I was struck by the tweets after the Center for Medicare Services’s (CMS) recent payment ruling on lung cancer screening. Some called the decision unfair, but here is my favorite:

This tweet, combined with the official response from the American College of Radiology, more clearly describes CMS’s decision.  Let’s review this decision using an economic industrial model known as Porter’s Five Forces.

Adapting this model and illustrated by the title figure, we can see that CMS has a monopoly over the Medicare population. The threat of health insurance substitutes in the over 65 population is almost nil. Customers (ie patients) effectively have no control over CMS’s decisions through the federal rule making process; their only recourse is a legislative fix that is lengthy and cumbersome. Finally, there will be no new entrants into the risky and expensive senior health insurance market, which is why Medicare was created in the first place.

Civilian hospitals that choose to offer lung cancer screening must compete using the inner circle of Industry Rivalry. Applicable tactics from Wikipedia include:

• Sustainable competitive advantage through innovation
• Level of advertising expense
• Powerful competitive strategy
• Firm concentration ratio

Innovation is perhaps the most important force that will allow hospitals to offer lung cancer screening to patients. Computer aided diagnosis, standardized reporting using patient centered Lung-RADS, and even some level of physician extender or automated draft reports and clinical registry entry will help practices keep costs down to a level that allows a small profit margin. In an urban market where there is a low concentration ratio, patients are more likely to find an innovative practice to provide this important service.  Rural patients may have to go without being screened.

Dr. McGinty and the ACR are correct; CMS’s decision will certainly limit access to this life and cost saving service. However from the perspective of CMS and the Five Forces, the decision is not unfair. The question of logic depends on your perspective and mission. As CMS’s primary mission is “an effective steward of public funds” , one might argue that their decision is logical as they are forcing innovation within the marketplace.

However, CMS’s position ignores the downstream costs of those who are not screened and must be treated for advanced stage lung cancer later. It also ignores the increased pain, suffering, morbidity, and mortality of advanced stage lung cancer.  Thus, a more holistic mission might be to allow access to lung cancer screening for ALL Medicare patients by restoring a higher level of reimbursement and reducing regulatory hurdles for this service.  From a temporal and patient centered perspective, CMS’s decision is completely illogical.

Finally, local practices would be wise to ignore the noisy commentary from our federal bureaucrats and push innovation locally, so that they remain sustainable and all patients will have access to quality care.