Christie James, MS

It was just a matter of time before health care payors began implementing policies to decrease radiology utilization and reimbursement and to manage referring physicians’ ordering practices. There is no love for radiology when insurers and the Medicare program are experiencing skyrocketing utilization rates for radiology’s expensive, high-tech procedures. With a focus on CT, MRI, positron-emission tomography, nuclear cardiology, and ultrasound, payors are developing policies to reduce their costs and control utilization.

Part B Medicare reimbursement climbed to $3.7 billion in 2003 from $2.61 billion in 2000, a nearly 30% increase.1 Despite radiology’s concerns about increased imaging by physicians outside radiology, diagnostic radiologists have seen their total Medicare Part B services increase 22.5% from 2000 to 2003, according to a Part B News analysis of Medicare billing data (PBN 4/18/05).For the top 25 services for which radiology bills payors, utilization increased 16.9% from 2000 to 2003 (from 60.1 million to 72.3 million services). This figure is for the specialty as a whole. Services billed to Medicare per procedure varied; none of the top 25 decreased, radiography of the abdomen showed the smallest increase (4.5%), and CT of the pelvis without dye had the largest (43.2%).

Insurers are looking for ways to decrease the double-digit inflation that they are experiencing, year after year. The reasons for these increases in imaging are many. Technological advances in diagnostic imaging, changes in best-practices guidelines, advertising, and self-referral models are among the reasons for the increase in imaging, as are patients who are better informed and request more advanced imaging procedures instead of radiography. Self-referral practices are emerging everywhere. Specialty and primary care practices are buying their own CT and MRI scanners, entering special lease agreements, and self-referring their patients while outsourcing the radiologists’ interpretations.

The technical component and global payment are the main focus in reducing radiology costs. Over the last few years, three payor strategies have been implemented in an effort to control increases in utilization. A payment retention (withholding) of 5% to as much as 15% or more of the allowable or contracted fee is one method of controlling reimbursement for overutilization. The retention is made at the time of payment, which is applied at the Current Procedural Terminology (CPT) level of reimbursement. The retained funds are paid back according to whether contracted utilization requirements and best-practices guidelines negotiated between the hospital and payor have been met. In effect, providers are supplying loans, in the form of retained payments, to payors for as long as 2 years.

The second strategy reduces reimbursement 50% for contiguous studies for CT, MRI, and ultrasound procedures. CT studies of the abdomen and pelvis, CT examinations with CT angiography, MRI studies of the head and neck, MRI examination with MR angiography, and transabdominal ultrasound performed with a transvaginal pelvic examination procedure are some of the most commonly paired procedures subject to the 50% reduction.

The third strategy uses precertification or prior authorization to manage utilization. Often, these steps are outsourced to organizations that control utilization and educate referring physicians on the appropriate diagnostic imaging procedures to order.


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Payors are contracting with physicians and hospitals to hold 5% to 15% or more of allowable or contracted fees. This plan is designed to encourage hospitals and physicians to control utilization while maintaining high-quality patient care. Several patient-care specifications are negotiated and ranked among all specialties, including primary care and ancillary departments. The most popular initiatives include measuring quality, improving quality, and maintaining uniformly high quality in specific areas across the health care network, and this includes measuring utilization of imaging services. Management of diabetes and of pediatric asthma are two of the pay-for-performance areas to which some insurers apply a retention model. Data are quantified and evaluated using the Health Plan Employer Data and Information Set® standards established by the National Committee for Quality Assurance. At the end of the contracted term, each criterion point is calculated and the retained funds are repaid based on how well the institution as a whole performed in controlling utilization while implementing best-practices guidelines.

Payor contracts that include payment retention can affect reimbursement (and cash flow) significantly during the first year of the contract. Hospitals and imaging centers are notably affected because retentions are commonly applied to the technical and global allowable fees. It can take a year or more to negotiate repayment, and there is no certainty that the amount withheld will be returned at 100% (or that the radiology department will get a portion of it, especially in a large academic center).


The technical advances made over the past 10 years allow contiguous examinations to be performed more quickly and economically, particularly for CT. The payor community is investigating ways to harvest some of the cost savings that hospitals and imaging centers are now experiencing through the use of faster CT and MRI scanners.

