GE Healthcare and Siemens Healthcare said that they will lobby Congress to fight President Barack Obama's budget plan to reduce spending on the use of MRIs and X-rays by using benefit managers that would approve imaging tests that Medicare should cover. The White House said the measure would save $260 million over a decade, money that would aid Obama’s plan to expand health coverage.
As employers, GE Healthcare and Siemens Healthcare, of Munich, say they back Obama’s efforts to cut health costs. Still, in separate interviews, the companies pledged to fight a plan, proposed in the president’s budget last week, to require approvals from a private “benefit manager” before Medicare will pay for imaging.
The measure may hinder equipment sales that accounted for more than half of GE’s $17.4 billion in health-care sales last year, or about 5% of overall revenue. The imaging unit at Siemens generated 262 million euros ($328.7 million) in profit in the fiscal first quarter, a fifth of net income, the manufacturer reported January 27, 2009.
Benefit managers will “actually hamper access and add administrative cost” to Medicare, said Mark Vachon, president of GE Healthcare’s Americas’ division, in a March 3 interview. “Having a system that gets between physicians and patients is probably not something we’d be supportive of.”
Obama’s budget has drawn fire from insurance companies and drugmakers, who have criticized the demand for more savings from both industries.
‘Hundred Million’ in Losses
Eli Lilly & Co. and AstraZeneca Plc said on February 26, 2009 they would lose “several hundred million” dollars from Obama’s proposal to mandate deeper discounts for drugs they sell Medicaid, the health plan for the poor. Health-care stocks, led by Humana Inc., slid after the budget called for stripping insurers of $175 billion over 10 years by forcing them to compete for Medicare contracts.
If Congress approves, Obama’s plan would be the latest attempt to rein in Medicare imaging costs, which more than doubled to $14.1 billion from 2000 to 2006, according to a June 13 congressional report. It would put Medicare on par with most private insurers, who already require prior approvals.
Doctors are increasingly owners as well as users of scanning equipment, giving some an incentive for unneeded tests, the Government Accountability Office found in the report. Imaging use “varied substantially across geographic regions, suggesting that not all utilization was necessary or appropriate,” the GAO said.
‘This Time is Different’
Within hours of the budget’s release on Feb. 26, 2009 the Medical Imaging & Technology Alliance, the trade group representing both GE and Siemens, issued a statement warning that the plan would deny seniors “life-saving medical services.”
The White House didn’t immediately respond to a request seeking comment. In a health care forum organized by the White House yesterday, Obama told his audience he expected a fight.
“Our inability to reform health care in the past is just one example of how special interests have had their way and the public interest has fallen by the side,” Obama, a Democrat, said. Still, with support for reform from doctors and patients, unions and businesses weary of high labor costs, “this time is different,” he said.
Nonetheless, in documents prepared for a December 4, 2008 investor meeting, GE Healthcare said the industry was ramping up “advocacy” efforts to stave off restrictions on the use of imaging machines.
Eleanor Kerr, a Siemens lobbyist, said Medicare has already moved to cut imaging costs, ordering radiologists who conduct the tests be accredited by 2012. That step, along with medical societies’ push to update guidelines, should be tried before pushing benefit mangers on patients, she said.
Policing Themselves
“We feel that providers can police themselves through the development of appropriateness guidelines” with oversight from Medicare, said Kerr, Siemens’s director of government affairs– health care.
Doctors ordered almost 600 million X-rays, magnetic resonance imaging tests, computed tomography scans and other procedures in 2006, according to the Reston, Virginia-based American College of Radiology. Medicare paid for a third of them. The tests use magnets, radiation, radio waves and other methods to peer at tumors, heart deformities and ills inside the body.
The group of radiologists also opposes the White House plan, though it acknowledges a need to cut back on unneeded scans, said John Patti, a thoracic radiologist at Massachusetts General Hospital in Boston. The problem could better be handled with doctor training than employing benefit managers with a profit motive, he said in an interview.
Middlemen and Brokers
“Any time you put a middleman or a broker between physicians who are trying to care for their patients, you’re going to run the risk of impeding care,” said Patti, vice- chairman of the radiology college board of chancellors.
GE Healthcare and Siemens Healthcare have been hammered by investors over the past year as the recession and credit crisis eroded revenue.
Obama’s plan would mean fewer procedures and lost revenue for equipment makers led by GE, Siemens and Amsterdam-based Royal Philips Electronics NV, said Greg Freiherr, an editor at “Diagnostic Imaging,” an industry newsletter in San Francisco.
“The goal of the proposal is obviously to slow the growth in demand,” Freiherr, a former industry consultant, said in an interview. “And slowing the growth would translate into fewer sales for the equipment makers.”
Reimbursements for imaging were among Medicare’s fastest- growing expense from 2000 to 2006, according to last year’s GAO report. Increased use pushed up costs, as did the rising prices for the newest MRI or nuclear medicine scans. Cutting-edge units can sell for as much as $1.5 million, Freiherr said.
Magellan doesn’t reveal its rejection rate, said Michael Fleming, a spokesman. The tests denied are often duplicative, or those where medical guidelines call for one scan and a doctor has proposed a different one, LeGalia said. Tests avoided can protect patients from unnecessary radiation, he said.
“We all agree this technology is wonderful,” LeGalia said. “It’s not a bunch of accountants sitting around making decisions on medicine.”