CFOs Model Further Erosion of HOPD Rates
“Every CFO I talk to is modeling a world where hospital outpatient department (HOPD) rates erode another 5%—you need scale or you need a niche,” observed a healthcare economist on the *Radiology Business Now* podcast. This sentiment reflects widespread anticipation of continued site-neutral payment reforms from CMS and commercial payers. The pressure on HOPD reimbursement is a primary factor compelling health systems to shift imaging volumes to lower-cost ambulatory settings.
- The 2024 Medicare Physician Fee Schedule finalized a conversion factor of $32.74, a 3.4% decrease from the previous year, leading to an estimated 3% pay decrease for diagnostic radiology and a 4% decrease for interventional radiology. This continues a trend that, when adjusted for inflation, has seen Medicare physician payments fall by 26% between 2001 and 2023. - Broader site-neutral payment reforms could reduce hospital revenue by nearly $12 billion in a single year and over $182 billion over a decade for facilities under the Outpatient Prospective Payment System (OPPS). Medicare pays, on average, two to four times more for the same outpatient procedure when it's performed in a hospital outpatient department versus a physician's office. - Legislative proposals aim to expand site-neutral payment policies. For example, the Same Care, Lower Cost Act (S.1629) would align Medicare payments for over 66 common outpatient services, including imaging and biopsies. The Congressional Budget Office estimates such reforms could save taxpayers and beneficiaries up to $157 billion over ten years. - In response to reimbursement pressures, many health systems are acquiring or partnering with freestanding imaging centers to create integrated networks. This shift is driven by the lower cost of performing procedures at Independent Diagnostic Testing Facilities (IDTFs) and policies from payers encouraging care in ambulatory settings. - The outpatient imaging market is experiencing rapid growth, with projections showing a 14% increase in advanced imaging and a 10% increase in standard outpatient imaging over the next decade. Advanced modalities like PET, ultrasound, and CT are expected to see the most significant growth at 23%, 16%, and 15% respectively. - Large-scale investments are being made to expand outpatient imaging access. NYC Health + Hospitals, for instance, is investing over $20 million to add comprehensive imaging services in underserved communities across all five boroughs, expecting a 20% increase in patient visits. - The Radiology Outpatient Ordering Transmission (ROOT) Act has been introduced in Congress to revive the Medicare Imaging Appropriate Use Criteria (AUC) program, which was paused by CMS in 2023. The program, which requires providers to consult clinical decision support before ordering advanced imaging, is estimated to have the potential to save Medicare over $700 million annually. - Consolidation is a major trend, with private equity-backed organizations and public companies like RadNet acquiring smaller imaging centers. RadNet is the largest outpatient imaging provider in the U.S. with 366 centers.
