$18 Billion in Cost Avoidance – The Math Behind the Number


The stated goal of Patient Protection and Affordable Care Act (PPACA) (i.e. Obamacare) and Health Care Reform is what people like to call the Triple Aim. As you know, the Triple Aim was designed to:

  • Improve patient satisfaction and quality of care

  • Improve the health of the community/population

  • Reduce the cost of health care

Portable diagnostics achieve all of these goals. In this section are details on quantifying the costs avoided in 2012 due to the use of portable diagnostics. Quantifying this cost avoidance is possible for the first time, because detailed data is now available in the Medicare Provider Utilization and Payment Data: Physician and Other Supplier Public Use File (PUF) for 2012 and from other sources. The NAPXP engaged an outside resource, CAC Professional Services, to analyze the PUF data and help develop a model that would demonstrate the costs avoided in 2012 for the Medicare system due to portable diagnostics. CAC has extensive experience in:

  • Hospital billing

  • Auditing reimbursements for a large third payer

  • Practice administration for urgent care

  • Training health care organizations in coding, compliance, HIPAA, office management, and billing

CAC’s analysis of the $18 billion in costs avoided in 2012 due to portable diagnostics and CAC’s opinion letter are below in this document. Such cost avoidance is possible because of how portable diagnostics are used by physicians today. Portable chest x-rays enable early detection of, or progression of, pneumonia, heart failure, emphysema (COPD), and various cancers. Portable bone x-rays enable early detection of fractures. Portable ultrasound exams can reveal life-threatening blood clots, dangerous occlusions in arteries, dysfunctional heart valves and other structural issues in the heart, cancerous masses,

and other dangerous conditions. These conditions are in fact the ones Medicare most often calls out as the leading drivers of cost in the U.S. health system, because these conditions so often lead to emergency department (ED) visits and hospitalizations. The very nature of portable diagnostics allows for early intervention in diagnosis and treatment of these diseases. If the results are positive, they often accelerate local therapy and allow the patient to be treated in the nursing home instead of in the ED or hospital. And, if negative, the patient stays in the nursing home and the expense of a trip to the ED, and potential hospitalization, are never incurred.

Sources and Commentary

(1) The 2.6 million x-rays and 137,000 ultrasounds performed by portable x-ray suppliers were extracted from the Medicare Provider Utilization and Payment Data record for 2012 known as the Physician and Other Supplier Public Use File (PUF) by CAC Professional Services, a consulting firm engaged by the NAPXP. The PUF can be found at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Physician-and-Other-Supplier.html.

(2) The NAPXP surveyed long-term care facilities asking their medical directors, directors of nursing, or their administrators the question below about portable x-rays. An identical question was asked about portable ultrasounds. If there are ten x-rays performed in a given month, on average, how many of those studies would have resulted in an emergency room visit had there been no mobile x-ray service available to you? Please answer with a number between 0-10. They replied that these mobile studies resulted in avoided emergency department (ED) visits 79% for x-rays and 73% for ultrasounds.

(3) The NAPXP surveyed its member owners who reported that their revenue of Part A studies were approximately 60% of their Part B revenue. Because the Medicare physician fee schedule for portable diagnostics is relatively uniform across the U.S. and to be conservative, the association assumed that the Part A studies represented 50% of their Part B volume in units and $. Therefore Part A x-rays are 1,134,000 (50% X 2,267,000) and Part A ultrasounds are 69,000 (50% X 137,000). Also the cost of those Part A studies to Medicare would be $143,494,000 (50% X $286,987,000).

(4) 38.3% is the percentage of ED visits requiring an ambulance ride as reported in the National Center for Health Statistics (NCHS) data brief #130, Oct. 2013 http://www.cdc.gov/nchs/data/databriefs/db130.pdf.

(5) $429 is the median cost to Medicare of an ambulance trip from the U.S. Government Accountability Office (GAO-13-6 published 10/1/2012) found at http://www.gao/gov/products/GAO-13-6. Because of the frailty of the patients it serves, the NAPXP has assumed a round trip ambulance cost of $858.

(6) $1,354 is the average mean cost of an ED visit in 2011 as reported in American Hospital Association ResourceCenter at https://aharesourcecenter.wordpress.com/2011/07/27/whats-the-average-cost-for-an-er-visit/.

(7) Health and Human Service’s National Center Health Statistics for 2009-10 reported that 36.5% of persons age 65 or greater, who went to the ED, were admitted to the hospital. See http://www.cdc.gov/nchs/data/databriefs/ db130.pdf.

(8) The Agency for Health Care Research and Quality (AHRQ) in January 2013 published the results of its Healthcare Cost and Utilization Project (HCUP) results for 2010, where it reported that for 2010 that the average cost of a hospital stay for all Americans 65 – 84 years old was $12,300. See http://www.hcup-us.ahrq.gov/reports/statbriefs/sb146.jsp. The NAPXP believes $12,300/stay to be conservative as of 2014. Because the cost of an ED visit is included in the subsequent bill for a hospital stay, the cost of the hospital stay itself is $10,946 ($12,300 – $1,354).

(9) The AARP Public Policy Institute reported in 2014 that Medicare provided health coverage to 50.7 million Americans. It also projected that, as baby boomers turn 65, Medicare enrollment will reach 64 million in 2020 and 81 million in 2030. See http://www.aarp.org/content/dam/aarp/research/public_policy_institute/health/2014/whorelies-on-medicare-fact-sheet-2014-AARP-ppi-health.pdf. Given this growth, the NAPXP believes an even greater opportunity for cost avoidance through the use of portable studies lies ahead.

Recent Posts