Ophthalmic OCT Reaches $1 Billion Per Year

But reimbursement clampdown clouds future innovation

Ophthalmic OCT Reaches $1 Billion Per Year

But reimbursement clampdown clouds future innovation.

Eric A. Swanson, MS • David Huang, MD, PhD

Long gone are the days when a new medical product could be easily introduced based solely on improved patient outcomes. To optimize the probability of success, a new product now needs to demonstrate that it can both improve patient outcomes and reduce costs. To the clinical practice manager, an attractive product will need to recoup its cost in the near term and generate revenues in a predictable and easily quantifiable manner, in addition to improving the quality of care.

Optical coherence tomography has been an unqualified success in ophthalmology, where it is in daily use worldwide. There are tens of millions of OCT diagnostic procedures every year, translating to hundreds of millions of dollars in charges to public and private healthcare insurers. The level of spending on OCT now far outstrips other diagnostic imaging procedures, such as fundus photography and fluorescein angiography (see data below), and it is receiving increasing attention from payers.

OCT is also poised to make large impacts in other fields. In cardiology, LightLab Imaging/St. Jude Medical has an FDA-approved intravascular OCT product that it is selling worldwide. Tomophase has an FDA-approved OCT system for bronchoscopy. Michelson Diagnostics has an OCT system for dermatology. Many other medical—and even nonmedical—applications are also under development, including uses in gastroenterology, urology, dentistry, gynecology, otolaryngology and oncology. In the nonmedical area, OCT is being successfully used by art experts to determine whether oil paintings are classics or frauds.

One consequence of great success is the rise of opposing forces. Any diagnostic or surgical procedure that grows faster than the general cost of medical care as a whole, or that represents a large fraction of healthcare expense, will face increased scrutiny by cost-conscious accountants from both private and public insurance plans. Has the spending on ophthalmic OCT grown to such a level that more restrictive reimbursement requirements will become fiscally necessary? This restriction could come in the form of a higher barrier to allow reimbursement and/or a lower amount of reimbursement dollars. Will the financial restriction lead to less innovation in technology as companies have lower profit margins to fund internal R&D? This article attempts to shed some light on these subjects.


It may be instructive to look at some of the historical and current reimbursement issues facing OCT in ophthalmology to get some insight on these questions.

Unfortunately, it is very difficult to get reliable statistics on the use of ophthalmic OCT and the reimbursement costs associated with that use. Most commercial insurance plans and HMOs will not share their data for a variety of business reasons. So instead of obtaining a direct estimate of OCT utilization, we will make some estimates based on equipment sales and utilization data, as well as from Medicare reimbursement statistics.

On the capital equipment side, there are more than 10 suppliers of ophthalmic OCT products. We estimate that in 2010 the sale of ophthalmologic OCT systems was pproximately $250 million. In 2017, it is estimated that the entire US diagnostic ophthalmic market (including OCT) will approach $650 million a year. Thus, OCT represents a large fraction of the total ophthalmic market for diagnostic equipment. We will use these numbers later to make estimates on the amount of commercial R&D money being invested.

A publicly available dataset of OCT utilization in the US comes from Medicare. Medicare statistics are available for each of the Current Procedural Terminology codes, first developed by the AMA to standardize the reporting of medical services. These CPT codes are used by the public and private insurers to determine the amount of reimbursement that a medical practitioner will receive for the service provided. Sometimes, practitioner services are provided and covered under a generic CPT code, and sometimes there are very specific CPT codes.

Up until 2011, the CPT code for ophthalmic OCT was 92135: “scanning computerized ophthalmic diagnostic imaging, posterior segment (eg, scanning laser) with interpretation and report, unilateral.” Unfortunately, this code also applies to confocal laser scanning ophthalmoscopy, scanning laser polarimetry, and other imaging modalities. The use of this CPT code is further complicated by the fact that there are no national coverage criteria for OCT, and the guidelines are often determined by the particular local Medicare carrier. In sum, the details are quite complicated.

