This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Welcome to Reed Smith's viewpoints — timely commentary from our lawyers on topics relevant to your business and wider industry. Browse to see the latest news and subscribe to receive updates on topics that matter to you, directly to your mailbox.
| 2 minutes read

Budget neutrality drives relentless Medicare physician fee schedule reimbursement declines

In a new study just published in the Journal of the American College of Radiology, researchers from the Harvey L. Neiman Health Policy Institute document a steep decline in radiologist reimbursement for imaging services provided to Medicare beneficiaries over 16 years when accounting for inflation, driven by a overall payment mechanism called "budget neutrality." 

Actual total Medicare reimbursement for radiologists' services saw a decline from 2005 to 2021. Total payment for radiology was $6.2 billion in 2005, but only $5.8 billion in 2021, or a 5.5% decline over this period. And when adjusting for inflation, the reduction in Medicare payments to radiologists from 2005 to 2021 equaled 31.9%. And radiologists' inflation-adjusted reimbursement per RVU has declined by one-third over that same 16-year period.

The authors do a good job explaining how the application of budget neutrality in determining Medicare Physician Fee Schedule (MPFS) payments has been a long-time source of pain for radiologists. Medicare payments are based on the number of relative value units (RVUs) performed multiplied by a "conversion factor" that is adjusted annually to maintain budget neutrality in the MPFS. As the MPFS is regularly revised to add codes for new reimbursable services and to adjust the assigned RVU values for existing codes, budget neutrality offsets increases for some specialties with reductions for others - like radiologists. The classic pie. More for some means less for others.

It should be noted that the reported reductions would have been far greater were it not for the ritual of Congress intervening almost every year in December to avert some - but not all - of the ongoing cuts to MPFS payments caused by budget neutrality.

So, how have radiologists coped with the conversion factor cuts? In part by doing more work. Over the 16 years of the study period, radiologists worked more, even as their total Medicare reimbursement declined. RVUs per beneficiary performed by radiologists increased 13.1% from 2005 to 2021, but this workload increase did not completely offset conversion factor and inflation-caused reductions. Without increases in volumes, the decline in reimbursement to radiologists per beneficiary would have been 7.9% or 33.6% when inflation adjusted. 

Little wonder that the Medicare Payment Advisory Committee (MedPAC) has recommended that the MPFS be adjusted for the impact of inflation.

So radiologists are working longer hours and increasing their reading speed but the consequences have been an alarming increase in concerns over diminished interpretive accuracy and widespread accounts of radiologist burnout.

Clearly the annual negative updates to MPFS payment are unsustainable. This broken system needs to be fixed. 

It's illustrated to me by the comment I heard one time about the bettor on the way to the racetrack to wager on the horses who said, "I sure hope I break even today, 'cause I can sure use the money." 

Unadjusted for inflation, aggregate Medicare fee-for-service reimbursement to radiologists declined 5.5% between 2005 and 2021, and when adjusted for inflation, it declined 31.9% over this period.


diagnostic radiology, medicare payments, budget neutrality, health care & life sciences