independent diagnostic testing facility
    category also includes imaging services provided in other outpatient
    facilities such as mammography screening centers and independent
    physiological laboratories that are paid under the physician fee
    schedule. Expenditures include fees for physician interpretation of
    imaging services in hospital settings, and fees for interpretation and
    provision of services in physician offices and independent diagnostic
    testing facilities. When the imaging examination is performed in an
    institutional setting, such as a hospital or skilled nursing facility,
    the physician can bill Medicare only for interpreting the examination,
    while payment for performing the examination is covered under a
    different Medicare payment system.

    [End of figure]

    During the period from 2000 through 2006, radiologists accounted for a
    declining share of in-office imaging spending--36 percent in 2000
    compared to 32 percent in 2006. Physicians in specialties other than
    radiology accounted for an increasing share of in-office imaging--64
    percent in 2000 compared to 68 percent in 2006. Cardiologists' spending
    on imaging services represented the largest share of in-office imaging
    spending of physician specialties other than radiology, growing from
    about $1.2 billion to about $3.0 billion--29 percent in 2000 compared
    to 35 percent in 2006. An array of physician specialties--including
    primary care, orthopedics, and vascular surgery--accounted for the
    remainder of in-office spending.

    The growth in spending by physicians in specialties other than
    radiology is partly due to an increasing proportion of these physicians
    billing for in-office services. While still small, this proportion has
    grown rapidly--more than doubling from 2000 to 2006 (from 2.9 to 6.3
    per 100 physicians), and is much higher for certain specialties, such
    as cardiology. For example, the proportion of cardiologists who billed
    for advanced in-office services nearly doubled between 2000 and 2006,
    rising from about 24 per 100 physicians to about 43 per 100 physicians.
    Although physicians generally are prohibited from referring Medicare
    beneficiaries for imaging services to an entity with which the
    physician has a financial relationship, there is an "in-office
    ancillary exception." Under this exception physicians may be paid by
    Medicare, for example, if the services are provided by the referring
    physicians in the same building where the physicians provide other
    services unrelated to the furnishing of imaging services.[Footnote 20]

    MedPAC and others have reported on the recent emergence of leased or
    other shared arrangements whereby "in-office" imaging services are
    actually delivered at another site.[Footnote 21],[Footnote 22] For
    example, physicians may rent an imaging center's services (employees
    and machinery) for a specific day of the week and refer their patients
    to that center on that day. The referring physician bills Medicare for
    providing the test, in turn paying the provider or center that actually
    performed the test a lower fee. In other instances, physicians may
    purchase imaging equipment which is then leased to an imaging center.
    In this case, the physician refers patients to the imaging center which
    bills for the service and then pays the physician a fee. MedPAC has
    expressed concerns that such arrangements create financial incentives
    that could influence physicians' clinical judgment, leading to
    unnecessary services.

    Physicians Generated an Increasing Share of Revenue from In-Office
    Imaging Services:

    Consistent with these trends, physicians in specialties other than
    radiology who billed Medicare for in-office imaging services obtained
    an increasing share of their Medicare revenue from imaging services
    from 2000 to 2006. For example, cardiologists' share of Medicare
    revenue attributable to in-office imaging services increased from about
    one-quarter in 2000 to over one-third in 2006 (see fig. 4). During this
    period, vascular surgeons also saw a large increase--from 10 percent to
    about 19 percent--in the share of their Medicare revenue generated from
    in-office imaging services. The same trend was evident for orthopedic
    surgeons, primary care physicians, and urologists.

    Figure 4: Share of Total Medicare Part B Revenues Derived from In-
    Office Imaging Services by Physician Specialty, 2000 and 2006:

    This figure is a combination bar graph showing share of total medicare
    Part B revenues derived from in-office imaging services by physician
    specialty, 2000 and 2006. The X axis represents the physician
    specialty, and the Y axis represents the percentage of total Medicare
    Part B revenue. Each bar represents a year.

    Physician specialty: Cardiology;
    2000: 23.2;
    2006: 36.

    Physician specialty: Vascular surgery;
    2000: 10.3;
    2006: 19.1.

    Physician specialty: Orthopedic surgery;
    2000: 8.5;
    2006: 9.5.

    Physician specialty: Primary care[A];
    2000: 4.1;
    2006: 5.9.

    Urology;
    2000: 3.4;
    2006: 5.4.

    [See PDF for image]

    Source: GAO analysis of Medicare Part B claims data.

    [A] Includes general and family practitioners and internists.

    [End of figure]

    Substantial Variation of In-Office Imaging Use across Geographic
    Regions Raises Concerns about Appropriate Use:

    Substantial variation in imaging use across geographic regions of the
    country suggests that not all utilization of in-office imaging services
    may be appropriate. We found that per beneficiary spending on imaging
    services provided in physician offices varied almost eight-fold across
    the states in 2006--from $62 in Vermont to $472 in Florida (see fig.
    5). Physician spending on in-office imaging was the highest in the
    South, Northeast, and in certain states in the West.[Footnote 23] Given
    the magnitude of the differences in imaging use across geographic
    areas, variation is more likely due to differences in physician
    practice patterns rather than patient health status. Further concerns
    about the appropriateness of imaging use are raised by research on
    geographic variation showing that, in general, more health care
    services do not necessarily lead to improved outcomes.[Footnote 24]

    Figure 5: Per Beneficiary Spending on In-Office Imaging Services, 2006:

    This figure is a picture of a United States map showing per beneficiary
    spending on in-office imaging services, 2006.

    [See PDF for image]

    Source: GAO analysis of Medicare Part B claims data, Map Resources
    (map).

    Notes: Per beneficiary spending across states is adjusted to account
    for differences in Medicare fees across geographic areas. Data for
    Maryland, Virginia, and Washington D.C., were not available separately;
    therefore, we used the average of the three for each state. We excluded
    data from Hawaii because spending per beneficiary appeared to be too
    low based on a comparison with other states of similar size and
    Medicare beneficiary population.

    [End of figure]

    The shift in imaging services to physician offices has the potential to
    encourage overuse, given physicians' financial incentives to supplement
    relatively lower professional fees for interpretation of imaging tests
    with relatively higher fees for performance of the tests. Physician
    ownership of imaging equipment can generate additional revenue for a
    practice, even after taking into account the high costs of purchasing
    advanced imaging equipment. MedPAC has expressed concern about whether
    Medicare's payment methodology overpays physicians for imaging
    equipment, because of outdated estimates of equipment use.[Footnote 25]
    An analysis published in 2005 of private insurance claims data on X-ray
    services concluded that orthopedists, podiatrists, and rheumatologists
    were two to three times more likely to order imaging services if the
    ordering physician also performed the examination, compared with those
    who referred patients to a radiologist. In addition, the authors found
    that podiatrists and rheumatologists were also more likely to order
    more intensive tests.[Footnote 26] Another study showed that physicians
    who refer patients for imaging in their own office are at least 1.7 to
    7.7 times more likely to order imaging than those physicians in the
    same specialty who do not self-refer.[Footnote 27]

    Increasing Provision of Imaging Services in Physician Offices Raises
    Additional Concerns about Quality:

    In addition to concerns about incentives for inappropriate use of
    imaging services, the shifting of services from hospital and other
    institutional settings to physician offices may have implications for
    quality. Hospitals must comply with Medicare's "conditions of
    participation" rules, which include general standards for imaging
    equipment and facilities, staff qualifications, patient safety, record-
    keeping, and proper handling of radioactive materials. In contrast, no
    comprehensive national standards exist for services delivered in
    physician offices other than a requirement that imaging services are to
    be provided under at least general physician supervision--that is, a
    physician is responsible for the training of the technical staff
    performing the imaging service, and the maintenance of the necessary
    equipment and supplies. CMS, however, has expanded existing quality and
    business performance standards for IDTFs. For example, CMS has
    explicitly prohibited hotels and motels from being considered
    appropriate sites for an IDTF setting.[Footnote 28]

