Hospitals Seem to Disproportionately Benefit From 2010 Medicare Cuts

Following the 2010 Medicare reimbursement cuts for office-based procedures, the share of imaging performed in the hospital setting has increased, according to a research letter published online May 26, 2015, ahead of print in JAMA Internal Medicine.  

Implications:  Hospitals Seem to Disproportionately Benefit From 2010 Medicare Cuts

Zirui Song, MD, PhD, of Massachusetts General Hospital (Boston, MA), and colleagues suggest this may be due to the loss of profitability of in-office imaging and the integration of many offices into hospitals.

In 2010, the Centers for Medicare & Medicaid Services lowered cardiology service fees, especially those in office settings. As a result, reimbursement for physicians in private practice was curtailed more than in hospitals.

For the study, investigators examined US medical claims from 2007 to 2012 for more than 13 million Medicare- and commercially insured patients who underwent myocardial perfusion imaging, echocardiography, or ECG testing. Cardiologist-hospital integration was determined by the share of volume billed in the hospitals’ outpatient departments.

In total, 806,266 Medicare patients (mean age 75.7 years; 53.3% women) and 12,567,069 commercially insured patients (aged 55 to 64 years; 52.8% women) with similar geographic distributions were included in the study.

Imaging Business Picks Up at Hospitals

Following the 2010 cuts, reimbursement favored the in-hospital setting for all 3 procedures. Average prices for both Medicare- and commercially insured patients decreased for in-office imaging and increased for in-hospital procedures (table 1).

Table 1. Difference in Average Cost: 2010-2012 vs 2007-2009

Hospitals also saw a larger share of procedural volume after 2010 than they had in previous years. The share of myocardial perfusion imaging, echocardiography, and ECG testing in the hospital increased each year after 2010 by 5.9%, 3.9%, and 2.7%, respectively—higher rate rises than before 2010 (P < .001). From 2007 to 2009, 21.1% of myocardial perfusion imaging for Medicare patients was done in hospitals; from 2010 to 2012, the proportion was 32.4%. Similarly, echocardiography rose from 22.1% to 31.7%, while ECG testing rose from 29.9% vs 35.2%.

Overall, the rates of echocardiography and ECG testing increased following 2010, whereas the rate of myocardial perfusion imaging fell.

Cuts Did Not Impart Intended Effect

According to the ACC 2010 Practice Census, 40% of surveyed private group practices were in the process of integrating into hospitals or with other private practices—a phenomenon that Dr. Song and colleagues say accelerated after the fee cuts.

The Medicare Payment Advisory Commission estimated in their 2013 report to Congress that, if the patterns continue, almost all of these cardiac testing procedures would be conducted in hospital outpatient departments by 2021. This transition, the authors point out, would cost “an additional $1.1 billion per year to Medicare and $290 million per year in beneficiary cost sharing because of higher prices for facility-based services.”

Hospital outpatient departments are more expensive than private offices due to licensing requirements, ancillary services, maintaining standby capacity, and treating more complex patients, Dr. Song and colleagues say. The higher Medicare reimbursement goes toward these costs but may also contribute to higher physician salaries, they report.

“Ultimately, integration may offset savings that fee cuts were intended to achieve, both because facility-based fees are higher and because of higher prices due to market power, ” the authors say.

Effect on Patient Care

Ralph G. Brindis, MD, MPH, of the University of California, San Francisco School of Medicine (San Francisco, CA), and M. Eugene Sherman, MD, of the Medical Center of Aurora (Centennial, CO), write in invited commentary that previous studies have shown that sharp Medicare price cuts have adverse effects on patient care and even mortality.

“The current healthcare delivery challenges and resultant changes to the practice landscape demand creative and workable solutions to meet the needs of new practice models as well as help current private practitioners [remain viable while] promoting high value…,” they say.

Dr. Brindis and Sherman suggest, among other things, adopting tools to ensure evidence-based care and better understanding new payment structures and evolving models of care.

“In particular,” they continue, “addressing the problem of overuse of unnecessary tests and procedures by implementing payment models that encourage appropriate testing while discouraging inappropriate testing is a more rational approach for controlling Medicare costs than across-the-board decreases in reimbursement.”

Dr. Song and colleagues acknowledge that other market forces could be contributing to the physician-hospital integration seen after 2010. Namely, hospitals could be acquiring practices “to preserve their referral base” and physicians could be discouraged by the rising costs of running a private practice. Additionally, because physician-hospital integration is not limited to cardiology, broader factors may be involved.

“Amidst growing recognition of payment disparities across sites of care, policies that aim to equalize payments across settings have received increasing attention,” the researchers conclude, citing a 2016 budget proposal for site-neutral payments estimated to save nearly $29.5 billion over 10 years. Such efforts may stem physician-hospital integration, they predict.

1. Song Z, Wallace J, Neprash HT, et al. Medicare fee cuts and cardiologist-hospital integration [research letter]. JAMA Intern Med. 2015;Epub ahead of print.
2. Brindis RG, Sherman ME. Medicare fee cuts and hospital- vs office-based cardiovascular imaging services [invited commentary]. JAMA Intern Med. 2015;Epub ahead of print. 


  • The study was supported through grants from the National Institute on Aging, the Robert Wood Johnson Foundation/Health Care Financing Organization, and a National Science Foundation Graduate Research Fellowship. 
  • Drs. Brindis and Song report no relevant conflicts of interest. 
  • Dr. Sherman reports acting as the chair of the American College of Cardiology (ACC) Political Action Committee as well as the chair of the ACC Advocacy Steering Committee. 

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