An M.R.I. Machine for Every Doctor? Someone Has to Pay

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March 13, 2004An M.R.I. Machine for Every Doctor? Someone Has to PayBy REED

ABELSON

 

SYRACUSE — This aging city is an unexpected epicenter for a high-tech medical

arms race. But employers and insurers here say that is just what they are paying

for, as doctors, their traditional sources of income squeezed, discover a new

one: diagnostic imaging.

 

Instead of sending patients to a radiologist or one of four local hospitals,

doctors in Syracuse have been particularly aggressive about installing imaging

equipment — particularly M.R.I. machines — in their own offices.

 

Nationally, diagnostic imaging, which also includes CT and PET scans, is

approaching a $100-billion-a-year business, according to a recent report by the

Blue Cross and Blue Shield Association, using estimates from the consultant Booz

Allen Hamilton, up about 40 percent just since 2000.

 

Indeed, while insurers have long paid the greatest attention to the rising costs

of drugs and hospital stays, they are becoming increasingly concerned about

imaging. " There's so much entrepreneurship here that is superseding what is

truly needed, " said Dr. Allan Korn, the chief medical officer for the Blue Cross

and Blue Shield Association. " It's becoming a huge problem. "

 

In the Syracuse area, the number of magnetic resonance imaging machines has

grown by a third over the last three years. In the 12 months ended last June

alone, use of M.R.I. scans in the area increased 23 percent, according to

National Imaging Associates, a company that works with insurers to manage costs.

 

Competing hospitals and radiologists complain that the imaging upstarts —

orthopedic surgeons, cardiologists, neurologists and others — are performing

services that the radiologists say they do better and that the hospitals say

they already provide. They also point to a regulatory environment, on the state

and federal levels, which restricts their business but, they say, gives the new

competitors free rein to expand.

 

No one disagrees that much of the recent growth in diagnostic imaging is a

result of medical advances that allow doctors to better discover what is wrong

with a patient or to avoid more invasive procedures, like exploratory surgery.

And many patients prefer not having to leave their doctor's office to get an

M.R.I.

 

" This is nothing more than changing times — we have to change, " said Dr. I.

Michael Vella, the president of Syracuse Orthopedic Specialists, the largest

orthopedic surgery practice here, with 23 doctors in eight offices across

Syracuse.

 

In a building at the edge of a shopping mall that the practice renovated last

summer into its main office, the doctors have installed two M.R.I. machines and

a nuclear camera, equipment made by General Electric that costs millions of

dollars.

 

That is part of a proliferation of M.R.I. machines here, whether in the

hospital, at free-standing imaging centers or in doctors' offices. The five

counties surrounding Syracuse have 27 M.R.I. machines, up from 20 just three

years ago, according to Excellus BlueCross BlueShield, the area's major insurer.

Four more are said to be in the works.

 

" There is just too much equipment, " said Dr. Patrick J. Lynch, a local

radiologist who complains that many specialists are investing in the machines as

a way to increase their incomes.

 

Employers are also concerned. " Unfortunately, it's the business community that

pays for these, " said John P. Driscoll, who heads a task force on health care

set up by the Metropolitan Development Association of Syracuse and Central New

York, a group of business leaders here.

 

Scans, of course, are not inexpensive. While prices vary widely, a typical PET

might cost $2,000, while an M.R.I. would cost $700 to $900 and a CT, or computed

tomography, scan would cost $500 to $700, according to National Imaging

Associates. The tests are frequently covered by insurance, however, so patients

would often pay much less, depending on their plan.

 

There are signs that more machines may translate into too much imaging. Excellus

points to data that suggest use of M.R.I.'s in Syracuse is two-thirds higher

than in Rochester, for example, and higher than the national average.

 

" There tends to be more self-referral in the Syracuse market, " said John J.

Donahue, the chief executive of National Imaging Associates, based in

Hackensack, N.J.

 

But the phenomenon is national. Imaging is the fastest-growing component of

physician services in the Medicare program, according to research by the

Medicare Payment Advisory Commission, an independent federal body that helps

Congress evaluate care. Average use per Medicare beneficiary for imaging rose at

nearly three times the rate of overall use of doctors' services from 1999 to

2002. And the program's spending on imaging is up about 50 percent over the last

five years, versus a 30 percent rise in Medicare's overall costs.

 

" We share the concern about the possibility for overutilization in imaging

technology, " said Dr. Sean Tunis, the chief clinical officer for Medicare. In a

departure from previous policy, Medicare has approved positron emission

tomography — or PET — scans, which take images using radioactive compounds, for

only certain uses, like the diagnosis of thyroid cancer. Medicare is conducting

a pilot program before deciding whether to cover scans for the diagnosis of

Alzheimer's disease.