    Regulatory responsibilities relating to imaging devices and services
    are divided among federal agencies as well as the states. The Food and
    Drug Administration (FDA) and the Nuclear Regulatory Commission (NRC)
    each have regulatory responsibilities for devices that are used to
    provide imaging services. For example, FDA is responsible for
    establishing quality standards for mammography equipment,[Footnote 29]
    and ensuring that manufacturers of radiation-emitting imaging equipment
    are in compliance with applicable performance standards. While FDA does
    not regulate the practice of medicine, such as the establishment of
    patient radiation dose limits, it is responsible for ensuring that
    medical imaging systems are safe and effective. NRC does not regulate
    medical products, but does oversee the medical uses of nuclear
    materials used by physicians, hospitals, and others through licensing,
    inspection, and enforcement programs. Regarding licensing, in many
    cases NRC has transferred this authority to the states. While all
    states have radiation control boards that monitor the use of radiation
    by imaging facilities, they do not regulate nonradiation imaging such
    as MRI or ultrasound, nor do they monitor the quality of imaging. Their
    primary mission is to ensure patient safety. In addition, officials
    from the Conference of Radiation Control Program Directors, Inc.--whose
    primary membership is made up of radiation professionals in state and
    local government who regulate the use of radiation sources--told us
    that states vary in the comprehensiveness of their rules as well as
    their ability to monitor compliance, often lacking the resources to
    perform all of their functions. Further, officials from the American
    Society of Radiologic Technologists told us that states also vary in
    their licensure requirements for imaging providers--some do not have
    any licensure or certification laws for radiology technologists, and
    most states also allow technicians to perform advanced imaging without
    additional training. In a 2007 report we recommended that CMS require
    sonographers--technologists that perform ultrasound examinations--paid
    by Medicare to be credentialed or work at accredited
    facilities.[Footnote 30]

    Although physicians can seek to have their facility accredited--a
    process by which facilities and providers are recognized as meeting
    certain quality, safety, and performance thresholds by one of the three
    primary accreditation organizations for imaging--officials we
    interviewed from these organizations estimated that very few physician
    offices are accredited.[Footnote 31] Studies of the provision of
    imaging tests in this setting showed quality concerns in several areas
    such as staff credentials, poor image quality, failure to monitor
    radiation exposure, and inadequately maintained equipment.[Footnote 32]
    Officials from some of the health plans, accreditation organizations,
    and other industry groups that we interviewed indicated similar
    concerns. For example, a health plan official told us that 25 percent
    of facilities in its network, including physician offices, failed
    credentialing, most commonly because of a lack of a board certified
    radiologist on staff, or problems with imaging equipment. Two of the
    three primary accreditation organizations told us that general problems
    encountered during the accreditation process of facilities, including
    physician offices, related to failure of staff to keep up with
    professional education requirements, lack of documentation of quality
    assurance policies, poor quality of the images, and incomplete or
    inadequate interpretation. The third accreditation organization told us
    that the failure rate for initial applications was about half, although
    the majority of reapplicants passed after correcting deficiencies.
    Typically, the main deficiency was equipment that needed to be
    recalibrated, and a lack of quality control programs. The officials
    from this organization were concerned about the implications for
    quality of the vast majority of providers who did not apply for
    accreditation, given a 50 percent initial failure rate for providers
    self-selecting to apply for accreditation.[Footnote 33]

    To Manage Imaging Expenditures, Private Health Care Plans in Our Study
    Use Certain Practices to Constrain Spending Growth:

    Similar to Medicare, private health plans in recent years have
    experienced rapid growth in imaging services, particularly in advanced
    imaging. We examined a sample of 17 private health care plans which
    were selected because they were known to take steps to actively manage
    imaging services. Most of the plans in our study contracted with
    companies called radiology benefits managers (RBM) to perform imaging
    management activities on their behalf. Officials of the plans or the
    RBMs they use told us that prior authorization, which requires
    physicians to obtain some form of plan approval before ordering a
    service, was the practice most important to managing their physicians'
    use of imaging services. Other practices they noted included
    privileging, by which a plan limits its approval for ordering certain
    imaging services to physicians in certain specialties, and profiling,
    which entails a statistical analysis of medical claims data measuring
    an individual physician's use of services relative to a desired
    benchmark.

    With respect to managing the growth in Medicare physician expenditures
    on imaging services, CMS does not employ the practices used by the
    plans in our study. The agency's focus is largely on physician billing
    practices, and its management activities therefore occur at a point
    when services have already been ordered and performed. CMS conducts
    profiling activities, but these are consistent with the agency's focus
    on identifying improper billing rather than on targeting services
    showing high spending growth rates. CMS officials indicated that
    approaches such as prior authorization would likely require significant
    administrative resources, and that the agency would have to consider
    any specific initiatives in light of its existing legal authority.

    Plans' Management of Imaging Services Relies Mostly on Prior
    Authorization:

    All the health plans in our study used prior authorization, the
    practice of determining whether to grant physicians approval to order
    some or all imaging services before they are delivered, to manage
    spending on imaging services.[Footnote 34] This practice was in
    addition to retrospective payment safeguards commonly used to identify
    medical claims that do not meet certain billing criteria. Under prior
    authorization, plans only pay physicians for imaging services rendered
    that have received plan approval. Almost all of the plans--16 of 17--
    conducted their prior authorization activities through an RBM. The
    steps plans typically use in the prior authorization process are shown
    in figure 6.

    Figure 6: Steps That Typically Occur in the Prior Authorization
    Process:

    This figure is a flowchart showing the steps that typically occur in
    the prior authorization process.

    [See PDF for image]

    Source: GAO analysis of information from RMBs and private plans.

    Note: In this figure, the term plan is used to refer to either a health
    plan or its RBM contractor.

    [End of figure]

    For example, prior authorization is typically used by RBMs for
    physicians requesting imaging services for lower back pain, a common
    condition for which physicians inappropriately request MRIs. Typically,
    the process works as follows: A physician requests an MRI of the lumbar
    spine with contrast for a patient with symptoms of lower back pain and
    no other symptoms. In considering this request, the RBM's nurse manager
    follows a protocol of questions based on the ACR clinical guidelines
    for "acute low back pain, uncomplicated." Such questions could include
    "How long has the patient had symptoms? Have you tried conservative
    management?" These questions are aimed at discouraging the use of
    advanced imaging at the condition's onset, unless certain other
    symptoms or conditions are present.[Footnote 35] The physician has the
    option of consulting with one of the RBM's board-certified radiologists
    or its medical director if there is disagreement with the initial
    decision to deny a request. If the physician still disagrees with the
    decision and proceeds with the request, the RBM will likely deny it.
    Alternatively, if the physician's request for an MRI of the lumbar
    spine with contrast is made for a patient with low back pain and the
    other specified symptoms or conditions, the RBM waives conservative
    management and approves the request.

    The plans in our study varied in their prior authorization policies.
    For example, officials we interviewed from almost all of the plans
    reported that they targeted prior authorization for technologically
    complex or high-cost imaging tests, but varied in what specific tests
    were included under their programs. In addition, to determine the
    appropriateness of a given diagnostic test or procedure, most plans
    relied on criteria developed by the American College of Cardiology or
    the ACR, but they also customized these criteria to their
    specifications. Three of the plans used a variant of prior
    authorization, called prior notification, which requires the physician
    to contact the plan prior to sending a patient for an imaging scan. If
    the plan determines that another test is more appropriate, based on
    clinical guidelines or other criteria, the plan can make this
    suggestion to the physician, but the physician has ultimate discretion
    to choose among options.

    Plan officials reported significant decreases in utilization after
    implementing a prior authorization program. For example, several of the
    plan officials we interviewed reported that annual growth rates were
    reduced to less than 5 percent after prior authorization; these annual
    growth rates had ranged for these plans from 10 percent to more than 20
    percent before prior authorization programs were implemented. The
    biggest utilization decreases occurred immediately after
    implementation. One plan's medical director said that prior
    authorization was the plan's most effective utilization control
    measure, because it requires physicians to attest to the value of
    ordering a particular service based on clinical need. Plan officials
    noted that there were costs associated with implementing a prior
    authorization program. Under a typical arrangement, plans paid a per-
    member per-month fee to an RBM to conduct prior authorization on their
    behalf.

