What Upcoming CMS Cuts Mean

Many of our readers, friends, and contacts across the imaging field have heard about the CMS reimbursement cuts to film processing that will come into effect in 2017. As a result, we've been flooded with requests from people looking to update their equipment stables ahead of the cuts. Many of them are sensing an even deeper turn in the direction of digital imaging and are inquiring after the ongoing viability of CR processing as a solution.

What many people haven’t heard is that the same legislation cutting reimbursements to film (The Consolidated Appropriations Act) will also cut reimbursements to CR processing in 2018 and again in 2023. In light of this additional wave of cuts, we want to share with you exactly what the law says will happen to CR reimbursements as well as how you can calculate your facility’s position and form an upgrade plan.

What the Law Says

Section 502 of The Consolidated Appropriations Act initiates the reduction of reimbursement of CR. The condensed version of this passage, without all the parenthetical statements, says this:

“In the case of an imaging service ... that is an X-ray taken using computed radiography technology... during 2018, 2019, 2020, 2021, or 2022, the payment amount for the technical component of such service ... shall be reduced by 7 percent; and ... during 2023 or a subsequent year, the payment amount ... shall be reduced by 10 percent.”

Based on what we’re seeing here, it looks like 2018 will kick off a war of attrition between CMS and CR, one which CR is all but guaranteed to lose.

How to Calculate Your Response

block-1If you’re currently processing on film, your best response to The Consolidated Appropriations Act, is to update with fully digital equipment as soon as possible and skip over CR processing entirely.

If you already have a CR system, these two steps will help you figure out if you should take action in the very near future to upgrade to a DR solution or if you can defer the investment for a few more years.

1. Evaluate your current cost of ownership with these considerations:
• Do you still owe on your CR reader? What are your remaining lease payments?
• How much did you spend on maintenance last year?
• What condition are your cassettes in? Any that are damaged will cost $1,500 each to replace.

12 more payments + annual maintenance + ($1,500 x number of damaged cassettes)

The equation above will give you a rough estimate of what you can expect to spend on your CR reader in the next year. Next, we’ll see how that cost lines up with the revenue you can expect it to generate.

2. Evaluate your X-ray revenue stream:
• What are the 5-10 exam types you process via CR most often?
• What is your average monthly volume for these exams?
• What has been your average reimbursement for these exams in the last six months?

(Exam volume x average reimbursement) x 12

Repeat this equation for each of your most common exams, then add the totals for a rough estimate of the revenue your CR reader will generate in 2017. Now, subtract seven percent from that total for an estimate of how the reimbursement changes will affect your revenue in 2018.

Your Options

Once you have an idea of the cost of ownership and revenue stream of your CR reader, your choices will be to act now or ride out the system and defer an upgrade.

Act Now

If your cost of ownership is low and your revenue stream is relatively high, consider acting now on a DR panel upgrade. The high revenue will allow for a quicker pay-off of the new capital equipment purchase and the ongoing cost of ownership will drop significantly due to the elimination of cassettes and the minimal maintenance that panels require. Your new DR panel will also come with a manufacturer’s warranty. On top of that, the price of drop protection for wireless and tethered panels has been declining over the past few years.

You should also consider the final disposition of your CR. Trade-in value on CR readers will drop as 2018 approaches. Falling domestic demand for CR readers will impact the price on the secondary market. Without an international outlet for sales it may be difficult for you to find a buyer for your used CR.

Ride It Out

If your cost of ownership and your revenue stream are both low, you may consider riding out your current CR until it “dies of natural causes.” At low patient volumes, a seven percent reduction in revenue may not justify the cost of upgrading. Additionally, DR panel prices have fallen over the last few years and riding out your CR may result in slightly lower DR prices when you are eventually ready to upgrade.

The Takeaway

The Consolidated Appropriations Act is certainly putting on the pressure to take the U.S. X-ray equipment base digital sooner rather than later but, before you make a call on your upgrade strategy, be sure you’re calculating all the costs – not just the sticker price on a DR panel.

In any case, whether you act now or ride it out with your current CR, the DR panel market will be ready to offer you all the benefits of digital imaging at prices far more manageable than replacing your entire X-ray room with a factory-born digital system.

John Maher is the product specialist for X-ray equipment at Block Imaging.