 

Policy analysts say that doctors have strong financial incentives to provide

diagnostic imaging and other so-called ancillary services, like lab tests.

 

" A lot of the impetus comes from the financial pressure physicians are feeling, "

said Dr. Hoangmai H. Pham, a senior health researcher at the Center for Studying

Health System Change and one author of a study on physician entrepreneurship

that appears in the current issue of Health Affairs, an academic journal.

" Physicians' strategies threaten to raise costs for public and private payers

through increased use, " the study warns.

 

Both specialists and primary care doctors are offering more imaging services,

according to research by the Medical Group Management Association, an Englewood,

Colo., group that represents large medical practices. Doctors' billings for

radiology services climbed 75 percent among family practice groups from 1998 to

2002, while doubling for cardiology groups, the association found.

 

" There are a lot of forces creating this trend, " including the desire to offer

patients convenient and efficient care, said Dr. William F. Jessee, the chief

executive of the association. Being able to make a diagnosis and develop a plan

for treatment while the patient is still in the office also saves physicians'

time, he said.

 

As the price of even high-end equipment has come down in recent years, doctors,

especially those in large groups, are finding it easier to afford an M.R.I.

machine. A typical unit might cost $1.4 million, but doctors can often borrow

the money or lease the equipment. Some save money by buying smaller machines

that can scan a knee, for example, or purchase used equipment. While payments

vary widely, doctors often collect $500 to $700 for a typical M.R.I. done on an

outpatient basis in this area.

 

In Syracuse, there have been attempts to discourage the purchase of imaging

equipment. In July 2000, Excellus put a moratorium on paying new providers for

M.R.I. services. " We did have some impact on capacity, " said James R. Smith,

Excellus's regional president for central New York.

 

But what makes the city particularly vulnerable to a proliferation in equipment

is New York's regulatory structure. While hospitals and licensed centers must

petition for approval to purchase imaging equipment under the state's

certificate-of-need laws, physicians who want to operate the same machines in

their offices face no such restrictions.

 

And in some cases, physicians may be in a better position to buy the equipment

than the hospitals, as many of the institutions struggle to make ends meet. For

example, Crouse Hospital here, which recently emerged from bankruptcy, formed a

partnership with the area's largest provider of M.R.I. services, Magnetic

Diagnostic Resources of Central New York, to offer M.R.I.'s on hospital grounds.

 

" You either fight them or joint- venture with them, " said David Speltz, the

former chief executive of Crouse, who was brought in to turn the hospital around

and remains an adviser. In this case, the hospital could not afford the full

cost of the equipment by itself.

 

But some executives voice concern about the migration of imaging and other

money-making services from their hospitals to physicians' offices. Syracuse

hospitals have already felt the impact of doctors and others opening up

free-standing surgical centers; the four hospitals experienced an 11 percent

drop in ambulatory surgeries from 2001 to 2003, according to the Hospital

Executive Council, a local planning group.

 

The competition, some executives acknowledge, fuels duplication of services.

 

" You have to stay in the race; you have to do it, " said Ben Moore III, executive

director of the University Hospital in Syracuse.

 

State officials have been studying some of these concerns. But because the

activities of doctors are largely outside the state health department's purview,

regulators do not even know how many M.R.I. machines there are in New York.

 

" We recognize that is, was and will continue to be an issue that we need to deal

with and the health care system in New York needs to deal with, " said Wayne

Osten, a state health official. As part of a review of the state's Medicaid

system ordered by Gov. George E. Pataki, a working group has begun looking at

the migration of services from hospitals to outpatient centers and doctor's

offices.

 

But radiologists and others are also troubled by the potential conflict that

arises when doctors make money from every test they recommend. Radiologists

perform scans on referrals from other doctors.

 

While federal regulations, under the so-called Stark Law, generally forbid

doctors from sending patients to imaging centers or labs in which they have a

financial interest, doctors are allowed to own and operate equipment in their

offices.

 

" There is nothing they can do about the office, " said Jean M. Mitchell, a

professor and health economist at Georgetown Public Policy Institute who has

studied the possible conflicts.

 

Efforts in Syracuse to address the continuing buildup in the medical arms race

focus largely on having hospital executives, doctors, insurers and others

communicate among themselves about the region's needs. But Dr. Vella of Syracuse

Orthopedic Specialists, for one, is uneasy about a community planning process

that would allow access to technology for some providers but not others.

 

" I don't think that you should limit the use of technology, limit competition, "

he said.

 

Mr. Driscoll, the business leader, expects significant resistance from other

doctors, as well.

 

" The doctors have the most to lose, " he said.

 

 

 

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