Blog Post

What Medicare's 2018 final rules mean for radiology

November 9, 2017

    Last week, the Centers for Medicare and Medicaid Services (CMS) released final rules governing hospital outpatient facility and provider payments for calendar year (CY) 2018. Included in the rules are payment and regulatory updates that are important for imaging programs to understand as they consider their strategy and financial outlook for 2018 and beyond.

    To help you prepare for changes and ensure future success, we read through the more than 2,500 pages and identified four key takeaways below for imaging leaders and radiologists. For more on how the 2018 Medicare Final Rules affect your imaging strategy, join us for a webconference on December 7.

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    Summary of 2018 finalized regulatory updates for radiology

    1. Hospital payments rise, clinician payments flat, and Independent Diagnostic Testing Facilities payments fall

    Hospital outpatient payments: CMS finalized a 1.35% increase in payment for hospital outpatient services, which is slightly less than the proposed 1.75%. However, hospitals can expect to see an additional 3.2% bump in outpatient payment rates for all non-drug services, including imaging procedures, due to a $1.6 billion cut in 340B payments.

    Clinician payments: CMS finalized the proposed 2018 conversion factor at $35.99, only about 10 cents greater than the 2017 conversion factor.

    CMS estimates that, in aggregate, reimbursement updates for physicians will hover between 0% and 1% for radiology specialties. The notable exception is for diagnostic testing facilities, which CMS estimates will see a 4% reimbursement reduction due to a drop in practice expense RVUs.

    Impact on radiology: While there are few overall payment cuts for imaging in 2018, the 4% reduction to reimbursement for diagnostic testing facilities demonstrates that CMS continues to view radiology as a source for Medicare savings. Imaging programs should continue to focus on controlling costs as further reductions could be seen in future years.

    2. Site-neutral payment adjustments reduced to 40% of hospital outpatient rate in 2018

    In 2017, CMS implemented a site-neutral payment provision to reduce payment discrepancies between services performed at hospital outpatient departments (HOPDs) and provider-based sites. The policy mandates that newer off-campus HOPDs—those opened or acquired after November 1, 2015—receive reimbursement at a site-specific Medicare Physician Fee Schedule (MPFS) rate, which in CY 2017 is equal to 50% of the hospital rate.

    CMS believed they overestimated the 50% rate in 2017. This summer, the agency proposed to cut the rate to 25% for 2018, based on a different analysis methodology.

    In response to stakeholder concern, CMS conducted a third analysis of payment discrepancies using the top 22 codes billed at off-campus sites, eight of which were imaging services. From this analysis, the agency found that on average, provider-based sites are reimbursed at about 35% of the hospital rate. To account for additional variables like packaging, the agency set the 2018 site-neutral payment rates to 40% of hospital payments.


    Impact on radiology: Moving forward, imaging leaders should continue to take site-neutral payment adjustments into consideration when relocating or building a new facility. Leaders should also anticipate greater rate changes in upcoming rules. Next year, CMS plans to use CY 2017 claims data with the hopes of calculating an even more precise payment rate. Even more dramatically, the agency is exploring fully transitioning impacted HOPDs to a MPFS claim instead of reimbursing on a reduced hospital outpatient rate.

    3. Imaging clinical decision support (CDS) deadline delayed to 2020, but voluntary reporting period begins in July 2018

    After proposing a delay in the provider deadline for the Appropriate Use Criteria (AUC) Program—also known as CDS—until Jan. 1, 2019, CMS has finalized an additional delay of the deadline until Jan. 1, 2020. This Jan. 1, 2020 date now represents the start of an “educational and operations testing period,” which means that there will be no financial penalties in place during this first year. Providers will be required to consult CDS and document usage, but Medicare would reimburse claims regardless of proper documentation in 2020. Reimbursement penalties are now expected to begin Jan. 1, 2021.

    While delaying the mandate, the agency finalized AUC consultation as an Improvement Activity in the CY 2018 update to the Quality Payment Program (QPP). That means that referring providers who move ahead with CDS implementation will be able to score additional performance points under the MIPS track of MACRA.

