Economics in Medical Imaging: Implications For Research and Development and Clinical Practice

1. James H Thrall, MD Chairman, Department of Radiology Massachusetts General Hospital Professor of Radiology Harvard Medical School Economics in Medical Imaging: Implications For Research and Development and Clinical Practice

2. Utilization New transformative technologies are driving increased utilization of services and costs in diagnostic radiology

3. ACRIN DMIST trial establishes value of digital mammography Picard study and ACRIN trial confirm efficacy of CT colonography—AGA, ACR and ACS endorse its use for screening CT colonography gets started with spiral CT Breast MRI starts to become important Reimbursement for PET from CMS Positive results from NLCST Reimbursement for CT colonography and lung cancer screening ? Reimbursement begins for limited applications of coronary CTA Multi-detector CT-New era of CTA and CT Colonography

4. PET/CT Diverticulitis CCTA 3D Endo-luminal view Polyp MD/CT Acute MI CTC CTA for Pulmonary emboli False aneurysm

5. Total Medicare Imaging Costs are Rising:GAO Report 2008 ~14% Of Part B Spending In 2006 Compound annual growth (CAGR) rate of > 14%

7. Economics Of Medical Imaging Effects of legislative initiatives and the recession

8. Direct effects Legislative assault on imaging reimbursement Regulatory assault on imaging reimbursement • DRA 2005– CT, MRI, PET reduced to HOPPS rate • PPACA– Utilization rate increased to 75% from 50% • Contiguous body part reduction increased to 50% • CMS—2010 MPFS Final Rule • Bundling of CT codes • Expansion of MPPR • Decrease in practice expense reimbursement CMS rejection of CTC and most CCTA for reimbursement Aggregate impact is several billion dollars per year

9. Indirect effects Recession linked decrease in capital spending by hospitals and imaging centers Public and professional concerns about radiation exposure and risk Attack on screening mammography by USPSTF Increase in co-pays and deductibles by insurance companies Economic uncertainties related to health reform Impossible to directly monetize these issues but clearly impactful

10. Legislative and Regulatory Cuts to Imaging Reimbursement Deficit Reduction Act of 2005 Capped the Technical Component (TC) at the lesser of the Medicare Physician Fee Schedule (MPFS) rate or Hospital Outpatient Prospective Payment Schedule (HOPPS) rate Congressional Budget Office (CBO) projected a decrease of $1.3B in Medicare Technical (TC) payments for 2008 $1.23 Billion from DRA in first year = 3X projected cuts of $2.8 Billion over 5 years Additional losses as private payers adopt CMS policies and DRA cuts Especially heavy blow to outpatient centers, the fastest growing part of imaging

11. Health Reform Legislation 2010 • Patient Protection and Affordable Care Act of 2010 (PPACA) • $940 Billion over 10 years • 32 million more covered– 95% of legal US residents • Individual mandate– up to $695 penalty • Employer mandate– up to $2000 per employee penalty • Medicaid expansion– up to 133% of Federal Poverty Level • Private insurance reforms

12. PPACA Imaging Provisions: Contiguous Body Part Reduction and Change in Utilization Assumption • TC contiguous body part reduction increased to 50% from 25% • Utilization: • Obama Administration legislative proposal– 95% • CMS 2010 MPFS Final Rule– 4 year phase in to 90% • Initial reconciliation proposal– 90% • Final legislative provision– 75%-- effective in 2011 for higher cost imaging devices—CT&MRI

13. 2010 MPFS Final Rule • Utilization assumption of 90% for higher cost Diagnostic Imaging-- now moot through PPACA • Medicare Final Rule for 2010 • Practice expense cuts—phased in over 4 years 2010-2013 • 18% for dx • 4% for RO • ACR assessment is that practice expense data used are statistically invalid.

