CMS Payment and Budget Proposals May Affect Imaging Reimbursements

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adriennegerryBy Adrienne Dresevic, Esq. and Gerald Aben, Esq.

August 2013—Over the last few years, imaging providers and suppliers have seen a trend of declining reimbursements as lawmakers and federal regulators seek cost savings from imaging services. This trend of declining reimbursements continues under the Centers for Medicare and Medicaid Services (CMS) proposed Calendar Year (CY) 2014 Medicare Physician Fee Schedule (MPFS) and Outpatient Prospective Payment System (OPPS). Although there are some bright spots in these proposals, such as CMS declining to expand the Multiple Procedure Payment Reduction (MPPR) program, other proposed policies present challenges to imaging providers, including CMS’s proposal to create separate CT and MRI cost centers for hospital outpatient services.

On the other hand, proposals in the President’s Fiscal Year (FY) 2014 Budget Request (PB) may offer some relief by limiting self-referral of advanced imaging services (among other services) under the In-Office Ancillary Services (IOAS) exception to the Stark law.

While the MPFS, OPPS, and PB are extensive policy documents with a myriad of provisions, this article is intended to provide readers with a brief summary of the proposals and to highlight a few of the policy changes that may impact imaging service reimbursement in the near future.

2014 Medicare Physician Fee Schedule

CMS released the CY 2014 MPFS and proposed rule on July 8 with official publication in the Federal Register on July 19, 2013. The MPFS and the proposed rule include CMS’s changes for payment rates and policies for services payable under the PFS for the 2014 calendar year, which begins January 1, 2014. Comments on the proposed rule will be accepted by CMS through September 6, 2013, with a final rule anticipated to be released in early November.

Under the 2014 MPFS, the Conversion Factor for 2014, which is a major component in determining payment rates, is set at $25.7109, which is down from $34.023 in 2013 and reflects a statutorily required decrease of 24.4%. Whether this reduction will actually take effect depends largely on whether Congress, as it every year since 2003, will negate the reduction as part of the Medicare “Doc Fix.”

Under the 2014 MPFS and proposed rule, CMS estimates that the rate and policy changes (excluding the statutorily mandated cut in the conversion factor) will have the following total impacts on payments for imaging services:

  • Radiology: -1%
  • Interventional Radiology: -4%
  • Nuclear Medicine: 1%
  • Radiation Oncology: -5%

These rates are aggregate and do not reflect an across the board impact. Providers will see various impacts depending on the mix of services provided as well as other factors such as geography and specialty.

            Multiple Procedure Payment Reduction

On a positive note, CMS has proposed to forego expanding or making changes to the MPPR program. Currently, MPPR reduces the payment for the second and any subsequent services of any advanced imaging services furnished in the same session or on the same day by the same provider or by multiple providers within a group practice. Specifically, the policy imposes a 50% reduction on the Technical Component (TC) and a 25% reduction on the Professional Component (PC) of advanced imaging services. CMS last expanded the MPPR in 2013, when it imposed the reduction on the PC of services provided by multiple providers in the same group practice. Although CMS declines to expand the MPPR for CY 2014, the agency does indicate that it may revisit the policy in subsequent rule makings to expand the reduction to other imaging services or revise the percentage of the reduction.

            Equipment Utilization Rate

The MPFS implements an increase in the equipment utilization rate on expensive advanced imaging equipment (equipment that costs more than $1 million) as required by the American Taxpayer Relief Act (Pub. L. 112-240, Jan. 1, 2013). For imaging services, the policy will mostly affect CT and MRI by increasing the utilization rate from 75% to 90%.  CMS estimates that this policy will reduce payments for radiology and interventional radiology by one percent (1%) in the year 2014.