    The plan and RBM officials we spoke with indicated that outright denial
    rates for requests to order imaging services were low, primarily
    because requesting physicians typically agree to a more clinically
    appropriate test or decide to forgo the test after they are shown
    countervailing evidence. These officials also contended that a
    spillover effect exists with respect to future ordering. That is, the
    interaction between plans and physicians that occurs during the prior
    authorization process enables physicians to make more educated
    decisions about what services to order for future patients with the
    same condition. The net effect has been to reduce unnecessary
    utilization to levels that are lower than they would have been in the
    absence of prior authorization.

    An official at one plan told us about the plan's experience using RBM-
    performed prior authorization. To control rapid spending growth, the
    plan contracted with an RBM in the late 1990s to perform prior
    authorization for advanced imaging services. After 3 years, when
    expenditures for these services stopped growing, the plan discontinued
    using the RBM for prior authorization, assuming that a lasting change
    had been achieved in physicians' ordering of the services. However,
    over the subsequent 3 years, annual growth in imaging services climbed
    to more than 10 percent, on average. In 2006, the plan reinstated the
    RBM's prior authorization program and 6 months after implementation,
    growth had again declined to single digits.

    To a lesser extent, plans in our study used privileging and profiling
    to manage utilization and spending on health care services in general,
    which include imaging services in particular. Over one-third of the
    plans used privileging, a practice which limits, according to
    specialty, a plan's pool of physicians who can order certain imaging
    services. For example, one plan in our study allowed orthopedic
    surgeons to perform CT scans of body joints, but did not allow
    endocrinologists to perform these scans. One of the RBMs we interviewed
    permitted ear, nose, and throat physicians to perform CT scans of the
    sinuses, head, or neck but none below the neck. Plan and RBM officials
    told us that their privileging rules were based on established medical
    practice guidelines and research and that physicians received advance
    notice of the plan's privileging rules--that is, which specialties were
    permitted to perform specific services. Plans enforced adherence to
    these rules through their claims adjudication systems: if a physician
    was not privileged to order or perform a specific imaging service, the
    plans would not pay for the images taken or interpreted. Typically,
    radiologists were allowed to perform all imaging services because of
    their imaging-specific education and training.

    Profiling is a practice that is carried out through a statistical
    analysis of paid claims. Eight of the plans in our study used profiling
    to collect information about individual physicians' ordering history
    and provision of imaging services. Using this information, the plans
    compare a physician's practice patterns against a benchmark, or norm,
    based on the practice patterns of the plan's other physicians in the
    same specialty. Typically, the plans inform physicians of their
    relative performance based on these profiling analysis results and
    provide additional education to physicians who order inappropriately or
    order at rates higher than their peers. An official at one RBM we
    interviewed noted that in addition to the contemporary peer
    comparisons, the firm's profiling activities include longitudinal
    analyses to determine if a physician's ordering of services has
    increased over time relative to the physician's peers regionally and
    nationally. The official noted that after implementing its profiling
    program, the RBM observed a reduction in the number of images ordered
    by physicians who provide high-technology imaging in their own offices.
    Prior to profiling, these physicians provided three to five times more
    imaging services than their counterparts who referred the imaging
    services to other practitioners or facilities.

    CMS's Management Activities, Focusing on Improper Billings, Have a
    Retrospective Rather Than Prospective Orientation:

    Unlike the private plans in our study, CMS's management practices are
    not oriented toward controlling spending prospectively--that is,
    through preapproval practices, such as prior authorization and
    privileging. Instead, CMS employs, through its claims administration
    contractors, an array of retrospective payment safeguards, or
    activities, that occur in the post-delivery phase of monitoring
    services. These activities are designed to achieve payment accuracy; in
    fact, CMS evaluates contractors' performance in terms of a payment
    error rate.[Footnote 36]

    In general, the contractors responsible for administering Part B
    payments are required to perform ongoing data analyses and take action
    on the services or physicians that present the greatest risk of
    improper payments. The contractors use various techniques, such as
    profiling, to examine unexplained increases in utilization, abnormally
    high utilization of services by an individual physician relative to the
    physician's peers, and other indicators of aberrancies. Some of the
    analyses result in recovering overpayments from individual physicians
    who have been found to bill the program inappropriately. They have also
    resulted in producing the evidence needed to modify coverage or payment
    policies at the local contractor level--referred to as a local coverage
    determination.[Footnote 37] For example, with respect to imaging
    services, one contractor that had conducted reviews of echocardiograms,
    nuclear medicine, and PET and CT scans, modified its coverage policies
    for these services by limiting the number of times the services could
    be billed for an individual patient within a certain time frame.

    In a 2007 report,[Footnote 38] we concluded that CMS's existing
    physician profiling and educational outreach activities, while focused
    largely on improper billing practices and potential fraud, put the
    agency in a favorable position to adopt profiling as a strategy to curb
    inappropriate spending resulting from physicians' inefficient
    practices. As with the private plans we reviewed for this study and the
    health care payers in our 2007 study, a consequence of profiling for
    efficiency could be to achieve physician compliance with clinical
    practice standards and, in doing so, reduce inappropriate ordering and
    use of services. In response to our recommendation to adopt an
    efficiency-oriented profiling program, CMS commented that this program
    fit into efforts the agency was pursuing to improve quality and
    efficiency in Medicare.[Footnote 39]

    To that end, CMS has contracted with a firm to develop efficiency
    measures for certain anatomically-specific imaging services with an
    anticipated completion date of December 2008.[Footnote 40] These
    measures are to be based on clinical evidence and are designed to
    provide the agency, in the firm's words, "the ability to more
    effectively manage the rapid diffusion of new technologies and patient-
    driven demand." The firm plans to test these measures and provide
    insight into their development and use. In the case of lumbar MRI, for
    example, the plan is to track physicians' behavior with respect to the
    conventionally accepted use of this service--namely, that the service
    is not typically indicated unless the patient has received a period of
    conservative therapy. Using a coding system, the firm will track
    whether the physician (1) provided documentation that the patient had a
    trial of conservative therapy prior to the MRI, (2) provided no
    documentation or conservative therapy prior to the MRI, or (3)
    documented that the patient did not require conservative therapy. The
    codes, in this instance, are intended to capture whether appropriate
    evidence-based guidelines were adhered to.

    CMS officials indicated that approaches, such as prior authorization,
    would likely require significant administrative resources. In addition,
    they stated that they were not aware of any statutory provision either
    explicitly authorizing or prohibiting the use of such approaches.
    Accordingly, they stated that if they were to pursue prior
    authorization, they would need to evaluate any specific initiatives in
    light of CMS's overall authority with respect to the Medicare program.

    Conclusions:

    The rapid increase in Medicare spending on imaging services paid for
    under the physician fee schedule from 2000 to 2006 poses challenges for
    CMS in managing the spending growth on these services. While much of
    this growth may be appropriate, the pace of increase and shift towards
    more costly advanced imaging; a shift towards providing imaging in
    physician offices, where there is generally less oversight; broader use
    of imaging by physician specialties other than radiologists; and the
    substantial variation of in-office imaging spending per beneficiary
    across geographic regions of the country raise concerns. Our
    examination of private plans--selected because they were known to take
    steps to actively manage imaging services--provides examples of
    practices to constrain spending growth. Unlike CMS, the private plans
    in our study had management practices oriented toward controlling
    spending prospectively rather than solely focusing on activities that
    occur after the imaging service has been provided to the beneficiary.
    Specifically, our examination of these plans found a common thread that
    requiring prior authorization of certain imaging services, such as
    advanced imaging services, was effective for them in reducing spending
    growth in this area.

    Given the pressures of a fiscally unsustainable Medicare program, CMS
    has undertaken several initiatives aimed at improving its performance
    as a purchaser of health care services. With respect to rapidly growing
    imaging services, the experience of the private plans in our study
    suggests that the benefits of front-end management of these services
    exceeded their costs. We believe CMS may be able to improve its prudent
    purchaser efforts by adopting strategies such as prior authorization
    and privileging. To do this, CMS would need to assess the feasibility
    of using these approaches for imaging services under the Medicare Part
    B program, including the costs or staffing resources needed to carry
    out these activities and the potential savings that might accrue from
    these activities. Moreover, CMS would also need to assess any specific
    activities in light of its authority under the Medicare program and
    determine if additional legislation is necessary.

    Recommendation for Executive Action:

    To address the rapid growth in Medicare Part B spending on imaging
    services, we recommend that CMS 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.