14. New Mischief From CMS • CMS is proposing to extend the contiguous body part concept • Officially called the “Multiple Procedure Reduction Rule” (MPRR) • Applies to CT, MRI and Ultrasound • CMS is proposing to apply the rule whenever more than one test is done in a day • MPRR would then apply across modalities and for non contiguous body parts • CMS has just (1/1/2011) bundled CT abdomen and CT pelvis with drastic cuts in reimbursement • CMS believes this action is in the “spirit” of Congressional intent to decrease reimbursement for “over valued” services

15. CMS Timeline FINANCE DRA ?? Health reform and CMS policy changes RADIOLOGY ASSOCIATES2010 Note: Source: ACR Data – P. Kassing Payment Policies 2011 presentation

16. Allowed Charges for Medicare Physician and Supplier Services, by Physician Specialty (Percentage of Medicare Part B FFS total only) DRA—(Took effect 1/1/2007) Decrease> $1.0B Assembled from CMS sources by ACR staff

17. Medicare Professional Fee Schedule --2009 • Number of advanced imaging exams (CT, PET, MRI, NM) declined by 0.1% • MRI 1.2% • CT 1.6% • Spending for advanced imaging increased by 1.2% versus 2.6% for all physician services • Overall imaging services declined 7.1% • Mammography 0.3%

18. Impact of DRA and CMS Policy Cuts on Industry and Radiology Practice ACR member survey—600 respondents 41% laid of staff or altered hiring plans 49% cancelled or postponed equipment acquisitions DI Magazine reported: Many imaging centers closed and valuations plummeted “The medical device industry saw sales of CT, MR and PET fall $125M”

19. Impact on Industrial Revenue: GE

20. Market for CT Scanners • US market • 2007= $2.1 Billion • 2010= $585 Million • Number of devices 2010 • US~ 700 • Europe~ 1200 Personal communication from major vendors

21. Future Directions For Imaging– Clinical Practice And Technology Development Will Medical Imaging Survive and Flourish?

22. Factors That Will Continue To Propel Imaging Forward • Economic recovery • Emerging markets • Consumer demands for better, safer, more effective technology– baby boom generation • All dependent on new technology • Example: Lower radiation exposure • Competition– • Inexorable advance of technology per se • Change in the business model– market share to market space • Regulation– requirements for more data and clinical trials prior to FDA approval

23. GE Health Care Quarterly Revenue Versus S&P 500 S&P 500 GE Revenue Economic recovery is a tide that will lift industry’s boats

24. Potential Impact of Emerging Markets • BRIC countries’ populations • China 1,342M • India 1,192M • Brazil 191M • Russia 142M • United States, Europe and Japan • 800M 42% of the worlds population and < 20% of medical products consumption 12% of worlds population and 2/3rds of medical products consumption

25. Supported By Emerging Markets, General Electric Healthcare Raises Growth Projection To 10% Per YearKaiser Health News 11/10.10 • China +19% • India +8% • Orders -9% • Profit -20% • Equip +8% • Profit +14%

26. Future Growth Of Clinical Medical Imaging In The United States Reimbursement for CCTA CTC and Lung Cancer Screening etc DRA, P-4-P, RBMs, NSF, radiation scare, recession Organic growth with aging population Growth “Golden age” of imaging growth with MDCT, CTA, MRA, 3D, PET/CT, digital mammo etc DRA 2, new 3rd party initiatives and Medicare cuts MIPPA and PPACA 2000 2007 2010 2015 Time

27. Single organ devices Hybrid imaging systems Massive computing Simplified devices Technology development Decreased cost Increased cost Competition Increased regulations Development of New Technology

28. Extremity CT • Head CT • Extremity MRI • Breast PET • PET/CT • PET/MRI • US/Angio Information Technology Single organ devices • Handheld US • CT • MRI Hybrid imaging systems Iterative reconstruction “Defeatured” devices • Data mining • CPOE • CAD Massive computing Simplified devices Lower doses Emerging markets Radiation concerns = number one non financial risk to radiology Technology development Decreased cost Increased cost • BRIC countries • SE Asia • Africa FDA under the gun Percentage share for a product or service Market share Competition Increased regulations Clinical trials moved offshore R&D moved offshore Market space Extended product offerings Number of products “footprint” in the market All major companies Increasingly difficult to initiate trials in US versus evidence based medicine

29. Radiation Exposure • Concerns about high radiation exposure represent the number one non financial risk to radiology • New technology can reduce exposures by 90% • Should be among the highest priorities of all people associated with medical imaging

