After years of quality playing the starring role in the value equation, cost finally takes center stage.

Radiologists are almost certainly familiar with the basic (albeit oversimplified) health care value equation:

Value = Quality/Cost

The value equation has laid the foundation for the Centers for Medicare and Medicaid Services’ (CMS) Quality Payment Program and influenced much of the recently instituted Medicare Access and CHIP Reauthorization Act (MACRA). Radiologists have largely focused on defining the “quality” component of the value equation, asking questions such as: How does one judge quality? Are current quality measures actually measuring quality?

Radiology specialty societies have responded to quality concerns by developing meaningful, measurable metrics and by defining episodes of care for which these metrics are impactful. The societies also employ dedicated personnel to work with CMS to shape and mold the instruments used to collect this data and develop the methods by which this data will be used to calculate quality-based reimbursement.

Because defining quality in health care has been such a time- and resource-intensive task, quality has overshadowed the denominator of the value equation. However, even as radiologists put great effort into improving quality, future reimbursement will be more closely tied to costs, so it is incumbent on radiologists to redirect some of their resources and energies to cost.

As daunting as quality measurement is, measuring costs may be even more problematic. Costs have proven so complex to understand and measure that costs will not be used to calculate reimbursement in 2017. CMS has delayed implantation of the cost component for the Quality Payment Program until 2018.

Why is it so hard to measure costs? Let’s look at a few of the reasons:

First, we don’t know which costs are best to look at. For example, provider costs, such as building and maintaining a hospital, hiring staff, and buying disposable equipment, are readily measurable, but not necessarily comparable between practices. For example, real estate in rural Arkansas does not cost the same as it does in Manhattan. Does it cost less to provide care in Arkansas because construction costs of a hospital are less? Should CMS be encouraging patients to receive “more valuable” care (equal quality, less cost) by travelling to rural locations? The answer to both of these questions is, of course, no.

To make matters trickier, cost standards may prove challenging to implement across state and national health plans. For example, using time-driven activity-based cost calculation (rather than traditional indirect cost allocation mechanisms), indirect costs may actually be about 50% less than what is typically allocated for basic interventional radiology procedures. So, which accounting method is the better measure of true cost? Which one might a health care insurance plan prefer if given a choice?

Instead of provider-focused costs, some have suggested using payments as a surrogate of costs – as payments can be controlled more easily on a large scale across broad geographies. Seems relatively easy at first glance.

Except that many payor contracts with various health care systems are proprietary. And as for the publicly-available Medicare Physician Fee Schedule, there are limitations of using these payments as a reflection of actual costs, as well.

Although the Current Procedural Terminology (CPT) and Relative Value Scale Update Committee (RUC) processes are rigorous and well-intentioned, more recent CMS inventions such as the Relativity Assessment Workgroup (RAW) and National Correct Coding Initiative (NCCI) have rendered payment assignment more unpredictable than at any time in CMS history.

Add to it the Government Accountability Office’s inability to present any cogent methodology for determining reimbursement for various imaging services, and it quickly renders using payor-controlled payments as a surrogate for costs unpalatable. For example, by using this methodology, the “cost” of a 2-view chest x-ray is about $28, and that of a chest CT without contrast is $164. And all it would take is a RAW screen or NCCI edit to lower “these costs.”

Lastly, what has been sorely and sadly omitted from many discussions is consideration of costs to patients and society. Recently, the Second Panel on Cost-effectiveness in Health and Medicine demonstrated that only 29% of quality-adjusted life-year analyses adopted a societal perspective and has therefore issued recommendations for how to comprehensively and most appropriately conduct cost-effectiveness analyses. Patient-time costs, such as lost time from work for patients and family, travel costs, educational impact of illness, cost of social services related to health care, and earning-potential reduction, are all very real costs to individuals, their families, and the national economy.

Diagnostic imaging, when used appropriately, can reduce inpatient length-of-stay and prevent unnecessary hospital admissions from the emergency department. Interventional radiology procedures have shorter recovery time and at least equal efficacy compared to more invasive surgical procedures. With respect to societal-related costs, radiology sure seems like a healthcare winner. But without appropriately measuring and reporting costs according to the recommendations issued by national consensus panels, all radiologists may be left with are unreimbursed self-congratulatory anecdotes.

Moving forward, costs will be used to calculate physician reimbursement as part of the Quality Payment Program, a daunting admonition, yet, also an exciting opportunity for radiologists to define the optimal method for measuring health care costs. Radiologists should collectively strive to lead this burgeoning field of research, for the advancement of our profession and for the well-being of our patients and society.