    Agency and Professional Association Comments and Our Evaluation:

    We obtained written comments on a draft of this report from HHS (see
    app. V). We obtained oral comments from representatives of two
    organizations, AHIP and AMIC, selected because they represent a broad
    array of stakeholders with specific involvement in the imaging
    industry.

    HHS Comments:

    HHS stated that, through ongoing data analysis and evaluation, Medicare
    contractors have identified imaging services as an area that poses a
    high risk to the Medicare Trust Fund, and are therefore continuing to
    conduct ongoing medical review and provider education. We are pleased
    that CMS contractors are scrutinizing imaging services through post-
    payment claims review; however, as we noted in the draft of this
    report, we believe that more front-end approaches to managing these
    services may also be desirable.

    Regarding our recommendation, HHS raised several concerns about the
    administrative burden, as well as the advisability of prior
    authorization for the Medicare program. First, the agency said there
    was no independent data--other than self-reported--on the success of
    RBMs in managing imaging services. Second, it stated that RBMs' use of
    potentially proprietary information, including clinical guidelines and
    protocols for approval of services, may be inconsistent with the public
    nature of Medicare. Third, the effectiveness of a prior authorization
    program could be diminished if a high proportion of denied services
    were overturned through Medicare's statutory and regulatory appeals
    process. HHS also raised a question about how prior authorization would
    fit within its current post-payment review program.

    Regarding the effectiveness of prior authorization and use of RBMs in
    the private sector, as we noted in the draft report, all the plans in
    our study had implemented some form of a prior authorization program,
    and all but one had hired an RBM to manage imaging services for its
    enrollees. It is unlikely that these plans--ranging in size from small
    FEHBP plans to nationwide private sector plans with up to 34 million
    covered lives--would incur RBM fees to implement prior authorization
    unless they believed it to be effective. As we also noted in the draft
    report, the use of prior authorization as a tool to manage imaging is a
    growing trend in the private sector. We do not dispute HHS's
    reservations about prior authorization, and agree that these concerns
    will require careful examination within the context of Medicare
    statutes and regulations. Because we believe post-payment claims review
    alone is inadequate to manage one of the fastest growing parts of
    Medicare, addressing these concerns should be incorporated into CMS's
    feasibility analysis of adding front-end approaches to its prudent
    purchasing efforts. If Medicare is to become a "value-based" purchaser
    of health services, for the sake of both its beneficiaries and
    taxpayers, it should consider going beyond its traditional methods of
    managing benefit payments to achieve this result.

    Professional Association Comments:

    AHIP and AMIC representatives presented contrasting concerns about our
    discussion of prior authorization in the draft report. AHIP
    representatives characterized prior authorization as primarily an
    educational tool to persuade physicians to prescribe imaging studies in
    conformance with practice standards, while AMIC representatives
    characterized it as a cost-cutting tool that achieves savings by
    imposing burdens on physicians, with little or no educational benefit.
    Their views on the value of RBMs as implementers of prior authorization
    are similarly contrasting.

    Specifically, AHIP representatives' primary concern was our
    characterization of prior authorization as a cost-control measure
    rather than a tool used by plans to improve quality and ensure
    appropriate use of imaging services by adherence to evidence-based
    guidelines. Officials we interviewed from plans and RBMs generally
    viewed prior authorization as the most effective tool to reduce
    inappropriate utilization and spending growth rather than to improve
    quality--many of the representatives described it as a utilization
    management tool. AHIP representatives said the draft report did not
    include provider consultations with radiologists as another strategy
    that plans employ. We have revised the report to note that providers
    have that option if they disagree with a plan's initial decision to
    disapprove a requested imaging service. AHIP representatives also
    raised concerns that the draft report did not give sufficient attention
    to market structure incentives, such as leasing arrangements and
    manufacturers' attempts to increase acquisition of imaging equipment.
    Our report does address the topic of incentives for inappropriate use
    of imaging; however a detailed analysis is beyond the scope of our
    work. AHIP representatives also provided technical comments, which we
    incorporated as appropriate.

    AMIC representatives raised four principal concerns about the draft
    report. First, they stated the draft report should have focused on
    strategies such as accreditation (which improves quality), and
    adherence to clinical practice guidelines (that result in appropriate
    use of imaging services), rather than private sector strategies such as
    use of RBMs, prior-authorization, and other techniques which focus
    solely on controlling costs. Specifically, AMIC representatives
    expressed several concerns about RBMs. They stated that the for-profit
    structure and lack of transparency in sharing appropriateness
    guidelines make RBMs incompatible with the Medicare program. They also
    contended that there is no evidence that RBMs improve care or add
    value, and RBMs involve physicians in lengthy interactions. Moreover,
    they stated that prior authorization had been tried and proven
    unfeasible for Medicare for lack of sufficient administrative
    resources. In the draft report, we noted plans' increasing use of
    accreditation to assure quality of imaging services. With regard to
    prior authorization and RBMs, we are recommending that CMS consider the
    feasibility of these and other front-end approaches. We would also note
    that while HHS indicated that prior authorization might be inconsistent
    with the Medicare program, the department did not rule it out as a
    strategy that had been tried and proven unfeasible for Medicare.

    Second, AMIC representatives stated that in emphasizing spending growth
    we had failed to recognize the benefits of imaging and its effects in
    reducing overall health costs by substituting for more invasive
    procedures or treatments. We acknowledged the benefits of imaging
    throughout the draft report and noted that while some of this spending
    growth may be appropriate, financial incentives inherent in Medicare's
    payment policies for potentially inappropriate use of imaging in
    physicians' offices, and their implications for a fiscally
    unsustainable Medicare program cannot be ignored. We are not aware of
    any peer-reviewed studies that conclusively show the role of imaging in
    reducing overall health care costs.

    Third, AMIC representatives stated that by focusing only on Part B
    spending under the physician fee schedule, the draft report did not
    acknowledge growth in imaging across other sites of care such as
    hospitals. As we stated in the draft report, Medicare's physician
    payment policies contain financial incentives for physicians to
    directly benefit from higher fees paid for the provision of imaging
    services in their offices, while receiving lower fees for
    interpretation of in hospitals. However, we have added additional
    information to the report, noting that about two-thirds of all imaging
    services were delivered in the hospital setting in 2006, and that
    spending on imaging services delivered in physician offices grew twice
    as fast compared to spending on services delivered in the hospital
    setting.

    AMIC's fourth concern was that the draft report did not discuss the
    fairness of the payment reductions resulting from the changes mandated
    in the DRA. As noted in the draft report, we will examine the effects
    of payment changes mandated by the DRA in a separate report.

    As agreed with your offices, unless you publicly announce the contents
    of this report earlier, we plan no further distribution of it until 30
    days from the date of this report. We will then send copies to the
    Secretary of HHS, the Administrator of CMS, appropriate congressional
    committees, and other interested parties. We will also make copies
    available to others upon request. This report is also available at no
    charge on GAO's Web site at [hyperlink, http://www.gao.gov].

    If you or your staff have any questions about this report, please
    contact me at (202) 512-7114 or steinwalda@gao.gov. Contact points for
    our Offices of Congressional Relations and Public Affairs may be found
    on the last page of this report. GAO staff who made contributions to
    this report are listed in appendix VI.

