Life Sciences Legal Update

Affordable Care Act and the Post-Election Implications for Radiology

This post was written by Thomas W. Greeson and Paul W. Pitts.

As the dust settles from Tuesday’s election, pundits and prognosticators are predicting the future of the world based on highly charged and deeply polarized perspectives. Those predictions are sweeping in scope and many we have seen tend toward dire scenarios - even for the diagnostic imaging industry. The more prudent course is to step back for a moment and assess the situation in a more pragmatic and dispassionate way. With this in mind, we wanted to take this opportunity to describe what we expect to see as health reform efforts continue.

In planning for the future, it is vital to take into account that there are things we know for certain, things that are unknown at the moment and things that are simply unknowable. We have to do planning, preparation and decision making taking those factors into consideration. In every situation where change happens (and change happens constantly) there are threats and opportunities. Often we miss the opportunities because we are so focused on the loss of the known and familiar. The well-known adage, “Success is where preparation meets opportunity” applies here. The radiology practice that carefully considers how to position itself for a future that has not fully revealed itself is more likely to be ready to seize the opportunities that come with change.

The Affordable Care Act is here to stay as a result of President Obama’s reelection. Even if Governor Romney had been elected, changes to the health system were inevitable. In some markets, accountability, transparency and greater integration is being driven as much by commercial payers as from the government. We don’t expect everyone to agree with the following comments, but this is how we see the short and mid-term time horizon:

  • Continuing Integration. CMS will continue to foster integration efforts via its shared savings program that calls for creation of accountable care organizations (ACOs) to coordinate care, encourage use of evidence-based measures, reduce costs and achieve betters outcomes for patients. Many of you practice in hospitals that want to be the drivers of ACOs and other integrated delivery systems. Although these organizations are centered around primary care providers, imaging is a necessary component of any ACO’s portfolio of services. The prudent group will try to find some way to “be at the table” to help shape the governance, appropriateness of the imaging service and especially, to shape the compensation model. While we expect these integration efforts to continue, we do not believe that employment by hospitals is the necessary fate of most radiologists. We feel it is critical for the group culture of radiologists to endure to allow radiologists to determine selection and retention of radiologists, scheduling of services and the compensation of individual radiologists. Employment is not necessary to achieve that group role. A carefully drawn contractual agreement can address a health system’s desire for integration while preserving the independence of a radiology practice. CMS requires all ACOs to be legal entities. Many radiology groups may want to consider taking an investment interest in the legal entity organized to operate as the ACO and strive to have key governance and committee roles in those organizations.
  • The Value Proposition. The challenge for the specialty may be a contest between commoditization of the professional services via teleradiology and the local delivery of those same services. The groups that succeed in offering a viable alternative to cost-based marketing of radiology services will learn to sell the value proposition for their services locally. Technology will play a key role, but so will the willingness of radiologists to truly offer consultative services that will be valued by local referring physicians, hospital administrators and payers. Radiologists can be the gatekeepers for appropriate care. There is a need for your role in controlling appropriateness and overall imaging costs in a manner that complies with the fraud and abuse laws and rules governing participation in Medicare.
  • Ventures. The efficiency and patient preference for free standing imaging is unlikely to change. It is even more likely, however, that such free standing facilities will be part of the offerings of an integrated delivery system. Hospitals, will likely have some ownership in an increasing percentage of the outpatient imaging that is delivered in this country. Not all of those facilities will be provider based. It is incumbent, therefore, that radiologists understand the Medicare enrollment rules and the options that are available as they work with their hospitals in organizing free standing imaging services. Here again, we recommend that radiologists work to “be at the table” and strive for ownership and participation in the governance and management of these facilities.
  • Regulatory Awareness. The government is likely to double down in its enforcement activities. Radiologists operate under a complex set of rules and guidelines. Radiology groups will have to remain vigilant to understand the rules that govern how your services are ordered, delivered and billed for Medicare patients. We anticipate those rules could apply to the delivery of certain non-Medicare patients as well.
  • Antitrust and Competition. As health systems continue their efforts to control costs through integration of all stages of care, we foresee greater competition in delivery of imaging services in the future and more disputes regarding whether health systems and large practices misuse their market power.
  • Curtailment of Self-Referral. After more than two decades of radiologists’ advocacy for retrenchment of self-referral, the regulatory climate appears more favorable than ever toward a roll back of in-office imaging. Both governmental and private payers appear now to perceive how the conflicts of interest caused by referral to a physician’s own imaging services is a driver in increased health care costs. The report of the General Accountability Office released last month contained specific policy suggestions for curbing self-referral. As payers adopt various strategies for steering patients away from centers that are higher priced and high utilizers of imaging services, centers owned and operated by radiologists or by radiologists and hospitals are likely to be very competitive in many markets.

Bottom line, we believe that the groups that prepare for these changes, and look for opportunities as a result of these changes, will not only survive but can thrive in the health care delivery system that will emerge.
 

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