As mentioned above, private insurers will not share their CPT code data. Fortunately, the US government does provide Medicare data. These figures show data from Medicare on allowed Medicare CPT 92135 services per year and the charges associated with those services (diagnostic procedures). Also shown for comparison are two other ophthalmic CPT codes: 92235 (fluorescein angiography) and 92250 (fundus photography with interpretation and report). Figure 1 shows the total number of allowed services for years 2000-2009 (2010 is not yet available). Figure 2 shows the total dollar amount of the charges by year. Figure 3 shows estimated cost per service obtained by dividing the total dollar charges by the number of services.

Figure 1. Allowed CPT 92135 (includes OCT), 92235 (fluorescein angiography), and 92250 (fundus photography) Medicare services per year.

Figure 2. Allowed CPT 92135 (includes OCT), 92235 (fluorescein angiography), and 92250 (fundus photography) Medicare charges per year.

Figure 3. Estimated Medicare per-procedure payment for CPT 92135 (includes OCT), 92235 (fluorescein angiography), and 92250 (fundus photography) per year.

Some striking features of these figures include the high rate of growth, from less than half a million series in 2000 toward over eight million services in 2010. This represents a ~36% annual growth rate over the past nine years (2000-2009), although that growth was faster over the first half of the decade than the second half (about 18% in 2009). The annual dollar charge approaches $400 million in 2010. In comparison, other commonly used ophthalmic CPT codes, such as 92235 and 92250, have remained flat or have even decreased in both revenue and number of procedures.

In 2010, the number of Medicare beneficiaries was ~46.6 million people, of whom approximately 85% are age 65 and older, and 15% are nonelderly disabled and ESRD. Assuming there were about nine million CPT 92135 cases in 2010 (projecting from Figure 1), then this figure implies that 23% of the elderly Medicare population (9M/ (0.85x46.6M) had this procedure. If you further assume that the majority of cases were for two eyes, then this implies that about 10% of the elderly Medicare population had this procedure at least once during 2010 or that a smaller percentage had more than one test during 2010.

While these figures show interesting data, there are two limitations: (1) the CPT 92135 code is also used for non-OCT imaging modalities, and (2) these data are for Medicare only. Medicare beneficiaries are about 15% of the total US population, but the older Medicare population consumes proportionally more medical procedures. To provide an estimated extrapolation from the Medicare CPT data to the wider US population, we obtained actual billing statistics from three major academic eye centers.

At these centers, OCT represented about 92% of the total CPT 92135 billing in the years 2009-2010, and 51% of CPT 92135 procedures were billed to Medicare. Extrapolating from Figure 1, there were approximately nine million CPT 92135 procedures reimbursed by Medicare in 2010. This translates to 8,289,000 Medicare OCT procedures and 16,257,000 total US OCT procedures. At $48 reimbursement per procedure, we estimate a 2010 OCT reimbursement of $780 million in the US alone. Worldwide reimbursement should total well over $1 billion. This level of reimbursement can easily support the estimated $250 million of worldwide OCT capital equipment sales mentioned above.

The increase in aggregate charges for CPT 92135 occurred despite downward adjustment in the per-procedure charge. Figure 3 showed an overall downward trend in the per-procedure charge, with a large step down in 2004.

This year will see an even more severe downward adjustment. The ophthalmic CPT 92135 code has been eliminated completely and replaced with three new codes: 91232 for imaging the anterior segment, 92133 for the optic nerve and 92134 for the retina. Further, the average payment for CPT code 92135 has been reduced from $52.25 in 2010 to $48.33 in 2011, and this is the amount for scanning one eye or two! Thus, there is an additional 50% hit in revenue over this nominal 8% drop for cases in which both eyes are scanned (as qualitatively indicated in Figure 3). The practitioner gets ~$48 for scanning one eye or two, and the majority of cases today may have been for scanning two eyes.