    Signed by:

    A. Bruce Steinwald:

    Director, Health Care:

    [End of section]

    Appendix I: Scope and Methodology:

    To determine trends in Medicare Part B spending, we analyzed Medicare
    claims data from 2000 through 2006 using the Part B Extract Summary
    System (BESS)--a data source that aggregates data to the billing code
    designated under the Healthcare Common Procedure Coding System (HCPCS).
    We extracted claims where the first digit of the Berenson-Eggers Type
    of Service (BETOS) code was equal to "I", indicating the line item was
    an imaging service.[Footnote 41] On the basis of data from the
    Denominator File--a database that contains enrollment data and
    entitlement status for all Medicare beneficiaries enrolled and/or
    entitled in a given year--we excluded beneficiaries who had 12 months
    of enrollment in a health maintenance organization in a given
    year.[Footnote 42] We aggregated the 18 BETOS categories into six major
    categories of imaging services, also referred to as modalities: CT,
    MRI, nuclear medicine, ultrasound, procedures that use imaging, and X-
    rays and other standard imaging. Our spending totals include two parts
    of the imaging service paid for by Medicare: (1) the technical
    component--the performance of the examination itself, and the (2)
    professional component--the physician's interpretation of the
    examination.[Footnote 43]

    We also examined the association between growth in total Part B imaging
    spending and various factors, including the growth in the volume and
    complexity of services, the number of Medicare fee-for-service
    beneficiaries, and Medicare fees for imaging services. To do this, we
    first calculated the growth in total Part B spending from 2000 through
    2006 and then estimated the relative contribution of each factor to the
    growth in total Part B imaging spending. To estimate the effect of
    volume and intensity on the growth in total spending, we totaled the
    Relative Value Units (RVU) associated with each imaging service from
    2000 and 2006. Because RVUs for imaging services may change from year
    to year, we used RVUs for the most recent year for which data were
    available, 2006. We estimated the effect of separately billed items
    used to deliver imaging services, such as radioactive agents and iodine
    supplies, by comparing total spending on these items in 2000 and 2006.
    Physicians submit separate bills for these items and are paid based on
    prices established by Medicare's claims administration contractors.
    These services are not assigned RVUs in the physician fees schedule. We
    compared the number of Medicare beneficiaries from 2000 to 2006 to
    determine the effect of their growth and compared changes in Medicare
    fees for imaging services using the Medicare conversion factor in 2000
    compared with 2006.[Footnote 44] To determine the share of Medicare
    beneficiaries who received any imaging services and, for those
    beneficiaries, the average number of services provided, we used
    Medicare Part B Physician/Supplier Claims data for 2000 and 2006 and
    Denominator File data for those same years.

    To supplement our quantitative examination of spending trends and to
    understand stakeholder perspectives on these trends, we obtained
    information from 19 physician specialty groups, including the American
    College of Cardiology and the American College of Radiology.[Footnote
    45] These 19 specialties were chosen because imaging is integral to
    their practices. In addition, we interviewed officials from two
    organizations, the Access to Medical Imaging Coalition and the Medical
    Imaging & Technology Alliance (a division of the National Electrical
    Manufacturers Association), that represent a diverse and large number
    of stakeholders including equipment manufacturers, physician
    specialties, patient-advocacy organizations, and others. We also
    interviewed representatives from America's Health Insurance Plans
    (AHIP), a trade association that includes about 90 percent of health
    insurers, 17 private plans, and five of the largest RBMs that manage
    imaging services for health plans.

    To examine the relationship between spending growth and the provision
    of imaging services in physician offices, we analyzed Medicare claims
    data from 2000 and 2006. We first examined the extent to which Medicare
    Part B spending on imaging services shifted to physician offices from
    Independent Diagnostic Testing Facilities (IDTF) and hospital
    inpatient, outpatient, and emergency room settings. To examine
    geographic variation in per beneficiary spending on in-office imaging,
    we divided total in-office spending for each state by the number of
    Medicare beneficiaries for that state. However, since total in-office
    spending may vary across states because of Medicare's geographic price
    differences, we derived an adjusted spending total by multiplying the
    total RVUs for in-office imaging in each state by the national Medicare
    physician fee schedule conversion factor.[Footnote 46] For this
    analysis, we excluded data from Hawaii because spending per beneficiary
    appeared to be too low compared with other states of similar size and
    Medicare beneficiary population.

    We also examined how physicians' share of their Medicare Part B revenue
    from imaging services has changed during this period and its
    relationship with certain physician specialties. Specifically, by
    physician specialty, we examined the number of non-
    radiologists[Footnote 47] who submitted bills that included the
    provision of the imaging examination, and the share of overall allowed
    charges that were attributable to imaging services provided in
    physician offices. To do this, we used Medicare Part B claims data from
    the National Claims History files and constructed data sets for 100
    percent of Medicare claims for physician services performed by
    physicians in the first 28 days of April 2000 and April 2006. We
    established a consistent cutoff date (the last day of the year) for
    each year's data file and only included those claims for April services
    that had been submitted by that date. Because claims continue to
    accrete in the data files, this step was necessary to ensure that the
    earlier year was not more complete than the later year. If non-
    radiologist physicians performed imaging examinations, either billed
    separately or in conjunction with an interpretation, and the place of
    service was "physician's office," then they were deemed to be
    performing those services in-office. We focused on non-radiology
    specialties that had at least 500 individual physicians who billed
    Medicare for any service and at least 5 percent of those billed for any
    imaging in the period examined, which yielded 297,000 physicians in
    2000 and 353,000 in 2006.

    To examine the approaches used by private payers that may have lessons
    for Medicare in managing spending on imaging services, we selected 17
    private payers known to be active in managing imaging benefits that
    included a combination of national and regional payers. We selected
    five plans because they had publicly presented information to the
    Congress or MedPAC on prior occasions about their imaging management
    practices, or had descriptions of their programs appear in the medical
    literature. We selected six private plans offered to federal employees
    under the Federal Employees Health Benefits Program (FEHBP), and six
    private plans identified through our interview with AHIP. Appendix IV
    provides characteristics of our sample of private plans. We conducted
    interviews with, or submitted questions to, these plans.[Footnote 48]
    We also interviewed five radiology benefits managers--organizations
    hired by private payers to manage radiology services for their
    enrollees--to learn about the management practices that they use to
    manage spending on imaging services. To determine what management
    practices the Centers for Medicare and Medicaid Services (CMS) uses for
    imaging services, we interviewed CMS officials including those from the
    Office of Clinical Standards and Quality, the Coverage and Analysis
    Group, and the Program Integrity Group, and officials from Medicare
    Part B contractors that together process claims for nine different
    states.

    We conducted our work from January 2007 through May 2008 in accordance
    with generally accepted government auditing standards.

    [End of section]

    Appendix II: Medicare Spending on Imaging Services Paid for under the
    Physician Fee Schedule by Modality, 2000 through 2006:

    Table 3:

    Dollars in millions.

    Imaging modalities: CT;
    2000: 975;
    2001: 1,205;
    2002: 1,308;
    2003: 1,521;
    2004: 1,818;
    2005: 2,076;
    2006: 2,171.

    Imaging modalities: MRI;
    2000: 1,002;
    2001: 1,316;
    2002: 1,451;
    2003: 1,768;
    2004: 2,155;
    2005: 2,738;
    2006: 2,982.

    Imaging modalities: Nuclear medicine;
    2000: 973;
    2001: 1,263;
    2002: 1,439;
    2003: 1,735;
    2004: 2,080;
    2005: 2,303;
    2006: 2,418.

    Imaging modalities: Ultrasound;
    2000: 1,842;
    2001: 2,116;
    2002: 2,204;
    2003: 2,490;
    2004: 2,823;
    2005: 3,208;
    2006: 3,334.

    Imaging modalities: X-ray and other standard imaging;
    2000: 1,711;
    2001: 1,925;
    2002: 2,013;
    2003: 2,189;
    2004: 2,391;
    2005: 2,464;
    2006: 2,485.

    Imaging modalities: Procedures that use imaging;
    2000: 386;
    2001: 473;
    2002: 555;
    2003: 686;
    2004: 840;
    2005: 708;
    2006: 715.

    Imaging modalities: Total for advanced imaging;
    2000: 2,951;
    2001: 3,783;
    2002: 4,197;
    2003: 5,025;
    2004: 6,052;
    2005: 7,116;
    2006: 7,571.

    Imaging modalities: Total for standard imaging;
    2000: 3,939;
    2001: 4,515;
    2002: 4,771;
    2003: 5,366;
    2004: 6,054;
    2005: 6,380;
    2006: 6,534.

    Imaging modalities: Overall total;
    2000: 6,891;
    2001: 8,298;
    2002: 8,969;
    2003: 10,390;
    2004: 12,106;
    2005: 13,496;
    2006: 14,105.

    Source: GAO analysis of Medicare Part B claims data.

    Note: Advanced imaging includes MRI, nuclear medicine, and CT. Standard
    imaging includes ultrasound, X-ray and other standard imaging, and
    procedures that use imaging.

    [End of table]

    [End of section]

    Appendix III: Medicare Imaging Use by Modality, 2000 and 2006:

    Table 4:

    Imaging modalities: CT;
    Percentage of beneficiaries: 2000: 16.0;
    Percentage of beneficiaries: 2006: 22.2;
    Percentage of beneficiaries: Percentage change: 39;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 2.1;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 2.5;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 22.

