Economics in Medical Imaging: Implications For Research and

Development and Clinical Practice

James H Thrall, MDChairman, Department of Radiology

Massachusetts General HospitalProfessor of RadiologyHarvard Medical School

Utilization

New transformative technologies are driving increased utilization of services

and costs in diagnostic radiology

1998 2000 2002 2004 2006 2008 2010

CT colonography gets started

with spiral CT

Multi-detector CT-New era of CTA

and CT Colonography

Reimbursement begins for limited

applications of coronary CTA

ACRIN DMIST trial establishes value of digital

mammographyPicard study and ACRIN trial

confirm efficacy of CT colonography—AGA, ACR and ACS endorse its

use for screening

Reimbursement for CT

colonography and lung cancer

screening ?

Breast MRI starts to become important

Reimbursement for PET from CMS

Positive results from NLCST

Polyp3D Endo-luminal view

PET/CT Diverticulitis

MD/CT Acute MI

False aneurysmCTA for Pulmonary emboli

CCTA

CTC

Total Medicare Imaging Costs are Rising:GAO Report 2008

~14%Of Part BSpending

In 2006Compound annual growth (CAGR) rate of > 14%

Economics Of Medical Imaging

Effects of legislative initiatives and the recession

Legislative assault on imaging reimbursement

Regulatory 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%

•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

Direct effects

Aggregate impact is several billion dollars per year

Recession linked decrease in capital

spending by hospitals and imaging centers

Economic uncertainties related

to health reform

Public and professional concerns about

radiation exposure and risk

Indirect effects

Impossible to directly monetize these issues but clearly impactful

Attack on screening mammography by

USPSTF

Increase in co-pays and deductibles by

insurance companies

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 2010-

2013• 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

FINANCE

CMS Timeline

RADIOLOGY ASSOCIATES 2010

DRA

Note:Source: ACR Data – P. Kassing Payment Policies 2011 presentation

??Health reform and CMS policy

changes

5.80%6.00%6.20%6.40%6.60%6.80%7.00%7.20%7.40%

2000

2002

2004

2006

2008

Dx Rad

Allowed Charges for Medicare Physician and Supplier Services, by Physician Specialty (Percentage of Medicare Part B FFS total

only)DRA—(Took effect 1/1/2007)Decrease> $1.0B

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”

3,000

3,500

4,000

4,500

5,000

Q42007

Q32008

Q32009

Q32010

Quarterly Revenue GE Health Care

Revenue inBillions

Impact on Industrial Revenue: GE

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

500

700

900

1100

1300

1500

1700

1900

Q4 2007 Q3 2008 Q3 2009 Q3 20103,000

3,500

4,000

4,500

5,000

5,500

S&P 500Revenue in Billions

GE Health Care Quarterly Revenue Versus S&P 500

S&P 500 GE Revenue

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

• United States, Europe and Japan– 800M

42% of the worlds population and < 20% of medical products consumption

12% of worlds population and 2/3rds of medical products

consumption

3,000

3,500

4,000

4,500

5,000

Q42007

Q32008

Q32009

Q32010

Quarterly Reveue GE Health Care

Revenue inBillions

•China +19%

•India +8%

•Orders -9%

•Profit -20%

•Equip +8%

•Profit +14%

Supported By Emerging Markets, General Electric Healthcare Raises Growth

Projection To 10% Per Year Kaiser Health News 11/10.10

Growth

Time

DRA, P-4-P, RBMs, NSF,

radiation scare, recession

Organic growth with aging population

Reimbursement for CCTA CTC

and Lung Cancer Screening etc

DRA 2, new 3rd party initiatives

and Medicare cuts

“Golden age” of imaging growth

with MDCT, CTA, MRA, 3D, PET/CT, digital mammo etc

Future Growth Of Clinical Medical Imaging In The United States

2000 2007 2010 2015

MIPPA and PPACA

Technology development

Massive computing

Increased cost

Hybrid imaging systems

Increased regulations

Simplified devices

Decreased cost

Single organ

devices

Competition

Development of New Technology

Technology development

Massive computing

Increased cost

Hybrid imaging systems

Iterative reconstruction

Lower doses

Increased regulations

Clinical trials

moved offshore

Simplified devices

Decreased cost

Single organ

devices “Defeatured” devices

R&D moved

offshore

Emerging markets

Competition

Market share

Market space

Extended product offerings

•PET/CT•PET/MRI•US/Angio

•Extremity CT•Head CT•Extremity MRI•Breast PET

•Handheld US•CT•MRI

•BRIC countries•SE Asia•Africa

Percentage share for a product or

service

Number of products “footprint” in the marketAll major

companiesIncreasingly difficult to

initiate trials in US versus evidence based medicine

FDA under the gun

Radiation concerns = number one non financial risk to radiology

Information Technology

•Data mining•CPOE•CAD

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 toLow 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 low-LET 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

Sub mSv Goal

Regulation/ National

Standards

Use of appropriateness criteria—PACA

2010

Mandatory accreditation—MIPPA

2008

More requirements for clinical trials

data (FDA)

Standard reference doses, registries,

patient dose tracking

Clinical practice

Education

Technology development

Optimization of CT protocols

Department governance

Quality assurance programs–

surveillance and audit

Physics of CT—what makes an

acceptable scan?

Radiation biology– effects of ionizing

radiation

Inclusion of all stakeholders

How to interpret relatively noisy images

Adoption of appropriateness

criteria

More efficient detectors

Iterative reconstruction

Dual source devices

Image post processing

Better filters and multi-spectral

imaging

Gating and motion correction

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 AbscessesCTDIvol = 2.75mGy, DLP = 51mGy.cm

Estimated Dose = 0.27mSv

3D Volume rendering

17 yo male with chest pain,

elevated troponnin

Negative CTA obviated need for invasive angiography. Cardiac MRI confirmed myocarditis (arrows).

FLASH-mode radiation dose: 0.76 mSv

MRI

Diffuse lung disease chest CT reconstructed with FBP and ASIR high definition mode

FBPB25f FBPB46f IRT

Body Part NCRP Report 1602006

Annals of Internal Medicine2009

MGH2010Adult

Mean Eff Dose (mSv)

Mean Eff Dose (mSv)

Mean Eff Dose (mSv)

Abdomen 10 12 6.9

Chest 7 7 3.4

CTA Heart 20 3.3

Head 2 2 1.0

Spine, Cervical

10 5 3.4

CTC 10 8 5.9

CT Dose Comparison

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

3D image processing

Contrast media

Injector

Ordering Physician’s

desktopOrder entry Results reporting

Radiology Work Flow

HIS RIS Imaging device

PACS HISRISWork station

Voice report

•Market share-- % of “X” sold by company

•Market space– Size of company “footprint” in the work flow

3D image processing

Contrast media

Injector

Ordering Physician’s

desktopOrder entry Results reporting

GE Market Space: Early 1990s: “Forklift” Relationship with Customers

HIS RIS Imaging device

PACS HISRISWork station

Voice report

•Market share-- % of “X” sold by company

•Market space– Size of company “footprint” in the work flow

3D image processing

Contrast media

Injector

Ordering Physician’s

desktopOrder entry Results reporting

GE Market Space 2010: “Sticky’ Relationship Through Integration

HIS RIS Imaging device

PACS HISRISWork station

Voice report

•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