Economics in Medical Imaging:
Implications For Research and
Development and Clinical Practice
James H Thrall, MD
Chairman, Department of Radiology
Massachusetts General Hospital
Professor of Radiology
Harvard Medical School
Utilization
New transformative technologies are
driving increased utilization of services
and costs in diagnostic radiology
ACRIN DMIST trial
establishes value of digital
mammography
Picard study and ACRIN trial
confirm efficacy of CT
colonography—AGA, ACR and ACS
endorse its use for screening
CT
colonography
gets started
with spiral CT
Breast MRI starts
to become
important
1998 2000
2002
2004
Reimbursement for PET
from CMS
Multi-detector CTNew era of CTA
and CT
Colonography
Reimbursement
begins for limited
applications of
coronary CTA
2006
2008
Positive results
from NLCST
2010
Reimbursement
for CT
colonography
and lung cancer
screening ?
PET/CT
Diverticulitis
CCTA
3D Endo-luminal view
Polyp
CTC
CTA for Pulmonary emboli
False aneurysm
MD/CT Acute MI
Total Medicare Imaging Costs are Rising:
GAO Report 2008
Compound annual growth
(CAGR) rate of > 14%
~14%
Of Part B
Spending
In 2006
Economics Of Medical
Imaging
Effects of legislative initiatives and
the recession
Direct effects
Legislative assault on
imaging reimbursement
•DRA 2005– CT, MRI, PET
reduced to HOPPS rate
•PPACA– Utilization rate
increased to 75% from 50%
•Contiguous body part
reduction increased to 50%
Regulatory assault on
imaging reimbursement
•CMS—2010 MPFS Final Rule
•Bundling of CT codes
•Expansion of MPPR
•Decrease in practice
expense reimbursement
CMS rejection of CTC and
most CCTA for
reimbursement
Aggregate impact is several billion
dollars per year
Indirect effects
Recession linked
decrease in capital
spending by hospitals
and imaging centers
Attack on screening
mammography by
USPSTF
Public and professional
concerns about
radiation exposure and
risk
Increase in co-pays
and deductibles by
insurance companies
Economic
uncertainties related
to health reform
Impossible to directly monetize these issues
but clearly impactful
Legislative and Regulatory Cuts to
Imaging Reimbursement
• Deficit Reduction Act of 2005
– Capped the Technical Component (TC) at the lesser
of the Medicare Physician Fee Schedule (MPFS) rate
or Hospital Outpatient Prospective Payment Schedule
(HOPPS) rate
– Congressional Budget Office (CBO) projected a
decrease of $1.3B in Medicare Technical (TC)
payments for 2008
– $1.23 Billion from DRA in first year = 3X projected
cuts of $2.8 Billion over 5 years
• Additional losses as private payers adopt CMS
policies and DRA cuts
• Especially heavy blow to outpatient centers, the
fastest growing part of imaging
Health Reform Legislation 2010
• Patient Protection and Affordable Care Act of 2010
(PPACA)
• $940 Billion over 10 years
• 32 million more covered– 95% of legal US residents
• Individual mandate– up to $695 penalty
• Employer mandate– up to $2000 per employee penalty
• Medicaid expansion– up to 133% of Federal Poverty
Level
• Private insurance reforms
PPACA Imaging Provisions: Contiguous Body Part
Reduction and Change in Utilization Assumption
• TC contiguous body part reduction increased to 50%
from 25%
• Utilization:
– Obama Administration legislative proposal– 95%
– CMS 2010 MPFS Final Rule– 4 year phase in to 90%
– Initial reconciliation proposal– 90%
• Final legislative provision– 75%-- effective in 2011 for
higher cost imaging devices—CT&MRI
2010 MPFS Final Rule
• Utilization assumption of 90% for higher cost
Diagnostic Imaging-- now moot through PPACA
• Medicare Final Rule for 2010
– Practice expense cuts—phased in over 4 years 20102013
• 18% for dx
• 4% for RO
• ACR assessment is that practice expense data
used are statistically invalid.
New Mischief From CMS
• CMS is proposing to extend the contiguous body part
concept
• Officially called the “Multiple Procedure Reduction Rule”
(MPRR)
• Applies to CT, MRI and Ultrasound
• CMS is proposing to apply the rule whenever more than
one test is done in a day
• MPRR would then apply across modalities and for non
contiguous body parts
• CMS has just (1/1/2011) bundled CT abdomen and CT
pelvis with drastic cuts in reimbursement
• CMS believes this action is in the “spirit” of
Congressional intent to decrease reimbursement for
“over valued” services
CMS Timeline
FINANCE
DRA
??
