Radiology Business Journal August?September 2012

August/September 2012

What Payors Want From Radiology page 22

Featured in this issue

Financing Growth in Radiology: Build, Buy, or Merge page 28 The Top 20 Imaging-center Chains: The Market Expands page 34 Imaging and the Integrated Health Network: Radiology’s Role page 44

www.imagingBiz.com

August/September 2012

What Payors Want From Radiology page 22

Featured in this issue

Financing Growth in Radiology: Build, Buy, or Merge page 28 The Top 20 Imaging-center Chains: The Market Expands page 34 Imaging and the Integrated Health Network: Radiology’s Role page 44

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CONTENTS

August/September 2012 | Volume 5, Number 4

22

Features

22

What Payors Want From Radiology

The demands seem endless, but taking a proactive role in the payor–provider relationship can put radiology in the cockpit.

28

Financing Growth in a Changing Imaging Environment

Imaging providers with an interest in growth are encountering fair weather in the credit markets.

By Greg Thompson

By Julie Ritzer Ross

34 2012’s Top 20 Imaging-center Chains: Third Annual Report

By Cheryl Proval

Numbers of imaging-center sites, patient visits, and annual procedures all show growth since last year’s report.

44

RBMA’s Spring Summit Roundtable: Imaging and the IHN

Industry experts imagine radiology’s future role in the integrated health network.

By Kris Kyes and Thanh Le

28

4 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

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CONTENTS

AUgust/September 2012 | Volume 5, Number 4 Publisher Curtis Kauffman-Pickelle · ckp@imagingbiz.com

8

EDitor Cheryl Proval · cproval@imagingbiz.com

Departments

Art Director Patrick R. Walling · pwalling@imagingbiz.com

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Summer Reverie and Olympic Dreams

10

The Bottom Line

By Cheryl Proval

Associate Editor Cat Vasko · cvasko@imagingbiz.com

Practices Adapt at the Expense of Political Advocacy

12

Priors 12 Leadership | Manager to Leader: Seven Transitional Steps 14 Regulatory Issues | Image Gently Responds to the FDA

Online Editor Lena Kauffman · lkauffman@imagingbiz.com Contributing Writers Howard Fleishon, MD, MMM, FACR; Julie Ritzer Ross; Matt Skoufalos; Greg Thompson

By Howard Fleishon, MD, MMM, FACR

By Matt Skoufalos

16 21

Numeric | Shapeshifting in the Era of Health-care Reform Numeric | 88 New ACOs

50

Advertiser Index

52

Final Read

Technical Editor Kris Kyes

Sales & Marketing Director Sharon Fitzgerald · sfitzgerald@imagingbiz.com Production Coordinator Jean Lavich · jlavich@imagingbiz.com Editorial Coordinator Thanh Le · tle@imagingbiz.com Webmaster Robert Elmquist · relmquist@imagingbiz.com Corporate Office imagingBiz 210 W. Main St., Suite 101 Tustin, CA 92780 (714) 832-6400 www.imagingbiz.com

The Hospital As a Business

By Curtis Kauffman-Pickelle

44

12

PResident/CEO · Curtis Kauffman-Pickelle VP, Publishing · Cheryl Proval VP, Administration · Mary Kauffman

Radiology Business Journal is published bimonthly by imagingBiz, 210 W. Main St., Suite 101, Tustin, CA 92780. US Postage Paid at Lebanon Junction, KY 40150. August/September 2012, Vol 5, No 4 © 2012 imagingBiz. All rights reserved. No part of this publication may be reproduced in any form without written permission from the publisher. POSTMASTER: Send address changes to imagingBiz, 210 W. Main St., Suite 101, Tustin, CA 92780. While the publishers have made every effort to ensure the accuracy of the materials presented in Radiology Business Journal, they are not responsible for the correctness of the information and/or opinions expressed.

Please address all subscription questions to Jean Lavich at jlavich@imagingbiz.com.

6 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

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Summer Reverie and Olympic Dreams Remove your nose from the grindstone, step away from the queue, and imagine a better future—not a worse one

A

ugust is the sweetest month.

The Pacific Ocean is finally warm enough to swim in, the tomatoes are ripening faster than I can eat them, and I give myself permission to slow down a bit and to spend an extra half hour reading the newspapers in the morning.

The news is not appearing less frequently just because it’s summer, of course—and it is certainly no less important than news that arrives in any other season. For instance, the proposed 2013 Medicare Physician Fee Schedule1 (and its latest litany of plagues for the sector), the eagerly anticipated results of the ROMICAT II study2 of cardiac CT, and the final stage 2 meaningful-use rule3 for health IT all arrived this summer. These days, health care news typically foreshadows change, and change raises hackles and translates into resistance—unless, of course, it’s news of a delay, such as the August 24 announcement4 that CMS would delay the deadline for implementation of ICD-10 coding until October 1, 2014.

