EZEQUIEL SILVA III, MD

REIMBURSEMENT ROUNDS

Why We Should Care How Hospitals Bill for Radiology INTRODUCTION

Medicare uses a different payment system to pay radiologists for officebased imaging than the payment systems used to pay hospitals for the technical component of radiologic services: physician office payments are determined by the Medicare Physician Fee Schedule (MPFS), hospital outpatient payments are determined by the Hospital Outpatient Prospective Payment System (HOPPS), and hospital inpatient payments are determined by the Acute Care Hospital Inpatient Prospective Payment System (IPPS). Each of these payment systems uses a different methodology to calculate payment amounts independent of the other fee schedules. Accordingly, differences in payment for the same service may occur across different sites of service. For example, a chest x-ray has a different payment amount for a hospital than for an office., This makes sense because different clinical settings incur different costs. The Deficit Reduction Act of 2005 (DRA) changed the payment paradigm for radiology by capping payments for advanced medical imaging studies at the lower end of the MPFS and HOPPS fee schedule payment amounts, linking what were previously two independent fee schedules. Because HOPPS payments are lower than Medicare Physician Fee Schedule payments for most advanced imaging services, the HOPPS rate determines payment for both outpatient hospitals and physician offices. Flawed policy changes proposed for 2014 would cause HOPPS payments to go down significantly. The ACR and other organizations continue to point out these flaws and seek to reverse these 820

policies at the CMS level, but at the core of the problem is a greater issue: inadequate hospital billing and cost reporting. In this column, I discuss these hospital billing shortcomings and propose actions hospitals and radiologists can take to improve hospital billing and cost reporting and thus increase hospital and office payments alike. HOW HOSPITAL PAYMENTS ARE DETERMINED

Payment amounts in hospitals are based on the hospital charges and costs submitted to Medicare from previous years, hence the term prospective in the acronym HOPPS and IPPS. Therefore, if a hospital’s charges and costs are too low, payment is too low. As I will show, hospital charges and cost reporting have been artificially low for CT and MR over the past several years, and the effects of those artificially low charges and cost reporting are manifesting now, largely because of two notable changes in payments by Medicare for radiology studies: (1) code bundling and (2) the creation of new cost centers for CT and MR. Bundling

The trend of bundling Current Procedural Terminology (CPT) codes to capture efficiencies is ongoing [1], which has the effect of changing many of our existing radiology CPT codes into new CPT codes. For example, in 2010, two individual CPT codes–CT of the abdomen without contrast (74150) and CT of the pelvis without contrast (72192)–became one CPT code (74176) when the abdomen and pelvis are studied together. Despite the appearance of these new bundled CPT codes

for CT of the abdomen and pelvis, many hospitals continued to submit the same lower charge for CT of the individual body part rather than the higher charge reflective of the combined service. Consequently, in 2014, CMS proposes to use 2012 charge data to determine payments for these codes, and the result will be a 23.9% decrease in payment. We can do better; here is how. The ACR and the Association of Medical Imaging Management have published the exact crosswalks between old and new codes for 2013 [2] and will do so again for 2014. All hospitals need to do is reference this paper and plug the new codes and respective charges into their charge masters, and the task is complete. Charges are then accurate, and payments in later years will be more reflective of true costs. Cost Centers

When hospitals submit inpatient cost reports to Medicare, these costs are allocated to specific cost centers. Previously, radiology had a single diagnostic radiology cost center; however, in 2010, separate cost centers were created for CT and MR. Cost reporting for CT and MR is challenging for hospitals given the capital-intensive nature of CT and MR. This makes it difficult to appropriately capture all costs related to equipment, labor, and overhead. Moreover, assigning costs related to equipment depreciation and lease costs is even more difficult. Therefore, many facilities use a long-standing method of allocating average capital costs on the basis of square footage [3]. In other words, hospitals are treating CT and MR machines as hospital fixtures (hospital overhead) instead

ª 2013 American College of Radiology 1546-1440/13/$36.00  http://dx.doi.org/10.1016/j.jacr.2013.08.001

Reimbursement Rounds 821

of equipment (a radiology-specific cost), resulting in the loss of significant cost allocations. The misallocation of CT and MR costs is widespread, with a significant number of hospitals reporting little or no capital costs for CT and MR. A recent internal analysis by Direct Research LLC estimated that of 4,380 hospitals reporting CT and MR data, only 179 (4%) captured the full cost data for CT and MR. And yet Medicare has finalized plans to use this flawed data in the IPPS and proposes to use this flawed data in the HOPPS despite the appearance of significant payment anomalies, such as CT of the brain paying the same as an x-ray of the skull in the hospital setting. Until minimum data quality requirements are enlisted, our only option is to improve our own cost reporting. We can do better; here is how. A new reclassification system is required to better allocate these codes,

which requires the engagement of radiologists, IT system administrators, financial officers, and hospital radiology department directors. Rather than the square footage method, whereby CT and MR costs are allocated to other cost centers across the hospital, a direct allocation method should be used. This change will not be easy, and in the meantime, CMS should abandon the use of CT and MR cost centers altogether or at least establish minimum data quality requirements for the data it uses from CT and MR cost centers. CONCLUSIONS

The various payment systems used by Medicare are becoming more and more interrelated across all specialties and sites of service. Radiology is familiar with this circumstance thanks to the DRA. In fact, in its June 2013 report to Congress, the Medicare Payment Advisory Commission [4] advocated for site-neutral

payments, bringing complete siteneutral payment closer to reality. Against this backdrop, it is incumbent on radiology to protect radiology payments in all venues. By helping hospitals improve their billing, radiologists help improve their own office-based payments. It is worth the effort. REFERENCES 1. Silva E. The search for misvalued services: why is radiology a target? J Am Coll Radiol 2012;9:7-8. 2. Kassing P, Mulaik M, Rawson J. Pricing radiology bundled CPT codes accurately. Radiol Manage 2013;March/April:11-5. 3. RTI International. A study of charge compression in calculating DRG relative weights. January 2007. Available at: http:// www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/Reports/ downloads/dalton.pdf. Accessed July 30, 2013. 4. Medicare Payment Advisory Commission. Report to the Congress: Medicare and the health care delivery system. June 2013. Available at: http://www.medpac.gov/documents/Jun13 EntireReport.pdf. Accessed July 29, 2013.

Ezequiel Silva III, MD, South Texas Radiology Group, 8401 Datapoint, Suite 600, San Antonio, TX 78229; University of Texas Health Science Center at San Antonio, Department of Radiology, MC 7800, 7703 Floyd Curl Drive, San Antonio, TX 78229-3900; e-mail: [email protected].

Why we should care how hospitals bill for radiology.

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