Effect of Financial Incentives on Cardiac Testing Rates and Locations

There have been large changes over the last decade in Medicare fee-for-service (M-FFS) reimbursement levels for the principal cardiac stress tests in both office and hospital-based outpatient (HBO) settings, including highly publicized cuts in 2010 in office reimbursement, intended to address perceived over-testing in cardiologist offices. An unnoticed, perhaps unintended effect of these changes is the emergence beginning in 2007 of a large gap between HBO and Office reimbursement levels; HBO reimbursement now greatly exceeds office reimbursement for all forms of cardiac imaging. We assess how these reimbursement changes affect imaging rates and locations. We use a difference-in-differences research design, in which we compare cardiac imaging rates and locations for M-FFS patients to rates and locations for a control group of patients in several large Medicare Advantage (M-Adv) networks, who did not face similar reimbursement changes. We find no evidence that the M-FFS reimbursement changes reduced cardiac imaging rates, or affected overall Medicare spending. Instead, providers shifted tests from Office to HBO to obtain the higher HBO reimbursements. This evidence on location shift is consistent with anecdotal evidence that reimbursement changes led to substantial vertical integration, with hospitals acquiring cardiology practices and then moving test locations from office to HBO.