Medicare Payment Gaps Drive Site Shift

The payment gap has widened significantly over the last decade. In 2021, the median Medicare payment for a service was 40% higher in a hospital outpatient department (HOPD) compared to a physician's office, a substantial increase from a 12% difference in 2011. For imaging specifically, the median payment ratio was 1.3, meaning HOPDs were paid 30% more. This payment differential is a key driver of hospital acquisitions of physician practices, which in turn moves more services into the higher-cost hospital setting. To counter this, some private payers are actively channeling patients toward freestanding imaging centers to avoid the higher facility fees associated with HOPDs. Health systems are responding by acquiring or partnering with independent centers to create their own freestanding imaging networks. The trend of shifting imaging services to lower-cost, outpatient settings is well-established, with about 40% of all radiology volume now performed in outpatient centers or clinics rather than hospitals. Projections show continued growth, with standard outpatient imaging volume expected to increase by 10% and advanced imaging by nearly 14% over the next decade. This move is fueled by cost-effectiveness, convenience, and technological advancements that make outpatient settings viable for more complex procedures. Consolidation is rampant among both independent practices and larger corporate entities. Private equity investment and the pursuit of economies of scale are major factors. Hospital-affiliated and private equity-backed radiology practices can command significantly higher negotiated prices with commercial insurers—43% and 16% higher, respectively—than independent practices. Key players in the fragmented imaging center market include RadNet, Inc., and Akumin Inc. The administrative burden of prior authorizations disproportionately affects radiology, creating significant delays in patient care. One survey indicated that physicians spend over 13 hours per week on prior authorization tasks. These delays can lead to postponed appointments and, in some cases, adverse patient events. A nationwide radiologist shortage exacerbates these operational pressures, with demand for imaging outpacing the supply of qualified radiologists. This leads to increased workloads, burnout, and potential diagnostic delays. In response, practices are leveraging teleradiology, workflow optimization tools, and AI to improve efficiency. The use of artificial intelligence in radiology is exploding, with the number of FDA-cleared AI/ML-enabled medical devices nearing 900. Roughly 80% of all approved AI medical devices are for medical imaging. Companies like GE HealthCare, Siemens Healthineers, and Aidoc are leading the way, offering tools that assist with workflow triage, image interpretation, and flagging urgent cases. However, establishing clear reimbursement pathways for these AI tools remains a significant challenge. For mobile imaging providers, the market is growing due to an aging population and the rising prevalence of chronic diseases. The U.S. mobile and fixed imaging market was valued at $102.4 billion in 2024. Key players in this space include RadNet, Inc., Alliance HealthCare Services (now part of Akumin), and DMS Health. The demand is particularly strong for bringing advanced modalities like MRI and PET/CT to rural areas or facilities with capacity constraints.