Some payors have implemented reimbursement that is 50% less for contiguous body examinations. This reduction does not consider the value assigned to CPT codes or the actual costs of performing these examinations. The position of the American College of Radiology (ACR) is that radiology interpretations are separately identifiable full services, each of which has been assigned relative value units (RVUs) determined by a multispecialty panel rigorously using evidence-based data to define the preservice, intraservice, and postservice components of the physician’s work and the technical components of each procedure. Significant savings in physician work do not exist when multiple imaging procedures are interpreted; thus, it is the position of the ACR and the Centers for Medicare and Medicaid Services (CMS) that these interpretations are not subject to the multiple surgical rules. These rules, as outlined by Medicare, apply to procedural codes for which less physician work is done for the additional procedures. The concept does not apply to interpretations of multiple CT, MRI, or ultrasound studies. The only economy in interpreting consecutive studies for these modalities is that dictating the patient’s name and unit number needs to be done only once. This certainly does not represent significant savings of time or physician work. It parallels the imaging portion of angiography, in which separate, identifiable services are provided for each area.2

It could be argued, however, that the technical component of the second radiological procedure costs less than it would if performed on its own. For example, if a CT of the abdomen is performed with a pelvic study, the cost to perform the pelvic (second) study is lower. Does it cost 50% less? True cost savings need to be demonstrated to payors.

Before going into contract negotiations with a payor, the hospital, radiology practice, and/or imaging center should determine, in detail, the actual cost of performing contiguous procedures. The cost breakdown should include all indirect, direct, and variable costs incurred to perform the additional examination during the same session. For example, when performing a thoracic MRI examination with an additional MRI study of the lumbar spine, does the technical component cost 50% less for the lumbar component than for the thoracic scan? The New England MRI Association, of Massachusetts doesn’t seem to think so. Members are very concerned that some insurance carriers are considering as much as a 50% reduction in the reimbursement for technical and global contiguous MRI body scans when both scans are done on the same day. While there may be some cost savings when both scans of contiguous body parts are done consecutively on the same day, the reduction in costs is nowhere near 50%. Members of the New England MRI Association have evaluated the cost components of their operations, including scheduling/reception, technologists, facility, equipment, supply, billing, and administration, and have found that any actual cost savings are in the 5% to 11% range. While no reduction in reimbursement is felt to be warranted, 50% is entirely arbitrary and unreasonable.3 These supposed economies of scale should be addressed when payors first announce that they are going to implement contiguous reimbursement reduction.

It is also important to recognize that, in an imaging center setting, the global fee could be subject to a 50% reduction. This bundled fee should not be discounted 50% because the professional fee is incorporated within it. The physician-fee component could be approximately 20% to 40% of the global fee, depending on the RVUs assigned to the CPTs involved. The physician’s fee should not be considered for reduction, according to the ACR’s guidelines1 for CT and MRI studies, which require documented procedures and technical factors to be prepared for each anatomic site. The guidelines state that the physician has the responsibility for all aspects of these studies, including (but not being limited to) reviewing all indications for the examination, specifying the pulse sequences to be performed, specifying the use and dosage of contrast agents, interpreting images, generating written reports, and ensuring the quality of both images and interpretations.

It is the ACR’s recommendation4 that the integrity of the resource based relative value scale be preserved in all medical coverage policies; the ACR finds no basis in fact that justifies the proposal made by payors to reduce reimbursement for contiguous body examinations for the professional component. A reduction could be negotiated for the technical component of the examination if the contiguous scan does cost less to perform, but cost analyses should be performed before the provider negotiates with the insurer on this point.

The ACR has been instrumental in working with the Medicare Payment Advisory Commission (MedPAC) since 2004 addressing perceived efficiencies in contiguous imaging examinations.5 During a public meeting with MedPAC in March 2004, it was stated that radiologists are commonly viewed as the reason for the need to reduce imaging costs. It was pointed out that radiologists perform examinations requested by other physicians and are, therefore, not the reason for the expansion of radiology services.

In a report6 to Congress in June 2004, MedPAC cited its own analysis of Medicare Part B data from 2002. MedPAC found that radiologists performed only 48% of all Medicare-reimbursed imaging, meaning that nonradiologists billed Medicare for the remaining 52%. Among those nonradiology billings, cardiologists had by far the largest part, at 23%.

In addition, MedPAC’s March 2005 report7 to Congress on Medicare payment policy examined ways to reduce inappropriate use of physician services and improve the quality of services provided to beneficiaries. The strategies include measuring resource use by physicians, in comparison with that of their peers; setting quality standards for imaging services; and creating new incentives for individual physicians to control unnecessary volume.

MedPAC advocates measuring fee-for-service physicians’ resource use and sharing results with physicians (confidentially) to educate them about how they compare with aggregate peer performance. This would be a costly endeavor, it would be difficult for CMS to measure the savings, and it could take many years to begin to see results (if any).


