Vascular laboratory cost analysis and the impact of the Resource-Based Relative Value Scale payment system

This study compares the actual cost of performing noninvasive laboratory studies with reimbursement under the previous Medicare Part B system and under current resource-based relative value scale (RBRVS) guidelines.

We calculated the cost to operate our own laboratory and estimated national costs for small- and large-model laboratories. Reimbursement under Medicare Part B was calculated for each Current Procedural Terminology code from average Medicare reimbursement allowances and national case volumes in 1990, which were obtained from the Health Care Financing Administration. All data were expressed as dollars per hour of study time to allow universal comparison of costs and reimbursement among tests that require differing lengths of time for completion.

Technical costs for laboratory time ranged from $143 to $173 per study hour. The largest components of laboratory expenses were fixed costs, including personnel (37% to 46%), equipment (30% to 42%), and facilities (6% to 8%). Variable costs such as billing (9% to 10%) accounted for most of the remainder. More efficient allocation of equipment resulted in lower costs in large laboratories, whereas continued use of depreciated equipment resulted in lower costs in our own laboratory ($127/hr).

We project that technical reimbursement under RBRVS will be $82/hr nationally and $80/hr locally, whereas global reimbursement (technical plus professional) will be $116/hr and $110/hr, respectively. On the basis of 1990 case volumes, the RBRVS system will decrease national global reimbursement by at least 35% compared with the previous Medicare Part B system. Under the new system, technical reimbursement will decrease by an estimated 27% nationally, whereas professional reimbursement will decrease by 52%. Revenue under RBRVS will not meet the cost to perform studies either nationally or locally. Technical reimbursement is 37% to 54% below actual technical costs, and even global reimbursement is 13% to 34% less than technical costs. Our analysis revealed that costs will exceed reimbursement despite maximization of operating efficiency. This analysis applies to outpatients only. A case mix including inpatients will further reduce reimbursement, because only the professional component is allowed. By setting reimbursement of vascular laboratories below actual costs, the new RBRVS system may ultimately reduce the availability of noninvasive vascular testing for elderly patients.