Obama’s solution of using RBMs to manage cost and utilization doesn’t add up.

Last June, the Government Accountability Office (GAO) report to Congress titled “Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices” (try saying that three times, real fast) found that imaging costs had risen significantly; that the amount paid varied greatly by state ($62 PMPY in Vermont to $472 PMPY in Florida); and, most importantly, focused on private payors’ emphasis on prospective activities to control spending. More specifically, the “common thread” of requiring prior authorizations for advanced imaging studies was seen as the most effective cost reducer in the private sector—and should be considered by the public sector, as well.

Fast forward to late 2008/early 2009 when the Congressional Budget Office (CBO) budget options proposal, a 236-page document listing 115 different options on how to reduce federal spending on health care, is finalized and presented to Congress. Option 41 out of 115, entitled “Require Prior Authorization for Imaging Services Under Medicare” purports to reduce CMS’ expenditures for Medicare recipients by approximately $220 million over the 5-year period 2010 to 2014, and approximately $1 billion over the 10-year period 2010 to 2019 if CMS implements a prior authorization program for advanced imaging. In order to do this, the CBO suggests that Medicare look into using radiology benefit managers (RBMs) as a way to introduce prior authorizations.

From a financial perspective, the projected savings hardly seem worth the effort. With a 2009 projected federal budget deficit of $1.75 Trillion (with a “T”), followed by another $1.17 Trillion in 2010, an “estimated” savings of $220 million over 5 years is less than the proverbial drop in the bucket. But wait, it gets worse. With the administration’s latest announcement on May 11, those initial federal losses were increased to $1.84T and $1.26T, respectively. That means the projected 5-year savings through the use of RBMs were completely wiped out with the revised estimate of an additional $90B loss in 2010 alone.

The sad part about this is that the savings are just simple, federal guesses. And temporary savings at that. In the CBO report, it was admitted that prior authorization for advanced imaging services has an initial benefit in the first year or two, but that utilization usually picks up and returns to its same growth rates in a very short period of time.

In spite of the financial issues, positive or negative, I have other issues with RBMs. Notwithstanding the wedge they drive between the treating physician, patient and radiologists, and their use of retrospective denials and specific CPT codes rather than an appropriate family of codes, I question whether they are practicing medicine in violation of the prohibition on the corporate practice of medicine that still exists in some states (like my California).

Let me explain by providing a real-life scenario in California. Radiologist-owned Imaging Company “R” negotiates a contract with Insurance Provider “C.” Insurance Provider “C” subcontracts with RBM “N” to provide prior authorization service. Primary Care Provider “Z” orders a study on a patient insured by Provider “C,” specifically choosing to send that patient to Imaging Company “R.” Now remember, “R” already has a contract with “Z”, so “R” is an approved provider. RBM “N” authorizes the test as medically necessary but then redirects the patient to a less expensive imaging center (note, quality is not the issue here). PCP “Z” calls RBM “N” and insists the patient goes to Imaging Company “R.” RBM “N” denies the request on financial issues, not quality or appropriateness, and sends to the less expensive imaging center. Clearly, the RBM is not only interfering with the provider relationship between the PCP and the radiology group (“R”), but is practicing medicine by denying and redirecting a patient. I cannot see this any other way.

So I’ll go out on a limb and say we won’t see RBMs at the federal level, but we will still have to deal with them in the commercial market. I, for one, believe that the Best Practices Guidelines on RBM Programs, jointly developed by the American College of Radiology and the Radiology Business Management Association, are the only way to move forward if we are going to have to work with RBMs. I urge the RBMs to accept and follow those guidelines.

Fred Gaschen, MBA, is executive vice president of Radiological Associates of Sacramento. He is also a member of Axis Imaging News’ Editorial Advisory Board.

For the full GAO Report, please go to: www.gao.gov/products/GAO-08-452