Precertification managed care programs (radiology management companies) are hired by insurers to manage radiology utilization, acquire utilization statistics, and educate referring physicians about the appropriate radiology procedures for their patients. The precertification process can cost a large academic center a tremendous amount of money if robust processes are not in place for obtaining precertification prior to performing a scan. Costs to have staff monitor precertification and ensure that all scans (including those for walk-in patients and add-on procedures) are appropriately approved are also extensive. Whether this type of managed care system actually reduces utilization and educates referring physicians is often challenged; in an academic imaging center, procedures may be performed with or without precertification, as patients are not usually turned away. Even when the call center denies precertification based on medical necessity, the referring physician often orders the scan anyway. The actual savings that some payors may experience could be the result of mismanaged precertification processes in the hospital, not decreased utilization.

Precertification is hard to manage in a hospital setting because only the referring physician’s office can obtain precertification from some radiology managed care call centers. It is likely to be the secretary, not the referring physician, who contacts the call center to obtain precertification. The call center will ask for clinical history, which requires the busy secretary to obtain results from office visits and send them by fax to the call center for review and approval. In many cases, the patient is standing in front of the secretary, waiting to schedule the radiology procedure. The notes from the current visit typically have not been completed, so the secretary must send them to the call center later and then contact the patient (or ask the patient to call later to schedule the procedure). Many secretaries have spent as long as 45 minutes on the telephone with a call center to precertify a single study. During this time, the call center may ask to speak with the physician to conduct a peer-to-peer consultation (suggesting an alternate scan or denying the request entirely). Many physicians will refuse to speak with the call center’s representative and will order the denied test anyway. In some cases, it has been noted that the referring physician who does speak to the precertification decision maker must educate that individual concerning the clinical situation in order to get approval.

There is no incentive for the referring physician to comply with this process unless the radiology service decides not to perform nonemergency scans without precertification (or unless the patient is billed for the radiology service when precertification is denied). Usually, the patient who has been billed blames the referring physician for failing to obtain the precertification, setting off correspondence ping-pong as letters go back in forth between the referring physician and the insurer. The patient will probably end up having to pay for the services if the radiology provider decides not to write it off (some contracts do not allow the hospital or radiologist to bill the patient if precertification has not been obtained).

The precertification approach upsets the referring physician and the patient, and it is not the insurance company that looks like the villain: it is the radiology provider. Again, there is no love for radiology.

Academic centers, as well as for-profit enterprises, should take over educating referring physicians on utilization management, not leave it to Medicare or other payors to determine what utilization criteria should be. For example, on-line radiology scheduling with decision support should be made available to referring physicians. The key to managing reimbursement and utilization in the future will be radiologists, not call centers, educating referring physicians about the best diagnostic measures. This would also preserve the integrity of patient care among physicians, preventing the insurer from dictating what type of diagnostic scan is appropriate for the patient. Providers should work with payors to develop a model that allows the radiologist to provide ongoing utilization education to referring physicians. Insurers do not want to pay radiology management organizations any more than radiology providers want them to educate referring physicians. Providers implementing a utilization-education tool using ACR guidelines and proving the efficacy of that tool to payors may be able to avoid the call-center approach.


Radiologists are commonly viewed as the reason for the increase in imaging costs, but radiologists perform examinations requested by other physicians; they are not at the heart of the rapid growth of imaging services. Instead, more attention should focus on the self-referral model. The ACR has provided data demonstrating that nonradiologists performing their own imaging are two to seven times more likely to order imaging procedures than are treating physicians with no stake in the radiology practice. As many as 50% of imaging procedures ordered by nonradiologist physicians may be unnecessary, according to the ACR.8 About one third of advanced imaging tests may be inappropriate or may not contribute to the physician’s diagnosis or to ultimate health outcomes. Appropriate use of advanced radiology varies by specialty. Overall, appropriate selection of imaging was 72% over a recent study period (lowest for chiropractors and highest for obstetrician-gynecologists).8 Nonradiologist practices that provide technical services will continue to increase utilization rates while costing academic centers a great deal of money through the reimbursement reductions that overutilization prompts.

Christie James, MS, is the radiology billing manager, Massachusetts General Physicians Organization, Affiliate of Massachusetts General Hospital and Partners Health Care Network, Charlestown, Mass.


  1. Part B revenues grow for speciality. Part B News, Volume 19, No. 17.
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  3. Ziegler, R, Boston: New England MRI Association; June 2005.
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  5. Medicare Payment Advisory Commission, Public Meeting; March 18, 2004; Washington, DC (statement of William Thorwarth, MD).
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  7. Medicare Payment Advisory Commission. Report to the Congress: Medicare Payment Policy. Washington, DC: MedPAC; 2005:144.
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