    Imaging modalities: MRI;
    Percentage of beneficiaries: 2000: 6.8;
    Percentage of beneficiaries: 2006: 12.0;
    Percentage of beneficiaries: Percentage change: 76;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 1.4;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 1.6;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 15.

    Imaging modalities: Nuclear Medicine;
    Percentage of beneficiaries: 2000: 9.4;
    Percentage of beneficiaries: 2006: 11.6;
    Percentage of beneficiaries: Percentage change: 23;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 2.0;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 2.6;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 27.

    Imaging modalities: Ultrasound;
    Percentage of beneficiaries: 2000: 27.7;
    Percentage of beneficiaries: 2006: 32.7;
    Percentage of beneficiaries: Percentage change: 18;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 2.7;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 3.2;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 19.

    Imaging modalities: X-ray and other standard imaging;
    Percentage of beneficiaries: 2000: 55.8;
    Percentage of beneficiaries: 2006: 57.0;
    Percentage of beneficiaries: Percentage change: 2;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 3.6;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 4.0;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 12.

    Imaging modalities: Procedures that use imaging;
    Percentage of beneficiaries: 2000: 5.7;
    Percentage of beneficiaries: 2006: 8.7;
    Percentage of beneficiaries: Percentage change: 53;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 3.6;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 3.2;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: -11.

    Imaging modalities: Total for advanced imaging;
    Percentage of beneficiaries: 2000: 25.0;
    Percentage of beneficiaries: 2006: 33.0;
    Percentage of beneficiaries: Percentage change: 34;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 2.5;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 3.1;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 27.

    Imaging modalities: Total for standard imaging;
    Percentage of beneficiaries: 2000: 61.0;
    Percentage of beneficiaries: 2006: 64.0;
    Percentage of beneficiaries: Percentage change: 4;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 4.8;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 5.7;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 18.

    Imaging modalities: Overall total;
    Percentage of beneficiaries: 2000: 63.2;
    Percentage of beneficiaries: 2006: 66.4;
    Percentage of beneficiaries: Percentage change: 5;
    Services per beneficiary for those who received at least one service in
    each category: 2000: 5.6;
    Services per beneficiary for those who received at least one service in
    each category: 2006: 7.0;
    Services per beneficiary for those who received at least one service in
    each category: Percentage change: 24.

    Source: GAO analysis of Medicare Part B claims data.

    Note: Advanced imaging includes MRI, nuclear medicine, and CT. Standard
    imaging includes ultrasound, X-ray and other standard imaging, and
    procedures that use imaging.

    [End of table]

    [End of section]

    Appendix IV: Characteristics of GAO Sample of Private Plans That
    Actively Manage Imaging Services (February 2008):

    Table 5:

    Plan name: American Postal Workers Union;
    Approximate number of covered lives affected: 143,000;
    Locations: Nationwide;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: Highmark Blue Cross Blue Shield;
    Approximate number of covered lives affected: 1.8 million;
    Locations: PA;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Blue Cross Blue Shield of Massachusetts;
    Approximate number of covered lives affected: 1.3 million;
    Locations: MA;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: Blue Cross Blue Shield of Michigan;
    Approximate number of covered lives affected: 5 million;
    Locations: MI;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Blue Cross Blue Shield of Texas;
    Approximate number of covered lives affected: 2.2 million;
    Locations: TX;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes[A];
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: CIGNA;
    Approximate number of covered lives affected: 4.5 million;
    Locations: Nationwide;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: Government Employees Health Association, Inc;
    Approximate number of covered lives affected: 423,000;
    Locations: Nationwide;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Harvard Pilgrim;
    Approximate number of covered lives affected: 1 million;
    Locations: MA, NH, and ME;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes[B];
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: HealthPartners;
    Approximate number of covered lives affected: 438,000;
    Locations: MN, ND, SD, and WI;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Humana CoverageFirst;
    Approximate number of covered lives affected: 1 million;
    Locations: LA, KY, parts of IN, and OH;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre- cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Independence Blue Cross;
    Approximate number of covered lives affected: 1.9 million;
    Locations: PA and NJ;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Panama Canal Area Benefit Plan;
    Approximate number of covered lives affected: 17,000;
    Locations: Panama Canal area;
    RBM used: No;
    Imaging management practices used by plan or RBM: Prior auth/ pre- cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Tufts Health Plan;
    Approximate number of covered lives affected: 507,000;
    Locations: MA;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: UniCare[C];
    Approximate number of covered lives affected: 10,000;
    Locations: Chicagoland area, IL, and IN;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: UnitedHealthcare;
    Approximate number of covered lives affected: 18 million;
    Locations: Nationwide;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes[D];
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: No.

    Plan name: Wellpoint[E] (FEHBP);
    Approximate number of covered lives affected: 78,000;
    Locations: MO, OH, and CA;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used: No;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Plan name: Wellpoint (Commercial);
    Approximate number of covered lives affected: 34 million;
    Locations: CA, CO, CT, GA, IL, IN, KY, MA, ME, MO, NV, NH, NY, OH, TX,
    VA, and WI;
    RBM used: Yes;
    Imaging management practices used by plan or RBM: Prior auth/ pre-cert
    used: Yes;
    Imaging management practices used by plan or RBM: Privileging used:
    Yes;
    Imaging management practices used by plan or RBM: Profiling used: Yes.

    Source: GAO interviews and analysis of plan data.

    [A] These covered lives are part of BCBS-TX's Radiology Quality
    Initiative (RQI), which only requires prior notification for an imaging
    test. BCBS-TX also has a separate program that requires prior
    authorization of imaging services and affects 50,000 covered lives.

    [B] Harvard Pilgrim employs prior notification for some imaging tests,
    and does not deny services on a clinical basis;
    however, it may deny for administrative reasons.

    [C] UniCare is owned by Wellpoint.

    [D] UnitedHealthcare employs prior notification for some imaging tests.

    [E] Includes BlueChoice HMO in MO, Blue Cross HMO in CA, and Blue HMO
    in OH.

    [End of table]

    [End of section]

    Appendix V: Comments from the Department of Health and Human Services:

    Department Of Health & Human Services:
    Office of the Assistant Secretary for Legislation:

    Washington, D.C. 20201:

    April 10, 2008:

    A. Bruce Steinwald:
    Director, Health Care:
    U.S. Government Accountability Office:
    Washington, DC 20548:

    Dear Mr. Steinwald:

    Enclosed are the Departments comments on the Government Accountability
    Office Draft Report Entitled: "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).

    The Department appreciates the opportunity to review and comment on
    this report before its publication.

    Sincerely,

    Signed by: Jennifer R. Luong:

    for:

    Vincent Ventimiglia:

    Assistant Secretary for Legislation:

    General Comments Of The Department Of Health And Human Services (NHS)
    On The U.S. Government Accountability Office's (GAO) Draft Report
    Entitled: "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):

    The GAO examined the extent to which Medicare Part B spending on
    imaging services shifted to physicians' offices from hospital settings
    and how physicians' shares of their Medicare revenue from imaging
    services have changed. GAO analyzed claims data and also interviewed
    physician specialty groups and private health care payers and reviewed
    health services literature.

    The GAO noted that private health care plans use the practice of
    privileging and profiling to manage their physicians' use of imaging
    services. Privileging entails the plan limiting its approval for
    ordering certain imaging services to physicians in certain specialties.
    Profiling entails a statistical analysis of medical claims data
    measuring an individual physician's use of services related to a
    desired benchmark.

    Through the Deficit Reduction Act of 2005 (DRA), Congress and CMS acted
    to constrain spending on Part B imaging services. The DRA required that
    Medicare payment for imaging services under the Medicare physician fee
    schedule not exceed what Medicare pays for these services performed in
    hospital outpatient departments. This provision was effective for
    services furnished after January 1, 2007. In addition, effective
    January 1, 2006, we implemented a multiple procedure payment reduction
    on certain diagnostic imaging procedures paid under the physician fee
    schedule. When two or more procedures in the same family of codes are
    furnished for the same patient in a single session, payment for the
    technical component of the second and subsequent procedures is reduced
    by 25 percent.

