Paul Sierzenski

As the United States migrates to a value-based healthcare system, one that is measured on improvements in quality and service while controlling costs, federal and state payment policies are needed to support the use of technologies and services that help to achieve these goals. Simple analysis, such as comparing payment amounts per procedure by site of service are not very helpful in efforts to bend the overall cost curve.

Physician offices have been targeted for reimbursement reduction for imaging services at levels not seen by hospitals, with 13 separate cuts in reimbursement rates since 2006.

This trend now also poses a concern for hospitals. Hospitals have struggled with how to accurately reflect the equipment costs of imaging services on their cost report to the Medicare program, with the result that many imaging services have been under-valued in the hospital outpatient setting. This issue is only now starting to be addressed by the Medicare program. Hospitals have very different overhead costs, due to several factors such as uncompensated care obligations, teaching and training activities, and the need to provide 24/7 emergency care for their communities. Yet policy organizations and researchers continue to compare the reimbursement rates for physician and hospital sites of service as if they are both apples, versus as an apple and an orange.

In its March 2014 Report to Congress, the Medicare Payment Advisory Commission (MedPAC) proposes aligning hospital outpatient department payment rates with physician office rates for some ambulatory services. MedPAC evaluated about 450 ambulatory payment classifications (APCs) and found 66 that did not require emergency standby capacity.

Aligning the payments for these 66 outpatient APCs would mean major cuts if this policy were to go into effect. Although the negative impact on hospital margins under the proposal would average 0.6 percent, the impact would be more onerous for rural, smaller, and specialty hospitals, which stand to lose as much as 0.9 percent because they have a larger share of their overall Medicare revenues coming from outpatient care.

Two of the 66 APCs would capture ultrasound services that have been shown to improve quality and reduce cost significantly. The proposed policy ignores the specific benefits of its use in a hospital setting, such having rapid access to the operating room and avoiding costly complications in surgeries. If the proposal were adopted, an unintended consequence might be the decision of some hospitals to shift from ultrasound to more cumbersome and time-consuming, but also higher-paid, radiation-dependent modalities, which pose the risk of radiation to patients. Because ultrasound poses no radiation risk to patients, it is one of the most useful tests in terms of balancing diagnostic needs with patient safety.

If payments are driven down for hospitals, the reality is that hospitals will need to respond. Management consultants might be called in to show administrators which procedures would keep their Level 1 trauma centers afloat, after which centers would shift their priorities accordingly. If quality is adversely affected, it ultimately will be the trauma centers, and potentially their vulnerable populations, that will suffer. A large proportion of the nation’s compassionate, uncompensated care is delivered in trauma centers. These centers and those they serve could be the victims of a well-intended but poorly considered policy change.

In short, making it more and more difficult to perform important procedures in the hospital setting—a conceivable result if their reimbursement is threatened—ultimately could lead to greater costs to Medicare and greater risks to patients, not to mention more limited access to care, which goes against one of the central tenets of healthcare reform. Healthcare finance leaders should advocate strongly against MedPAC’s proposal, bringing these compelling perspectives to bear.


Paul R. Sierzenski, MD, RDMS, FAAEM, FACEP, is medical director, point-of-care ultrasound, and director, Emergency, Trauma & Critical Care Ultrasound, Christiana Care Health System, Wilmington, Delaware.

Publication Date: Wednesday, April 23, 2014