            Other MPFS Highlights

  • CMS has proposed to begin capping reimbursement for services furnished in non-facility settings when the same services if furnished in a facility would be reimbursed at a lower rate. While the policy applies to all CPT codes, in reality the change will only affect approximately 200 CPT codes due to a number of exceptions and because most non-facility rates are already lower than the facility rates. Imaging services that are subject to the payment cap under the Deficit Reduction Act (DRA) are excluded from this policy.
  • The MPFS implements another change from the American Taxpayer’s Relief Act of 2012 by changing the timeframe for which a provider is presumed to be “without fault” from three years to five years. In practice, this means that providers may be required to repay overpayments for an additional two years. Nonetheless, the presumption that a provider is “without fault” is negated if there is evidence to show that he or she was responsible for causing the overpayment.
  • Other changes include:
    • Change regulations to require compliance with state law for all “incident to” services;
    • Update the Medicare Economic Index and Geographic Practice Cost Indices using new data;
    • Review whether the Ultrasound Guidance Codes are mis-valued; and
    • Collect information on University Hospital acquisition of off-campus physician offices and subsequent treatment of those locations as outpatient departments.

Outpatient Prospective Payment System

CMS released the proposed 2014 OPPS, which sets payment rates and policies for services furnished in an outpatient facility setting, on the same day as the MPFS with the same proposed schedule for accepting comments and publishing of the final rule. For 2014, the OPPS conversion factor will be $72.728 for services performed in a hospital outpatient department, which reflects an increase of 1.8 percent from 2013. The conversion factor for services provided in an ambulatory surgical center (ASC) will be $43.321, an increase of 0.94 percent from 2013.

            New Cost Centers for CT and MRI

One significant policy change in the OPPS has the potential to affect imaging reimbursement levels furnished in both facility and non-facility settings. CMS is proposing to use 2011 cost data to create new cost centers in order to set payment rates for CT and MRI. These cost centers would be separate from the diagnostic imaging cost centers for services provided in the inpatient setting, and would have the potential to decrease reimbursement for hospital-outpatient based CT and MRI by 18-38%. In addition, this proposal has the potential to affect reimbursement for services furnished in non-facilities as well because the TC of these services will fall below the TC set by the MPFS implicating caps set by the DRA requiring payment at the lesser of the MPFS or OPPS.

President’s Budget Proposal for FY 2014

The President’s Budget Request (PB) was delivered to Congress on April 11, 2013. Although it is unlikely that Congress will enact the President’s Budget as proposed, many provisions of the PB may find their way into whatever deal Congress makes in order to fund the government in FY 2014. In an effort to replace automatic budget cuts imposed by the Budget Control Act of 2011 the PB includes $1.8 trillion in reductions, including $401 billion in reductions to healthcare spending. While the healthcare reductions would likely affect all healthcare providers, the PB includes two significant proposals that impact imaging providers and may significantly limit self-referrals for advanced imaging services.

In-Office Ancillary Services Exception to the Stark Law

By way of quick background, the IOAS exception to the Stark law’s prohibition on physician self-referral was intended to allow physicians to provide beneficiaries with certain services that were a natural extension of their core practices and to lawfully bill for such services. CMS takes the position that radiation therapy, outpatient therapy, and advanced imaging services, in a significant number of cases, do not fit within the rationale underlying the IOAS exception insofar as they are “rarely performed on the same day as the related office visit.” CMS also cites evidence that suggests allowing these services to fit the IOAS exception has led to overutilization and rapid growth of these services. Thus, CMS proposes to limit the self-referral of advanced imaging services (as well as outpatient therapy and radiation therapy) by limiting the IOAS exception. CMS hopes this proposal will save nearly $6.1 billion over the next 10 years.

Prior Authorization for Advanced Imaging Services

The PB also proposes to begin requiring prior authorization for advanced imaging services on the theory that the rapid growth in the number and intensity of services in the last decade is the result of inappropriate use of the services. In its summary of the proposal, CMS notes that this proposal would bring the program in line with private payers, which typically require prior authorization. Furthermore, the proposal satisfies a request from the Government Accountability Office (GAO) that CMS implement prior authorizations or attempt other methods to limit growth in spending for advanced imaging services. However, at this time, CMS does not believe this will have an effect on the budget.


As discussed above, the proposed MPFS and OPPS rules are open to comment through September 6, 2013. While it is possible that these rules could be revised before CMS publishes the final rules in November or December, it is likely that the policies discussed above will be implemented in some form. As for the proposals in the President’s Budget Request, it is less certain whether those policies will be enacted, either through statute or regulation.

Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, eg, IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Gerald L. Aben joined the Health Law Partners as an associate in September of 2012. He graduated Summa Cum Laude from Michigan State University College of Law in May of 2009. 

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at

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