Budget Deficit Reduction Act of 2005 hurting GE, PHG and other makers of imaging equipment

The Budget Deficit Reduction Act of 2005 (PL 109-171, or DRA) continues to be blamed for slowing sales of x-ray, CT and MRI equipment sales by GE, PHG, SI and other makers of that equipment. The exact language of that act related to imaging is shown below. Click on this story’s headline.

What the act does is reduce the profitability of owning imaging equipment for radiologists and owners of outpatient clinics, making investments in the equipment much less attractive. The Congressional Budget Office’s analysis of the bill is here. It’s section on Medicare is on page 26 of the report. The Centers for Medicare and Medicaid Services (CMM) announces the rules that will implement Section 5102 of PL 109-171 here. To better understand the reasons for the DRA, read this statement by Herb Kuhn, director of the Centers for Medicare and Medicaid Services (CMM) to a congressional committee.

The CBO’s short review of the bill’s section relating to imaging services:

Payment for Imaging Services. Section 5102 would reduce spending on imaging services
(such as X-rays and magnetic resonance imaging) by $2.8 billion over the 2007-2010 period
and by $8.1 billion over the 2007-2015 period, CBO estimates. Those savings would be
realized, in part, by capping the “technical” component of payments (as distinguished from
the “professional”—or interpretation—component) for imaging services that are performed
in a doctor’s office. Those payment rates would be capped at the rates paid to hospital
outpatient departments.
In addition, the act would exempt from Medicare’s budget-neutrality rules scheduled
reductions in payments for certain imaging services that are performed on contiguous body
parts. Exempting these reductions (which were put in place through administrative action)
from the budget neutrality rules would allow savings resulting from the new payment rates
to decrease overall spending rather than being used to increase payment rates for other
services.

The law’s language:

SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

  (a) Multiple Procedure Payment Reduction for Imaging Exempted From
Budget Neutrality.—Section 1848(c)(2)(B) of the Social Security Act (42
U.S.C. 1395w-4(c)(2)(B)) is amended—
        (1) in clause (ii)(II), by striking ``clause (iv)’’ and
      inserting ``clauses (iv) and (v)’‘;
        (2) in clause (iv) in the heading, by inserting ``of certain
      additional expenditures’’ after ``Exemption’‘; and
        (3) by adding at the end the following new clause:
                  ``(v) Exemption of certain reduced
              expenditures from budget-neutrality calculation.—
              The following reduced expenditures, as estimated
              by the Secretary, shall not be taken into account
              in applying clause (ii)(II):
                        ``(I) Reduced payment for multiple
                      imaging procedures.—Effective for fee
                      schedules established beginning with
                      2007, reduced expenditures attributable
                      to the multiple procedure payment
                      reduction for imaging under the final
                      rule published by the Secretary in the
                      Federal Register on November 21, 2005
                      (42 CFR 405, et al.) insofar as it
                      relates to the physician fee schedules
                      for 2006 and 2007.’‘.

  (b) Reduction in Physician Fee Schedule to OPD Payment Amount for
Imaging Services.—Section 1848 of such Act (42 U.S.C. 1395w-4) is
amended—
        (1) in subsection (b), by adding at the end the following
      new paragraph:
        ``(4) Special rule for imaging services.—
              ``(A) In general.—In the case of imaging services
          described in subparagraph (B) furnished on or after
          January 1, 2007, if—
                  ``(i) the technical component (including the
              technical component portion of a global fee) of
              the service established for a year under the fee
              schedule described in paragraph (1) without
              application of the geographic

[[Page 120 STAT. 40]]

              adjustment factor described in paragraph (1)(C),
              exceeds
                  ``(ii) the Medicare OPD fee schedule amount
              established under the prospective payment system
              for hospital outpatient department services under
              paragraph (3)(D) of section 1833(t) for such
              service for such year, determined without regard
              to geographic adjustment under paragraph (2)(D) of
              such section,
          the Secretary shall substitute the amount described in
          clause (ii), adjusted by the geographic adjustment
          factor described in paragraph (1)(C), for the fee
          schedule amount for such technical component for such
          year.
              ``(B) Imaging services described.—For purposes of
          subparagraph (A), imaging services described in this
          subparagraph are imaging and computer-assisted imaging
          services, including X-ray, ultrasound (including
          echocardiography), nuclear medicine (including positron
          emission tomography), magnetic resonance imaging,
          computed tomography, and fluoroscopy, but excluding
          diagnostic and screening mammography.’‘; and
        (2) in subsection (c)(2)(B)(v), as added by subsection
      (a)(3), by adding at the end the following new subclause:
                        ``(II) OPD payment cap for imaging
                      services.—Effective for fee schedules
                      established beginning with 2007, reduced
                      expenditures attributable to subsection
                      (b)(4).’‘.

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