Health reform and CMS policy
changes
RADIOLOGY ASSOCIATES 2010
Note:
Source: ACR Data – P. Kassing Payment Policies 2011 presentation
Allowed Charges for Medicare Physician and
Supplier Services, by Physician Specialty
(Percentage of Medicare Part B FFS total only)
7.40%
7.20%
7.00%
DRA—(Took effect
1/1/2007)
Decrease> $1.0B
6.80%
Dx Rad
6.60%
6.40%
20
08
20
06
20
04
20
02
20
00
6.20%
6.00%
5.80%
Assembled from CMS sources by ACR staff
Medicare Professional Fee
Schedule --2009
• Number of advanced imaging exams (CT,
PET, MRI, NM) declined by 0.1%
– MRI 1.2%
– CT 1.6%
• Spending for advanced imaging increased
by 1.2% versus 2.6% for all physician
services
• Overall imaging services declined 7.1%
– Mammography 0.3%
Impact of DRA and CMS Policy Cuts
on Industry and Radiology Practice
• ACR member survey—600 respondents
– 41% laid of staff or altered hiring plans
– 49% cancelled or postponed equipment
acquisitions
• DI Magazine reported:
– Many imaging centers closed and valuations
plummeted
– “The medical device industry saw sales of CT,
MR and PET fall $125M”
Impact on Industrial Revenue: GE
Quarterly Revenue GE Health Care
5,000
4,500
4,000
Revenue in
Billions
3,500
3,000
Q4
2007
Q3
Q3
Q3
2008 2009 2010
Market for CT Scanners
• US market
– 2007= $2.1 Billion
– 2010= $585 Million
• Number of devices 2010
– US~ 700
– Europe~ 1200
Personal communication from major vendors
Future Directions For Imaging–
Clinical Practice And Technology
Development
Will Medical Imaging Survive and
Flourish?
Factors That Will Continue To
Propel Imaging Forward
• Economic recovery
• Emerging markets
• Consumer demands for better, safer, more
effective technology– baby boom generation
– All dependent on new technology
• Example: Lower radiation exposure
• Competition–
– Inexorable advance of technology per se
– Change in the business model– market share to
market space
• Regulation– requirements for more data and
clinical trials prior to FDA approval
GE Health Care Quarterly Revenue Versus S&P 500
5,500
1900
S&P 500
1700
5,000
GE Revenue
1500
4,500
1300
S&P 500
Revenue in Billions
1100
4,000
900
3,500
700
500
3,000
Q4 2007
Q3 2008
Q3 2009
Q3 2010
Economic recovery is a tide that will lift
industry’s boats
Potential Impact of Emerging Markets
• BRIC countries’ populations
– China 1,342M
– India 1,192M
– Brazil
191M
– Russia 142M
42% of the worlds population
and < 20% of medical
products consumption
• United States, Europe and Japan
– 800M
12% of worlds population and
2/3rds of medical products
consumption
Quarterly Reveue GE Health Care
5,000
Supported By Emerging Markets, General
4,500
Electric Healthcare Raises Growth
Projection To 10% Per Year
4,000
Kaiser Health News 11/10.10
Revenue in
Billions
3,500
3,000
Q4
2007
Q3
Q3
Q3
2008 2009 2010
•China +19%
•Orders -9%
•Equip +8%
•India +8%
•Profit -20%
•Profit +14%
Future Growth Of Clinical Medical Imaging In
The United States
Reimbursement
for CCTA CTC
and Lung Cancer
Screening etc
DRA, P-4-P,
RBMs, NSF,
radiation scare,
recession
Organic growth
with aging
population
Growth
“Golden age” of
imaging growth
with MDCT, CTA,
MRA, 3D, PET/CT,
digital mammo etc
2000
MIPPA and PPACA
2007
2010
Time
DRA 2, new 3rd
party initiatives
and Medicare cuts
2015
Single
organ
devices
Hybrid
imaging
systems
Massive
computing
Simplified
devices
Technology
development
Increased
cost
Decreased
cost
Competition
Increased
regulations
Development of New Technology
Information
Technology
•PET/CT
•PET/MRI
•US/Angio
Single
organ
devices
Hybrid
imaging
systems
Iterative
reconstruction
•Data mining
•CPOE
Massive
•CAD
computing
•Extremity CT
•Head CT
•Extremity MRI
•Breast PET
•Handheld US
•CT
•MRI
“Defeatured”
devices
Simplified
devices
Lower
doses
Radiation
concerns =
number one
non
financial
risk to
radiology
Emerging
markets
Technology
development
Decreased
cost
Increased
cost
FDA under the
gun
•BRIC
countries
•SE Asia
•Africa
Market
share
Competition
Increased
regulations
Clinical
trials
moved
offshore
Increasingly difficult to
initiate trials in US versus
evidence based medicine
R&D
moved
offshore
All major
companies
Market
space
Number of products
“footprint” in the market
Percentage
share for a
product or
service
Extended
product
offerings
Radiation Exposure
• Concerns about high radiation exposure
represent the number one non financial
risk to radiology
• New technology can reduce exposures by
90%
• Should be among the highest priorities of
all people associated with medical imaging
Why Now?