    The CMS has taken significant steps to address concerns over improper
    payments in the Medicare program and in the imaging services area.
    Through data analysis, our contractors determine which areas seem
    problematic and have high risk potential to the Medicare Trust Fund.
    The most egregious areas are selected for validation by probe review. A
    probe review is used to validate the hypothesis that such claims are
    billed in error. A random or stratified sample of generally 20-40
    claims is reviewed. The results of the probe review aid the contractor
    in determining the nature and scope of these problem areas, and which
    problem areas warrant further action. Then the contractor prioritizes
    the problem areas and focuses on the ones with the largest
    vulnerabilities, given their limited resources. Contractors do this by
    developing strategies annually to focus their resources on those claims
    that pose the largest vulnerabilities to the Medicare Trust Fund. For
    example regarding imaging services, for 2007 and 2008, many of our
    contractors, after performing data analysis, have found imaging
    services to be vulnerabilities in their jurisdiction (relative to other
    services) and thus are performing ongoing medical review and giving
    education to the provider community. Our contractors will continue to
    include imaging services in their analysis and prioritization
    activities in the future.

    GAO Recommendation:

    GAO recommends that CMS should examine the feasibility of expanding its
    payment safeguard mechanisms by adding more front-end approaches to
    managing imaging services, including using privileging and prior
    authorization.

    HHS Response:

    The CMS would have to consider a more robust set of issues dealing with
    the advisability of prior authorization techniques that the GAO has
    recommended before considering their feasibility and the administrative
    burden that this would place on our contractors. The report relies on
    plans' experience with radiology benefit managers (RBMs) as self-
    reported to GAO by the RBMs. It does not appear that GAO conducted any
    independent review of the methodology or data used by plans to
    determine that the use of RBMs was successful or of the manner in which
    RBMs make their prior authorization determinations.

    We are particularly concerned that the approval or disapproval
    determinations of RBMs could be based on proprietary systems, the use
    of which could be inconsistent with the public nature of the Medicare
    program. Further, the report does not indicate how the protocol of
    questions were developed or the extent to which such protocols deviate
    from the clinical guidelines of the physician professional societies.
    These are important questions in considering the use of private
    entities and their methods to make Medicare payment/non-payment
    determinations and something we would need to closely examine before we
    could consider adopting such a system. For example, Medicare may have a
    statutory and regulatory appeals infrastructure that is more favorable
    to Medicare beneficiaries than which exist for members of private
    health insurance plans. Services that are denied by an RBM, using a
    confidential proprietary system, could be overturned on appeal if a
    beneficiary or physician argue that a service they believe was
    medically appropriate was denied without an explanation of the basis
    for the denial. RBMs would not be considered an effective policy tool
    if a high proportion of imaging claims denied by RBMs are overturned on
    appeal. Similarly, the report might address the issue about how prior
    authorization might relate to post-payment review. Post-payment review
    could be nullified in a case where prior authorization was granted.

    We appreciate the effort that went into this report and the opportunity
    to review and comment on these issues.

    [End of section]

    Appendix VI: GAO Contact and Staff Acknowledgments:

    GAO Contact:

    A. Bruce Steinwald, (202) 512-7114 or steinwalda@gao.gov:

    Acknowledgments:

    In addition to the contact name above, Jessica Farb and Thomas A.
    Walke, Assistant Directors; Todd Anderson; Iola D' Souza; Hannah Fein;
    Julian Klazkin; Emily Loriso; and Richard Lipinski made key
    contributions to this report.

    [End of section]

    Footnotes:

    [1] See GAO, 21st Century: Addressing Long-Term Fiscal Challenges Must
    Include a Re-examination of Mandatory Spending, GAO-06-456T
    (Washington, D.C.: Feb. 15, 2006); Congressional Budget Office, The
    Long-term Outlook for Health Care Spending, Pub. No. 3085 (Washington,
    D.C.: November 2007); and The Boards of Trustees of the Federal
    Hospital Insurance and Federal Supplementary Medical Insurance Trust
    Funds, 2008 Annual Report of the Boards of Trustees of the Federal
    Hospital Insurance and Federal Supplementary Medical Insurance Trust
    Funds (Washington D.C.: Mar. 25, 2008).

    [2] Medicare Part B pays for physician, outpatient hospital, home
    health care, and certain other services.

    [3] Medicare Payment Advisory Commission, Report to the Congress:
    Medicare Payment Policy (Washington, D.C.: March 2005). MedPAC was
    established by the Balanced Budget Act of 1997 (Pub. L. No. 105-33) to
    advise the Congress on issues affecting the Medicare program.

    [4] Medicare Payment Advisory Commission, Report to the Congress:
    Variation and Innovation in Medicare (Washington D.C.: June 2003).
    MedPAC measured variation in the number of imaging services across
    metropolitan statistical areas and rural areas using Medicare data from
    1999 through 2002.

    [5] 70 Fed. Reg. 70116, 70262 (Nov. 21, 2005).

    [6] Pub. L. No. 109-171, � 5102(b), 120 Stat. 4, 39-40 (2006).

    [7] The six major categories of imaging services--also referred to as
    modalities--include: CT, MRI, nuclear medicine, ultrasound, X-ray and
    other standard imaging, and procedures that use imaging. For the
    purposes of this report, we classify the first three modalities listed
    as advanced imaging services.

    [8] A more complete description of this current procedural terminology
    (CPT) code--number 71010--is radiologic examination, chest, single
    view, frontal. CPT codes and descriptions are copyrighted by the
    American Medical Association.

    [9] The CPT code for this service is 70450 and it is described as
    computed tomography, head or brain, without contrast material.

    [10] In practice, payment rates are adjusted for variations in
    physicians' costs of providing care in different geographic areas or
    payment localities. These adjustments raise or lower Medicare fees,
    depending on whether the payment locality's average cost of operating a
    physician practice is above or below the national average. The locality
    adjustments are made to each of the three RVUs before they are totaled
    and multiplied by the conversion factor, which converts the RVUs into a
    dollar payment amount.

    [11] In 2006, about two-thirds of all imaging services were performed
    in a hospital setting.

    [12] MedPAC, March 2005.

    [13] CMS estimated that the elimination of budget neutrality for the
    multiple payment reduction would result in a 0.3 percent decrease in
    payment for all physician fee schedule services in 2007, while the
    additional effect of capping of payments at the OPPS level would result
    in a total 0.9 percent decrease. 71 Fed. Reg. 69,766 (2006).

    [14] Average annual spending growth on physician-billed imaging
    services was also greater than spending growth for all services paid
    under Medicare Part B during this period, which was 8.9 percent and
    included spending on Part B institutional services such as outpatient
    hospital and home health services.

    [15] We have work underway examining the effect of the 2006 payment
    change as well as the imaging payment changes established in the
    Deficit Reduction Act of 2005 and implemented in 2007.

    [16] In February 2007, we reported on the potential multiplier effect
    resulting from the diffusion of new technology and increases in
    diagnostic capability, which in turn may increase the identification
    and treatment of diseases and conditions. In some cases, this
    capability can lead to overdiagnosis and the excessive use of health
    care resources. See GAO, Health Care Spending: Public Payers Face
    Burden of Entitlement Program Growth, While All Payers Face Rising
    Prices and Increasing Use of Services, GAO-07-497T (Washington D.C.:
    Feb. 15, 2007). See also Richard A. Deyo, "Cascade Effects of Medical
    Technology," Annual Review of Public Health, vol. 23 (May 2002).

    [17] For example, a study of inpatient costs at a Chicago-area breast
    center found that in treating cancer, mastectomies and lumpectomies
    that use image-guided core biopsies were less expensive than those
    using surgical biopsies. See Robert M. Golub et al., "Cost Minimization
    Study on Image-guided Core Biopsy Versus Surgical Excisional Biopsy for
    Women with Abnormal Mammograms," Journal of Clinical Oncology, vol. 22,
    no. 12 (June 15, 2004).

    [18] We estimate that about one-tenth of the growth in Part B spending
    on imaging from 2000 through 2006 resulted from this shift in settings.

    [19] From 2000 through 2006, spending on imaging increased in both
    treatment settings. However, spending in physicians' offices grew twice
    as fast--at an average annual rate of 14 percent--compared with
    spending in the hospital setting which grew at an average annual rate
    of 7 percent.

