Two Orange County medical scanning companies are hoping a possible decision by Medicare to expand coverage will bring more business for them.
The Centers for Medicare and Medicaid Services said last month that it wants to pay for diagnostic scanning for Medicare patients who are being treated for cancer.
The change would cover positron emission tomography, or PET, scans, which produce 3-D body images to detect tumors and other conditions.
Regulators took comments on the proposal through Thursday and are expected to make their final decision in April.
If the federal insurance program approves the change, it could push more hospitals to order the scans, funneling money to local companies that make PET scan machines or offer scanning services.
Paul Viviano, chief executive of Newport Beach-based Alliance Imaging Inc., said he expects the Centers for Medicare and Medicaid Services to OK the change.
“This is a meaningful change for us,” said Viviano, whose company has made expanding into PET scanning and cancer treatment a priority.
Alliance derived some $215 million of its projected 2008 revenue of $486 million to $496 million from PET and computerized tomography, or CT, scanning, according to Viviano.
The company performs some 135,000 such scans a year and does not provide a breakdown of revenue from each type.
Insight
InSight Health Services Holdings Corp., an Alliance rival based in Lake Forest, has targeted hospital outsourcing of PET and other scans for growth.
“We are excited,” said Kip Hallman, chief executive of InSight.
PET scans aren’t cheap,prices easily can top $2,000. Overall, PET and CT scanning is roughly a $2 billion yearly market and is likely to keep growing despite political pressures to reduce healthcare costs.
“When it comes to cancer, there’s a reluctance to reduce coverage,” Hallman said.
At a recent J.P. Morgan healthcare conference, Alliance,which is changing its name to Alliance HealthCare Services later this month,said it anticipates the medical scanning market will grow about 10% a year.
The growth of PET scanning was driven by an acceptance by regulators, who have expanded coverage from two procedures in 1998 to nearly 40 today, Alliance said in a Securities and Exchange Commission filing.
PET scans more than tripled from 2001 to 2005 to an estimated 1.1 million a year, according to Greenbelt, Md.-based market researcher IMV Medical Information Division Inc.
Indirect Source
But the expansion of Medicare coverage doesn’t go directly to medical scanning companies.
Alliance, InSight and others primarily see additional revenue when hospitals,which collect the payments from Medicare,order additional equipment or services.
Alliance said that it receives about 11% of its revenue from directly billing Medicare, Medicaid and private insurers. Insight received 13% of its $265 million in total revenue from Medicare in the 12 months ended June.
The proposal also may not be a total windfall for scanning companies, since the proposed coverage expansion doesn’t include prostate cancer, one of the most common cancers in older men.
The regulators don’t consider a PET scan an effective way to screen for prostate cancer, said Mark Carol, Alliance’s chief medical officer.
Regulators also said they are going to require what’s called “coverage with evidence development” for additional PET scans for Medicare patients.
Under that requirement, Medicare pays for additional PET scanning if clinical information is available that says the scans help a patient’s cancer care.
Some concerns have been raised about the use of PET scanning for cancer.
Last summer, a panel of outside Medicare advisers expressed doubt that industry-sponsored data on the use of PET scans for diagnosing and evaluating certain types of cancer could be used as a universal standard. The panel also said it didn’t have a lot of confidence that patient data gathered from a national registry showed that PET scans could help doctors make better decisions or improve patients’ conditions.
That hasn’t stopped Alliance from taking a shot at advanced scanning and cancer treatment. Alliance, one of the county’s midsize companies with a recent market value of $450 million, has bought several smaller companies to do so.
“We have been very overt about our strategy,” Viviano said at the J.P. Morgan conference.
It came about, Viviano said, because Alliance had a profitable core magnetic resonance imaging business “that unfortunately, given industry pressures, began to decline. We began to invest in growth products that were linked to the same customers.”
