The mechanics of spending reductions could use a mechanic.

Dan Anderson

It was shiny and new—at least to me—and I thought it was the best thing I’d ever seen. I was 18 years old, and “it” was a 5-year-old black truck with pinstripes and tinted windows. Like most teen-age boys, at least those in car-crazy California, I was convinced the outward appearance of this truck was going to improve my social life in ways I could only imagine. I was dazzled with promises of things to come—social status, better road trips, girls! I should have looked under the hood.

With little counseling from anyone with knowledge about such things as buying a used car, this impassioned, obsessed, love-struck teen walked into the bank, got a $6,500 loan, and handed a cashier’s check to the man with the truck.

Several hundreds of dollars and a trip to small claims court later, I finally got back my $6,500 and he got back his well-dressed lemon. In the intervening 3 months, I racked up fewer than 100 miles on the truck. As for my social life: with the heap parked in the mechanic’s garage most of the time, I got out even less than I did with my old clunker that I had sold for $500.

Congress is faced with the same realization that they’re struck with a lemon in the Deficit Reduction Act (DRA). Dazzled by the promise of reduced spending amid a massive budget deficit—as much as $2.8 billion over 5 years—they bought in big time. But now the true impact of the DRA is starting to show and so far the warnings and misgivings are proving out.

We see evidence that clinics are scaling back—and in some cases closing—because of significantly reduced reimbursements. Anecdotally, some Medicare patients are forgoing medical imaging procedures because of the out-of-pocket expenses or because they live in rural areas that have little or no immediate access to imaging.

The industry is seeing a sales slump—more than 20% among the major manufacturers, according to one industry group. Clinics are rushing to refinance their equipment to maintain a broad range of services or, in some cases, to keep the doors open for the limited services they have.

And there are more cuts to come.

Medical imaging has grown leaps and bounds in the last couple of decades as better technology has allowed for better images and broader applications for MRI and PET/CT, for example. And research is finding new applications all the time. At a few recent trade shows, I’ve been wowed by 3D technology, improved CT imaging, and lightning-fast MRI. But all the while, I found myself wondering what good any of it would be if it’s not accessible.

The companies are wondering the same thing, and that’s why they’re employing dozens of lobbyists to get Congress to cut back on the cutting back. The American Medical Association has begun a campaign in certain legislative districts to hold off on additional cuts. Patients rights groups are screaming about the effective reduction in care to some of the country’s most vulnerable. And there’s plenty to argue with in the latest round of proposed cuts in the Medicare physician reimbursement – nearly 10%—on which our business editor, Cheryl Proval, has some thoughts in her column this month.

Despite all the efforts, they don’t appear to be persuasive to the myopic cost-cutters. As a whole, the industry had $25 billion in revenue last year, according to The Associated Press. While that’s a far cry from, say, the oil and gas industry, it’s an impressive haul, one not likely to incite Congress to ease up.

Sometimes, a person can be so caught up in the allure of something shiny that they miss what’s under the hood.

Dan Anderson
Editorial Director