November 05, 2019

CMS Allows for Two-Year Transition of CT and MR Cost Center Policy

Last week, the Centers for Medicare and Medicaid Services (CMS) released the calendar year (CY) 2020 Hospital Outpatient Prospective Payment System (HOPPS) final rule . In the final rule, CMS implemented a two-year transition period for the CT and MR cost center policy. CMS first introduced the policy in 2009 in which CMS would estimate the imaging APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed.

Despite stating in the CY 2020 HOPPS proposed rule that the CT and MR policy would go into effect on January 1, 2020, CMS finalized policy for a two-year transition based on public comments. In 2020, CMS will begin a two-year phase of the policy that will apply 50 percent of the payment impact. For CY 2020, CMs will calculate imaging payment rates using both the transition method (excluding providers using a square feet allocation method) and the standard methodology that includes all providers regardless of allocation method. In CY 2021, the transition will end and fully implement the CT and MR cost data regardless of the cost allocation method.

CMS received many public comments regarding the policy, with several commenters asking to further delay implementation or provide a transition period. One commenter requested the CMS work with hospital organizations to educate the hospital community on how to report these costs on the CT and MR CCRs in hopes to transition to the new policy. CMS addressed comments stating that they have continued to make the OPPS a more prospective payment system, which includes greater packaging and the use of comprehensive APCs. CMS also responded to the concern of the American College of Radiology® (ACR®) regarding the duplicative effects of the Deficit Reduction Act, stating they understood the payment reductions for imaging services under OPPS could have significant payment impacts under the physician fee schedule (PFS), where the technical component is capped at the OPPS rate and would continue to monitor the potential impacts of payment changes in the PFS.

Despite public comments, CMS does still intend to fully implement the new cost allocation methodology in January 1, 2021. For 2020, CMS will being the two-year phased in transition period that will 50% of the payment will be based on the standard methodology and 50% will be based on the transition methodology that excludes providers using the “square feet” cost allocation method. For 2021, CMS will set the imaging APC payment rates based solely using the standard methodology, which include all providers regardless of cost allocation method.

This table illustrates the estimated impact on geometric mean costs for CT and MR APCs under the blended approach of utilizing 50% of the transitional payment methodology and 50% of the standard payment methodology for 2020.


APC Descriptor

Providers Using “Square Foot” Included Geometric Mean Cost

Providers using “Square Foot” excluded Geometric Mean Cost

Blended Geometric Mean Cost

% Impact

of Blend

Relative to


Mean Cost






Level 1 Imaging without Contrast






Level 2 Imaging without Contrast







Level 3 Imaging without








Level 4 Imaging without








Level 1 Imaging with








Level 2 Imaging with








Level 3 Imaging with








CT and CTA without

Contrast Composite







CT and CTA with

Contrast Composite







MRI and MRA without

Contrast Composite







MRI and MRA with

Contrast Composite






The American College of Radiology has raised concerns in the past regarding the use of claims from hospitals that continue to report under the “square foot” cost allocation method, noting that it would underestimate the true costs of CT and MR studies. CMS has given the hospitals six years to adjust their cost allocation methods from “square foot” to either “direct” or the “dollar” method. These changes are the result of a study that was done by the Research Triangle Institute (RTI) back in 20071 . Although the ACR has argued that the RTI study and data which back it up are outdated, CMS is adamant to continue with full implementation of the policy.

[1] Cromwell, J., & Dalton, K. (2007, January). A Study of Charge Compression in Calculating DRG Relative Weights (Rep.). Retrieved July 1, 2019, from Centers for Medicare and Medicaid Services