30. Why Now? BEIR VII (Biological Effects of Ionizing Radiation) endorsed the linear no-threshold model for extrapolating cancer induction NCRP (National Committee on Radiation Protection) Medical exposures have increased by 7 fold over last 25 years Multiple journal articles and editorials Cancer risks– 29,000 CT related cancers per year Increasing population exposure over time Highly publicized cases of errors resulting in over exposures of patients in both diagnostic and therapeutic radiology practices

31. Beir VII: Health Risks from Exposure toLow Levels of Ionizing Radiation Figure 2. In a lifetime, approximately 42 (solid circles) of 100 people will be diagnosed with cancer from causes unrelated to radiation. The calculations in this report suggest approximately one cancer (star) in 100 people could result from a single exposure 100 mSv of low-LET radiation. Sponsored by the US National Academies of Science

32. Medical radiation exposure found equal to non medical sources—ubiquitous background, consumer, occupational

33. Radiation overexposures have undermined the public’s trust in radiology

34. Dual source devices More efficient detectors Mandatory accreditation—MIPPA 2008 More requirements for clinical trials data (FDA) Gating and motion correction Image post processing Use of appropriateness criteria—PACA 2010 Iterative reconstruction Regulation/ National Standards Technology development Better filters and multi-spectral imaging Standard reference doses, registries, patient dose tracking Sub mSv Goal Radiation biology– effects of ionizing radiation Optimization of CT protocols Clinical practice Education Physics of CT—what makes an acceptable scan? Department governance Adoption of appropriateness criteria Quality assurance programs– surveillance and audit Inclusion of all stakeholders How to interpret relatively noisy images

35. Technology for Sub mSv CT • More efficient detectors—garnet based • Dual tube– high pitch fast scanning CCTA • Post processing– noise reduction • Better filters—reduce low energy photons • Better tubes • Multispectral imaging • Iterative reconstruction • Partial– 30% dose reduction • Full– 70-90% dose reduction

36. Low-dose H&N CT Dx: Bilateral Peritonsillar Abscesses CTDIvol = 2.75mGy, DLP = 51mGy.cm Estimated Dose = 0.27mSv

37. 17 yo male with chest pain, elevated troponnin 3D Volume rendering

38. Negative CTA obviated need for invasive angiography. Cardiac MRI confirmed myocarditis (arrows). MRI FLASH-mode radiation dose: 0.76 mSv

39. Diffuse lung disease chest CT reconstructed with FBP and ASIR high definition mode

40. FBPB25f FBPB46f IRT

41. CT Dose Comparison

42. Change in Business Model From Market Share to Market Space

43. What Sticks in Customer Relationships and What Doesn’t? Commodities and devices that come into a hospital on a forklift are not “sticky” The strongest bonds to a customer derive from integration of products into the work process, especially transfer of information Integrated solutions that stitch together multiple products with information systems to facilitate work and meet compliance requirements are the most valued by providers

44. Radiology Work Flow Ordering Physician’s desktop Order entry Results reporting Imaging device Work station Voice report HIS RIS PACS RIS HIS 3D image processing Injector • Market share-- % of “X” sold by company • Market space– Size of company “footprint” in the work flow Contrast media

45. GE Market Space: Early 1990s: “Forklift” Relationship with Customers Ordering Physician’s desktop Order entry Results reporting Imaging device Work station Voice report HIS RIS PACS RIS HIS 3D image processing Injector • Market share-- % of “X” sold by company • Market space– Size of company “footprint” in the work flow Contrast media

46. GE Market Space 2010: “Sticky’ Relationship Through Integration Ordering Physician’s desktop Order entry Results reporting Imaging device Work station Voice report HIS RIS PACS RIS HIS 3D image processing Injector • Market share-- % of “X” sold by company • Market space– Size of company “footprint” in the work flow Contrast media

47. Conclusions • The European and American markets are mature • Growth in the US in medical imaging is at a standstill or even contracting regionally • Multi-national corporations will increasingly turn to emerging markets for growth and to do R&D • Large corporations will seek to increase their market space for accretive growth and to become more important and more indispensible to their customers

48. Conclusions • New technology for imaging will continue to be developed at a robust pace • Radiology will enter an era of massive computing • Rapid advances in reducing radiation dose will largely take radiation risk out of the discussion • New technology and applications will counter downward economic pressures • However, the Golden era of combined high rates of procedure growth and high per unit reimbursement for imaging are gone