    In addition, CMS finalized a voluntary reporting period lasting from July 2018 until December 2019, which will allow the agency to begin data collection on CDS usage. Participating in this voluntary reporting program could give programs that have implemented CDS a leg up for coding changes and workflows that will need to be put in place by the Jan. 1, 2020 deadline.

    CDS regulatory timeline

    Additionally, CMS has decided to not move forward with several major proposals:

    • For the reporting of CDS consultations, CMS will not be using the G-code and modifier combinations that were proposed in July. Instead, CMS will explore other reporting options, which will be discussed in future rulemaking.
    • CMS has also decided not to align the significant hardship exemptions from the CDS mandate with similar exemptions from the Advancing Care Information performance category under the Merit-Based Incentive Payment System (MIPS). After commenters raised concerns about the impact of this alignment, CMS plans to revisit those exemptions in future rulemaking.

    Beyond these announcements, CMS also made a few smaller clarifications, most notably by exempting Critical Access Hospitals from CDS consultation and documentation requirements.

    Impact on radiology: Radiologists’ reimbursement will not be at stake from CDS until Jan. 1, 2021. However, as evidenced by the repeated delays in the requirements, CDS implementation is a complicated, time-consuming process that will require significant support from imaging leaders. Therefore, we recommend continuing to move forward with CDS implementation using our best practices and customizable tools to ensure success.

    4. Computed radiology X-ray reimbursement penalties to hit in 2018

    Starting on Jan. 1, 2018, organizations using computed radiology (CR) equipment will receive a 7% technical component payment cut, increasing to 10% in 2023. CMS finalized the modifier “FY” to track these x-ray services at both hospitals and provider-based sites.

    This penalty is the second step in CMS’ efforts to encourage the adoption of digital X-ray technology, as mandated by the Consolidated Appropriations Act of 2016. The first step in this shift began this year with a 20% reimbursement cut for x-rays performed on analog machines.

    Impact on radiology: CR X-ray payment cuts will have widespread impacts since many imaging departments continue to operate these machines. To prepare for the penalties, organizations can use our Digital X-Ray Upgrade Decision Support Tool to determine if switching to digital x-ray technology is the correct investment.

    Other notable coding updates

    • Mammography coding changes: Despite speculation, CMS did not cut mammography payments by 50%. But as expected, the agency created new category I CPT codes, 77065 – 77067, for mammography with computer-aided detection to replace the existing G-codes.
    • PACS workstation: Providers will now be reimbursed for both the professional and technical PACS workstation practice expenses for 21 CPT codes related to vascular ultrasounds. These additions reflect the change in practice patterns due to the adoption of digital technologies, as organizations were previously reimbursed only for the technical PACS workstation.
    • Cost-to-charge calculation delay: Next year, providers using the “square feet” CT and MRI cost allocation method will continue to be excluded in cost-to-charge ratio (CCR) calculations to estimate imaging Medicare Ambulatory Payment Classifications (APCs). Then, in CY 2019 the agency will add the “square feet” method in addition to those currently used, “dollar assignment” or “dollar value.” Before next year, imaging leaders should adopt one of these other allocation methods, as CMS anticipates significant imaging payment reductions once “square feet” is incorporated into the APC weight methodology in 2019.
    • Expansion of conditional packaging: CMS finalized the proposal to conditionally package payment for low-cost drug administration services. This will be the first year drug administration services are included in the packaging policy. It demonstrates the agency’s commitment to the “multiple services, one payment” approach.
    • Patient-physician relationship codes: CMS finalized voluntary reporting of patient relationship codes beginning on Jan. 1, 2018. This allows CMS to appropriately attribute patients, services, and resources to providers, as required under MACRA. Of the five proposed categories, the "Episodic/Focused" relationship category pertains to time-limited treatment given by specialists such as interventional radiologists, while "Only as ordered by another clinician" pertains to clinicians furnishing exams ordered by other physicians, such as diagnostic radiologists.

    For more information on how CMS’s proposals will impact those beyond radiology, read our colleagues' blogs for hospitals and providers.


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    How will the 2018 Medicare final rules affect your imaging strategy?

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