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Radiology costing and consumerism

November 25, 2020
Business Affairs X-Ray
From the November 2020 issue of HealthCare Business News magazine

In recognition of this dilemma, CMS allowed time for providers to transition from the square-foot method to more direct-costing methods by excluding costing data from providers who use the square-foot allocation method. The exclusion of costing data from these providers ended Jan. 1, 2020, with CMS applying the payment impact of 50% of providers (regardless of cost allocation method) for calendar year 2020 and 100% of the payment impact for CCR calculations starting Jan. 1, 2021. Unless providers move to more direct-costing methods for CT and MR cost centers, CMS reimbursement for these services will likely take another hit on top of already shrinking reimbursement.

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How to evaluate radiology costs and why it’s time to do it
Given the projected policy changes and the impromptu restart of nonemergent imaging due to COVID-19, it’s time for diagnostic imaging leaders to start the conversation with their financial accounting counterparts. Radiology leaders should start by asking: “How is cost being measured for our cost center and how is it reported?”

Next, cost-accounting systems should be established with the goal of shifting to recommended cost reporting requirements along with optimizing the value chain to create value and reduce waste. Many experts tout time-driven activity-based costing (TDABC) as a cost-accounting method that can help drive value in the radiology setting. Cost accounting can be very complicated and methods like TDABC require additional recording that is beyond traditional accounting. But it is crucial that radiology leaders stay highly engaged and allocate appropriate resources to achieve long-term results. The benefits may not be apparent overnight, but those providers who are early adopters of methods such as TDABC could enjoy an early-mover advantage over regional competitors.

Adam Fairbourn
Regardless, critically examining costing methods in radiology could help mitigate looming reimbursement cuts for radiology services and help promote the value of Radiology services in the continuum of care. As CMS remains committed to payment reform, and commercial payors or patients become more involved, Radiology leaders have a golden opportunity to rise to the occasion.

About the author: Adam Fairbourn manages a portfolio of national GPO contracts covering diagnostic imaging equipment. Leveraging 10 years of clinical experience and advanced study healthcare economics, Adam serves as a Vizient SME for diagnostic imaging equipment, and works to align contracting strategies with current regulatory and market forces.
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