By Avram Goldstein

July 28 (Bloomberg) -- Insurers, led by WellPoint Inc. and Magellan Health Services Inc., are increasingly rejecting imaging procedures recommended by U.S. doctors as the companies work to trim $30 billion a year they say is wasted on the tests.

CT and MRI scans that allow doctors to peer inside the body can cost as much as $2,000 each. Almost 50 percent of scans for some conditions fail to improve patients' diagnoses or treatment, according to a report issued today by America's Health Insurance Plans, a Washington-based trade group.

With U.S. health costs projected to grow to 25 percent of the economy in 2025 from 16 percent now, insurers are turning to so-called radiology benefit managers who can reject scans determined to be unneeded, said Shay Pratt of the Advisory Board Co., a Washington-based consultant to hospitals. Doctors ordered 115 million of the procedures last year. More than 80 million Americans already must get advance approval for the tests, and that may grow to 120 million in two years, Pratt said.

"We've seen radiology growth trends in the 20 percent-plus range drop to the low single digits" when pre-screening is used in a health plan, said Wayne DeVeydt, WellPoint's chief financial officer, in a telephone interview last week. Prior authorization "is going to be a huge growth area" for insurers, he said. Not everyone agrees it should be. Christopher Ullrich, who heads the American College of Radiology's managed-care committee, says lives may be endangered with the growth of a new bureaucracy dedicated to saving insurers money.

Aneurysms and Tumors

"You're going to find patients with a headache who turned out to have an aneurysm or who had abdominal pain that wasn't investigated and turned out to be a tumor," said Ullrich, a radiologist in Charlotte, North Carolina, in a July 25 telephone interview. It is "hard to live with arbitrary denials and a system with huge administrative burdens with no reimbursement for providing that."

Partly because of expanded pre-screening, growth in the number of procedures using computed tomography, or CT scans, fell to 8.2 percent annually on average after 2003, down from 14 percent a year before that, said Lorna Young of IMV, a market research firm based in Greenbelt, Maryland, in a telephone interview.

In addition to requiring advance approval, screeners are negotiating discounted fees for scans, requiring
imaging facilities to win accreditation and guiding consumers to cheaper test centers.

'No Illusions'

"It's natural physicians wouldn't like our program," said Paul Danao, vice president of WellPoint's radiology benefits subsidiary, in a telephone interview. "We harbor no illusions about that." Indianapolis-based WellPoint is the second largest U.S. health insurer after UnitedHealth Group Inc.

By using pre-screening, UnitedHealth cut the growth in imaging costs for certain medical plans to about 7 percent in 2007 from 12 to 18 percent annually previously, according to Sam Ho, a senior medical officer with the company. That saved $65 million, he said.

Almost $100 billion a year is spent on imaging in the U.S. and that may double by 2013 unless costs are reined in, according to the report today by America's Health Insurance Plans.

Four radiology benefit managers dominate the U.S. market: WellPoint's American Imaging Management, which it acquired last year; the National Imaging Associates subsidiary of Avon, Connecticut-based Magellan; and two closely held companies, MedSolutions Inc. of Franklin, Tennessee, and CareCore National LLC of Wappingers Falls, New York.

Request Rejected

Shelley Weiner, chief medical officer of CareCore, said she recently rejected a doctor's request for a CT scan for a 34- year-old woman with suspected appendicitis because a less costly pelvic ultrasound wasn't tried first. The doctor went ahead with the CT scan at the patient's expense and found only an ovarian cyst that ultrasound, a cheaper alternative, would have spotted, Weiner said.

Still, about 70 percent of scans are approved immediately, and about 15 percent are cleared after appeals, she said.

The Congressional Budget Office cited the "widespread diffusion of new medical technologies and services" as a leading cause of cost increases in its November report forecasting that health care will grow from 16 percent of the U.S. economy to 25 percent by 2025 unless changes are made. Health spending is currently $2.4 trillion, according to U.S. estimates.

Medicare, the U.S. health-care program for the elderly and disabled, has taken an initial step by reducing payments for scanning facilities when they perform more than one procedure on the same patient in the same day.

'Extraordinary Growth'

More controls are needed to cope with "extraordinary growth" in scanning services, said Herb Kuhn, Medicare's deputy administrator, in a telephone interview last month. Its annual spending on outpatient imaging doubled to $14.1 billion from 2000 to 2006.

The Government Accountability Office, the investigative arm of Congress, said last month that Medicare should consider requiring pre-authorization for outpatient imaging of its 44 million beneficiaries. That could be a boon for the radiology benefit managers, said Donald R. Ryan, CareCore's chief executive officer, in an interview.

"It's a huge opportunity for us to build our business and for us to save the Medicare program an awful lot of money," he said.

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net.