    [20] 42 U.S.C. � 1395nn (a), (b)(2).

    [21] Statement of Glenn M. Hackbarth, J.D., Chairman of MedPAC, at a
    hearing entitled: "Use of Imaging Services: Providing Appropriate Care
    for Medicare Beneficiaries," on July 18, 2006, for the Subcommittee on
    Health, Committee on Energy and Commerce, House of Representative,
    109th Cong.

    [22] A recent study of imaging providers in California estimated that
    about 60 percent of providers billing for in-office imaging did not
    actually own the imaging equipment, but were involved in leasing or
    other arrangements designed to take advantage of the in-office
    ancillary exemption. Jean M. Mitchell, "The Prevalence of Physician
    Self-Referral Arrangements After Stark II: Evidence from Advanced
    Diagnostic Imaging," Health Affairs, Web exclusive (Apr. 17, 2007).

    [23] Mirroring trends in spending on in-office imaging, total spending
    per beneficiary across all settings--including hospitals, physician
    offices, and IDTFs--also varied widely across states. The variation
    across these settings ranged about five-fold across the states in 2006-
    -from $150 in Vermont to $684 in Florida.

    [24] Elliot S. Fisher et al., "The Implications of Regional Variation
    in Medicare Spending: Part I: The Content, Quality, and Accessibility
    of Care," and "The Implications of Regional Variation in Medicare
    Spending: Part II: Health Outcomes and Satisfaction with Care," Annals
    of Internal Medicine, vol. 138, no. 4 (February 2003).

    [25] Medicare Payment Advisory Commission, Report to the Congress:
    Increasing the Value of Medicare (Washington, D.C.: June 2006). MedPAC
    conducted an equipment capacity study in six markets across the country
    to determine the average usage levels for MRI and CT equipment. MedPAC
    found that providers used CT and MRI equipment more than 70 percent of
    the time they were open for business, rather than CMS's current
    estimate of 50 percent.

    [26] Andrew W. Litt et al., "Relative Procedure Intensity with Self-
    Referral and Radiologist Referral: Extremity Radiography," Radiology,
    vol. 235 (2005): 142-147. Also, we reported in 1994 that physicians
    with equipment within their practices ordered three times as many MRI
    scans and twice as many CT scans for their patients than physicians
    without such equipment. See GAO, Medicare: Referrals to Physician-Owned
    Imaging Facilities Warrant HCFA's Scrutiny, GAO/HEHS-95-2 (Washington,
    D.C.: Oct. 20, 1994).

    [27] Brian E Kouri et al., "Physician Self-Referral for Diagnostic
    Imaging: Review of the Empiric Literature," American Journal of
    Roentgenology, vol. 179 (October 2002).

    [28] 42 C.F. R. � 410.33(g)(3) (2007).

    [29] Under the Mammography Quality Standards Act of 1992, as amended,
    FDA implements quality assurance standards for mammography equipment,
    personnel, and facility practices. 42 U.S.C. � 263b(f).

    [30] GAO, Medicare Ultrasound Procedures: Consideration of Payment
    Reforms and Technician Qualification Requirements, GAO-07-734
    (Washington, D.C.: June 28, 2007). In its written response, CMS stated
    that while it would consider our recommendation, it would rather have
    states engage their own licensing bodies in implementing sonographer
    licensure programs.

    [31] The three primary accreditation organizations in imaging are the
    American College of Radiology (ACR), the Intersocietal Accreditation
    Commission (IAC), and the American Institute of Ultrasound in Medicine.

    [32] Kouri et al., "Physician Self-Referral for Diagnostic Imaging:
    Review of the Empiric Literature," pp. 843-850. (This article contains
    a compilation and empirical review of several studies on quality of
    imaging services, including those provided in physician offices.)

    [33] Private payers are increasingly requiring that all providers
    obtain accreditation of their imaging facilities from one of the three
    main accrediting agencies. For example, United Healthcare Group, one of
    the nation's largest private purchasers, requires that all independent
    diagnostic testing facilities and physician offices performing
    outpatient advanced imaging services for their enrollees will have
    obtained ACR or IAC accreditation as of March 1, 2008.

    [34] This is a growing trend among private health plans. For example,
    on the basis of its 2007 Community Tracking Surveys of health care
    trends in 12 markets across the country, the Center for Studying Health
    System Change reported an increasing use of prior authorization as a
    tool to manage advanced imaging services in the private sector.

    [35] Such symptoms or conditions include recent significant trauma, or
    milder trauma for individuals older than 50; unexplained weight loss;
    unexplained fever; immunosuppression; history of cancer; intravenous
    drug use; prolonged use of corticosteroids for osteoporosis; age over
    70; focal neurological deficit progressive or disabling symptoms; and
    duration of symptoms greater than 6 weeks.

    [36] GAO, Medicare Payment: CMS Methodology Adequate to Estimate
    National Error Rate, GAO-06-300 (Washington, D.C.: Mar. 24, 2006).

    [37] CMS also makes determinations or policies on whether certain
    imaging services are covered at the national level--referred to as a
    national coverage determination. For example, CMS has a national
    coverage determination that describes under what circumstances CMS will
    cover PET scans for dementia and neurodegenerative diseases such as
    Alzheimer's.

    [38] GAO, Medicare: Focus on Physician Practice Patterns Can Lead to
    Greater Program Efficiency, GAO-07-307 (Washington, D.C.: Apr. 30,
    2007).

    [39] CMS has several ongoing demonstrations examining alternative
    methods to pay physicians, which combine Medicare fee-for-service
    payments with new incentive payments. For example, in the Physician
    Group Practice demonstration that began in April 2005, 10 physician
    groups (groups with 200 or more physicians) may earn annual bonus
    incentive payments by achieving cost savings and meeting quality
    targets on conditions such as diabetes.

    [40] The services are MRI and magnetic resonance angiography (MRI of
    the blood vessels) of the brain, MRI lumbar spine, CT in combination
    with pelvic CT, mammography, and cardiac single photon emission
    computed tomography.

    [41] The BETOS categorization system was developed by CMS primarily for
    analyzing the growth in Medicare expenditures by broad service
    categories. Each billing code is assigned to only one BETOS category.
    There are 18 distinct BETOS categories for imaging services.

    [42] For beneficiaries with less than 12 months of enrollment in
    Medicare Part B, we totaled the number of months they had been enrolled
    and divided this by 12.

    [43] Our spending totals are in nominal dollars and do not include the
    technical component of services provided in hospitals or other
    institutions that fall under Medicare Part A.

    [44] Medicare fees for each service are determined by multiplying the
    RVUs for each service by a "conversion factor" expressed in dollars.
    Thus, fees could change from year to year due to changes in both the
    conversion factor and the RVUs for each service.

    [45] Specifically, we interviewed representatives from the following 18
    physician specialty groups: American Academy of Orthopaedic Surgeons,
    American Academy of Ophthalmology, American Academy of Family
    Physicians, American Association of Neurological Surgeons, American
    Academy of Neurology, American College of Cardiology, American College
    of Emergency Physicians, American College of Obstetricians and
    Gynecologists, American College of Physicians, American College of
    Radiology, American Gastroenterological Association, American Society
    of Clinical Oncology, American Society of Echocardiography, Society of
    Nuclear Medicine, American Society for Therapeutic Radiology and
    Oncology, American Society of Radiologic Technologists, Society of
    Interventional Radiology, and Society for Vascular Surgery. In
    addition, the American Urological Association provided us written
    comments on imaging services in lieu of an interview. We also
    interviewed representatives from the American Medical Association, a
    physician-member advocacy organization.

    [46] Some services, including separately billed ancillary services, do
    not have RVUs; therefore we used the actual spending in each state for
    these services unadjusted for Medicare's geographic price differences.
    Spending on these services provided in physician offices accounted for
    about 5 percent of total in-office imaging spending in 2006.

    [47] Some physicians billed under more than one specialty. To avoid
    double counting, we grouped these physicians into the specialty that
    comprised a plurality of their allowed charges.

    [48] We used the Office of Personal Management to assist us in
    collecting information from the six FEHBP plans and AHIP to assist in
    collecting information from the six private plans.

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