Physician Practice Information Survey Forecasts Big Changes in Physician and Outpatient Imaging Reimbursement

From The Chair of the Commission on Economics Gregory N. Nicola, MD, FACR

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For the past 17 years, physician reimbursement and outpatient technical reimbursement have relied on survey data last updated in 2006-08. That data, acquired as part of the AMA Physician Practice Information (PPI) Survey, has substantial implications on how money is split both amongst medical specialties and between components of the relative value unit (RVU). For the past year, the AMA has been surveying thousands of physician practices across all specialties, including radiology. That data was compiled by Mathematica and sent to CMS in late January of this year. If CMS accepts the data, as they did during the last PPI survey, there will be shifts in payment rates across all of medicine.

How did radiology do? Importantly, our specialty had a very high response rate — much higher than the last PPI survey. ACR has actively participated with the AMA to ensure broad participation across radiology with a survey instrument that is relevant to our unique workflow.

As for the final financial impact: CMS alone controls the modeling that determines where funds may flow, but there are several preliminary insights we can gleam from the data. The three main areas of interest are: physician compensation, the Medicare Economic Index (MEI) and practice-expense rates.

Physician Compensation

The AMA surveyed physicians of all specialties for compensation and hours worked to derive a compensation-per-hour metric. This number was necessary to determine the MEI, an important number discussed in the subsequent section. Notably, multiple specialties were grouped into larger buckets to obtain a reasonable sample size. For radiology, this included not only diagnostic and interventional radiology but also radiation oncology and nuclear medicine.

The survey reported that radiology is the top specialty in compensation per hour (see Table 1). Despite ever-downward pressure on radiology reimbursement, many trends seem to be countering this pressure. Some of the factors with the greatest impact include the radiology labor shortage, ever increasing work RVU requirements (leading to ever increasing burn out) and a shift from small radiology practices performing their own billing to employed and supplemented models. As radiology worklists continue to deepen across the country, the intensity and volume of work have increased beyond what many consider sustainable.

Medicare Economic Index

The MEI is used both as an inflationary measure within healthcare and to distribute healthcare spending among physician work, practice expense and malpractice expense. As an inflationary measure, the MEI typically increases to reflect inflationary pressure on delivering healthcare, an increase that has not been recognized by the physician update (see Figure 1). The physician update line refers to the physician fee schedule, the component of Medicare spending that is wholly responsible for physician reimbursement and, specifically, outpatient services. Outpatient and inpatient hospitals rely on separate fee schedules that use very different mechanisms to set payment rates. This discordance between the MEI and the physician update is well known with efforts led by the AMA to address budget neutrality constraints.

While there has not yet been a commitment by the federal government to inject more money into the Physician Fee Schedule, CMS is allowed to move money around within that constrained system. The three components of the RVU in the Physician Fee Schedule include: physician work, practice expense and malpractice expense. The MEI weights determine how much total spending can be allocated to each of these buckets. If practice-expense spending is forecasted to increase in the current year, that money is depressed by various budget neutrality adjustments. Notably, that money is not taken from physician work. However, every few decades, CMS decides to perform a MEI rebase that can result in large swings of funding moving from one component of the RVU to another. As the PPI survey includes new MEI weights, it is likely that a MEI rebase will soon occur. The last MEI rebase was in 2006.

The MEI weights for physician work, practice expense and malpractice expense are presented in Table 1. CMS had recently proposed to update the MEI based on their own data sources (see “CMS-Proposed 2017 MEI” in the chart below) but delayed implementation until the AMA finished the PPI survey.

	Physician Work	Practice Expense	Malpractice Expense
Current MEI	50.9%	44.8%	4.3%
CMS-Proposed 2017 MEI	47.3%	51.3%	1.4%
AMA PPI Survey MEI*	60.8%	37%	2.3%

*rounding error noted in official materials

 

The current MEI dictates that 50.9% of Physician Fee Schedule spending goes to fund physician work (the work RVU). In the CMS-proposed 2017 MEI, the amount of funding for physician work would have decreased. However, the AMA PPI survey reported a substantial increase in physician work expenditures. If the AMA PPI survey data is adopted, we can expect that funds will be pulled from practice expense and placed into physician work. How would the AMA MEI rebase numbers translate to reimbursement? The conversion factor would increase, resulting in larger payments to physicians. Practice expense would conversely see a reduction in spend not via the conversion factor — which applies to all three buckets — but with drops in budget neutrality adjustments that are specific to practice expense. While physician work RVU would stay the same (and total work payments increase with a higher conversion factor), the practice-expense RVU would decrease. Notably, the technical component (TC) is composed almost entirely of practice-expense RVUs.

Practice Expense Rates

While the impact of the MEI alone could result in substantial changes, there will also be changes in practice-expense funding for each specialty, independent of a potential MEI rebase. Practice expense is particularly important for radiology as it makes up a large percentage of total imaging reimbursement. While the details of practice-expense funding is beyond the scope of this article, the basic calculation for practice-expense splits funding into two buckets: direct and indirect practice expense. As part of the new PPI survey process, the AMA has calculated new direct and indirect practice-expense-per-physician-hour rates for each specialty, also referred to as PE/hr. These rates are directly responsible for setting indirect practice-expense funding, an amount that comprises 70% of total practice-expense money in radiology.

Many specialty surveys saw an increase in PE/hr compared to 2006. Diagnostic radiology experienced a rise in both direct and indirect rates. However, because additional funding has not been committed to fund these increases, changes to practice-expense reimbursement will rely on how that specialty performed relative to all other specialties. Due to the way practice expense is calculated, the indirect PE/hr has a particularly large impact as it informs the only specialty-specific budget neutrality adjustment, the Indirect Practice Cost Index (IPCI).

Previously, different specialties within the house of radiology had their own PE/hr rates. In the current survey, Mathematica grouped like-specialties when sufficient sample sizes were not reached. This could result in differential impacts on diagnostic radiology, interventional radiology, nuclear medicine and radiation oncology (see Table 3 below).

Table 3

Specialty	Direct PE/hr	Indirect PE/hr	Total PE/hr
Radiology 2024 PPIS	$58.79	$118.12	$176.91
Radiation Oncology	126.20	165.10	291.30
Diagnostic Radiology	39.24	95.60	134.84
Interventional Radiology	18.99	82.56	101.55
Nuclear Medicine	12.21	39.80	52.01

All numbers are in dollars. All rows except Radiology 2024 PPIS are current values.

Next Steps

The AMA and Mathematica have submitted data to CMS with the expectation that CMS will provide comment in the 2026 proposed rule, typically released in July. This redistribution will occur both among specialties and the components of the RVU (e.g., physician work, practice expense and malpractice). While changing the PPI survey inputs could result in a large redistribution of funding, this update will not increase total funding for the physician fee schedule without congressional action.