According to other published articles, “OCT tests are used between 3% and 12% of total visits, meaning approximately 450 tests for a doctor who sees 6,000 patients per year.” This translates to about $20,000 per OCT machine per year. Assuming that the average OCT system costs ~$60,000, this implies a payback of about three years, not accounting for the other costs, such as labor. However, reimbursement is not the only reason for physicians to have OCT in their practice. OCT provides such value in its unique diagnostic ability that it is becoming an essential tool for patient care. OCT has become a cost for any practice to do business.

The OCT market has enjoyed tremendous growth as a result of providing bona fide value to clinicians and patients seeking eye care. The value of OCT has increased with the rapid improvement in performance in imaging speed, resolution, and diagnostic software. At the same time, the reimbursement per procedure has been pushed down well below that of fluorescein angiography and even simple fundus photography. Unfortunately, this success has drawn increasing scrutiny from private and public payers and growing pressure to lower reimbursement rates repeatedly. This pressure creates uncertainty concerning whether OCT can continue the rapid growth and improvement it has enjoyed so far.


Pressure on reducing reimbursements' dollars per procedure or increasing the requirement hurdle for the procedure not only will affect revenue for practitioners but also revenue for the OCT capital equipment manufacturers.

Further reductions in revenue for capital equipment suppliers may limit the amount of innovation coming to market. This result may be inevitable in the long term. For the shorter term, it may be that the 10 companies fighting for market share will continue to spend R&D dollars at a high percentage of revenue. Assuming 40% margins on OCT equipment and given that a typical company may plow ~30% back into R&D implies a total R&D budget for commercial companies of about $30 million per year. This is probably commensurate with the worldwide level of government funding of universities for research in OCT for ophthalmology.

For the near term, this level of R&D expenditure ($30 million to $60 million a year) still represents a healthy number for innovation, especially because so many OCT companies are now competing to differentiate their products and are probably gambling that more R&D dollars will garner additional market share. In the longer term, a threat to innovation in OCT in ophthalmology may not just be public and private insurers capping ophthalmic CPT billing; it may be that there are too many companies in the market spending too much money betting that feature differentiation will grow their market share. This is complicated by the natural tendency to compress margins to win market share. Eventually the accountants at these companies will want to see a return on their investment, and if they don't, then they may clamp down on R&D dollars.


OCT has been a tremendous medical and business success in ophthalmology. In 2010, there were about eight million Medicare OCT procedures and about 16 million total OCT procedures in the United States alone. The worldwide numbers are probably around that. Over the past 10 years, US OCT has grown at an impressive average of 36% YOY. The public and private payers have noticed this growth as reimbursement payments in 2010 most likely surpassed $1 billion worldwide. They have tried and will continue to try to manage reimbursement requirements and payments to contain healthcare costs. Any procedure that pokes its head up high in the percentage of expenditures or in absolute dollars will get scrutiny and face cost containment efforts.

Over the next decade, this trend of cost containment will likely become an increasingly formidable problem for practitioners, capital equipment suppliers and startups that want to become suppliers. Beyond simple reimbursement payback analysis, for a practice to have OCT instrumentation, OCT provides synergistic value for other ophthalmic procedures. OCT is becoming the cost of doing business in a retinal practice, but the good news is that, at least for the near term, there are still a large government-sponsored R&D budget and probably an even bigger commercial company R&D budget that will continue to drive innovation in the technological capability of ophthalmic OCT instruments, as well as drive reductions in capital equipment costs for ophthalmic OCT instruments. Finally, there are still large, untapped ophthalmic OCT markets, such as the anterior eye and the optometry markets, that should provide benefits to doctors, patients and OCT equipment makers.


We thank Dr. Joel Schuman of the University of Pittsburgh Medical Center Eye Center, Dr. Jay Duker of the Tufts New England Eye Center and Ms. Elizabeth Cottle for providing information on OCT utilization. RP

Eric Swanson is the editor of OCT News. David Huang, MD, PhD, is affiliated with the Casey Eye Institute's Oregon Health & Science University Center for Ophthalmic Optics & Lasers. Dr. Huang reports significant financial interest in Carl Zeiss Me ditec and Optovue. Both authors report significant interest in OCT patents owned and licensed by MIT to various OCT companies. Mr. Swanson can be reached at