• BEIR VII (Biological Effects of Ionizing
Radiation) endorsed the linear no-threshold
model for extrapolating cancer induction
• NCRP (National Committee on Radiation
Protection)
– Medical exposures have increased by 7 fold over
last 25 years
• Multiple journal articles and editorials
– Cancer risks– 29,000 CT related cancers per year
– Increasing population exposure over time
• Highly publicized cases of errors resulting in
over exposures of patients in both diagnostic
and therapeutic radiology practices
Beir VII: Health Risks from Exposure to
Low Levels of Ionizing Radiation
Figure 2. In a lifetime, approximately
42 (solid circles) of 100 people will
be diagnosed with cancer from
causes unrelated to radiation. The
calculations in this report suggest
approximately one cancer (star) in
100 people could result from a
single exposure 100 mSv of lowLET radiation.
Sponsored by the US National Academies of Science
Medical radiation
exposure found equal to
non medical sources—
ubiquitous background,
consumer, occupational
Radiation overexposures have
undermined the public’s trust in
radiology
Mandatory
accreditation—MIPPA
2008
Use of
appropriateness
criteria—PACA
2010
More requirements
for clinical trials
data (FDA)
Gating and motion
correction
Regulation/
National
Standards
Technology
development
Sub mSv
Goal
Image post
processing
Iterative
reconstruction
Clinical
practice
Radiation biology–
effects of ionizing
radiation
Education
Department
governance
Quality assurance
programs–
surveillance and
audit
Dual source
devices
Better filters and
multi-spectral
imaging
Standard reference
doses, registries,
patient dose tracking
Optimization of
CT protocols
More efficient
detectors
Adoption of
appropriateness
criteria
Inclusion of all
stakeholders
Physics of CT—
what makes an
acceptable scan?
How to interpret
relatively noisy images
Technology for Sub mSv CT
•
•
•
•
•
•
•
More efficient detectors—garnet based
Dual tube– high pitch fast scanning CCTA
Post processing– noise reduction
Better filters—reduce low energy photons
Better tubes
Multispectral imaging
Iterative reconstruction
– Partial– 30% dose reduction
– Full– 70-90% dose reduction
Low-dose H&N CT
Dx: Bilateral Peritonsillar Abscesses
CTDIvol = 2.75mGy, DLP = 51mGy.cm
Estimated Dose = 0.27mSv
17 yo male with
chest pain, elevated
troponnin
3D Volume rendering
Negative CTA obviated need for invasive
angiography. Cardiac MRI confirmed
myocarditis (arrows).
MRI
FLASH-mode radiation
dose: 0.76 mSv
Diffuse lung disease chest CT reconstructed
with FBP and ASIR high definition mode
FBPB25f
FBPB46f
IRT
CT Dose Comparison
Body Part
Abdomen
NCRP
Report 160
2006
Annals of
Internal
Medicine
2009
MGH
2010
Adult
Mean Eff
Dose (mSv)
Mean Eff
Dose (mSv)
Mean Eff
Dose (mSv)
10
12
6.9
7
7
3.4
Chest
CTA Heart
20
3.3
Head
2
2
1.0
Spine,
Cervical
10
5
3.4
CTC
10
8
5.9
Change in Business Model
From Market Share to Market
Space
What Sticks in Customer Relationships and
What Doesn’t?
Commodities and devices that come into
a hospital on a forklift are not “sticky”
The strongest bonds to a customer derive from
integration of products into the work process, especially
transfer of information
Integrated solutions that stitch together multiple
products with information systems to facilitate work
and meet compliance requirements are the most
valued by providers
Radiology Work Flow
Ordering
Physician’s
desktop
Order entry
HIS
RIS
Imaging
device
PACS
Injector
3D image
processing
Contrast
media
Results reporting
Work
station
Voice
report
RIS
HIS
•Market share-- % of “X” sold by
company
•Market space– Size of
company “footprint” in the work
flow
GE Market Space: Early 1990s: “Forklift”
Relationship with Customers
Ordering
Physician’s
desktop
Order entry
HIS
RIS
Imaging
device
PACS
Injector
3D image
processing
Contrast
media
Results reporting
Work
station
Voice
report
RIS
HIS
•Market share-- % of “X” sold by
company
•Market space– Size of
company “footprint” in the work
flow
GE Market Space 2010: “Sticky’
Relationship Through Integration
Ordering
Physician’s
desktop
Order entry
HIS
RIS
Imaging
device
PACS
Injector
3D image
processing
Contrast
media
Results reporting
Work
station
Voice
report
RIS
HIS
•Market share-- % of “X” sold by
company
•Market space– Size of
company “footprint” in the work
flow
Conclusions
• The European and American markets are
mature
• Growth in the US in medical imaging is at a
standstill or even contracting regionally
• Multi-national corporations will increasingly turn
to emerging markets for growth and to do R&D
• Large corporations will seek to increase their
market space for accretive growth and to
become more important and more indispensible
to their customers
Conclusions
• New technology for imaging will continue to be
developed at a robust pace
• Radiology will enter an era of massive
computing
• Rapid advances in reducing radiation dose will
largely take radiation risk out of the discussion
• New technology and applications will counter
downward economic pressures
• However, the Golden era of combined high rates
of procedure growth and high per unit
reimbursement for imaging are gone