As I write this, September presses in, signaling a return to business as usual; it is, now or never (I tell myself ), time to take a break from current events and dream a little. Before we do, let’s scroll through the activities of the past several months for some perspective.

Early this summer, at the RBMA 2012 Radiology Summit in Orlando, Florida, Radiology Business Journal publisher Curtis Kauffman-Pickelle and I were privileged to moderate a roundtable discussion with a panel representing a cross section of radiology stakeholders: practice, hospital, and imaging center (page 44). My takeaway was this: No physician, practice, or hospital is an island. Successful health-care providers will confer, collaborate, and align with other providers and stakeholders to create new, more efficient (and effective) models of patient care. This is happening much faster than anyone would have imagined, even last year.

Two weeks later, I was back in Orlando for the annual meeting of the Society for

Imaging Informatics in Medicine (SIIM), where Radiology Business Journal presented the awards to the recipients of the Top 5 Medical Imaging Informatics Projects of 2012,5 selected by a SIIM panel of medicalimaging informaticists. The winning projects moved the specialty forward by finding new ways to access and use the huge quantity of digital information that is produced, analyzed, and stored by the medicalimaging specialties. My takeaway: Imaging informatics is radiology’s sword in the stone.

A month later, I had a nonpareil summercamp experience at the inaugural event of the Radiology Leadership Institute at the Kellogg School of Management, located on the summer-lush campus of Northwestern University. Under the leadership of Cynthia Sherry, MD, the ACR® and its staff invested many resources and much thought in developing a certificate program designed to provide participants with the competencies required to lead health-care organizations.

My takeaway: This program is a tremendous gift to radiology—all of radiology—and its value will be enhanced if all radiology stakeholders engage as participants.

In August, I was in Orlando (again) for the 40th Annual Meeting and Exposition of the AHRA. Aisle conversations echoed many of the issues and concerns that I had heard elsewhere this summer: Veteran leaders are ready to retire, and no one is ready (or willing) to take the baton. I was surprised to encounter more than one highly skilled senior radiology administrator who had been the victim of balance-sheet restructuring at more than one large, nonprofit health-care organization.

One keynote address was the equivalent of ice water to the face: Brian Klepper, PhD, a confessed partisan of primary care and chief development officer of WeCare, an on-site primary-care clinic and medicalmanagement company, announced that he had just cut a deal for $450 MRI exams in Lafayette, Indiana. He referred to the AMA’s RVS Update Committee as the beating heart of the US health-care crisis. My takeaway: Toto, we’re not in Kansas anymore.

Before I sign off, let’s get back to dreaming; it’s a great opportunity to imagine a better future—not a worse one.

This summer, during the opening ceremony

8 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

of the Olympic Games, the world watched as the United Kingdom celebrated its greatest contributions to society: Shakespeare; the Industrial Revolution, which resulted in a tenfold increase in the world’s per-capita income6; children’s literature; and the physicians, nurses, and other caregivers who compose the National Health Service.

It was a great sight and a rare demonstration of hero worship for the medical specialties and the people who keep the doors open at hospitals and physicians’ offices. It is a dream worthy of a great civilization. In these pages, you will read about how, in the United States, we cannot afford the health-care promises we’ve made, let alone the act of extending health-care benefits to all citizens—but right now, we’re dreaming.

Cheryl Proval cproval@imagingbiz.com

References 1. US DHHS. 42 CFR parts 410, 414, 415 et al: proposed rules. Fed Regist. http:// www.gpo.gov/fdsys/pkg/FR-2012-07-30/ html/2012-16814.htm. Published July 30, 2012. Accessed August 24, 2012.

2. Hoffmann U, Truong QA, Schoenfeld DA, et al. Coronary CT angiography versus standard evaluation in acute chest pain. N Engl J Med. 2012;367:299-308.

3. CMS. 42 CFR parts 412, 412, and 495. http://www.ofr.gov/OFRUpload/ OFRData/2012-21050_PI.pdf.

Published August 21, 2012. Accessed August 25, 2012.

4. CMS. 45 CFR part 162. http://www.ofr. gov/OFRUpload/OFRData/2012-21238_ PI.pdf. Published August 24, 2012. Accessed August 25, 2012.

5. Proval C. The top 5 medical-imaging IT projects of 2012. Radiology Business Journal. http://www.imagingbiz.com/articles/view/ the-top-five-medical-imaging-it-projectsof-2012. Published July 10, 2012. Accessed August 25, 2012.

6. Maddison A. The World Economy: Historical Statistics. Paris: Development Centre, OECD; 2004:256-262.

The Bottom Line

Practices Adapt at the

Expense of Political Advocacy To meet the specialty’s need for greater grassroots advocacy, the Radiology Advocacy Network debuts

R

eaders of this journal tend to be interested in the business of radiology. We recognize the priority of having efficient and effective practices, whatever future health-care environment evolves. Observers would probably agree that many radiology practices have successfully improved their operational performance as market forces have demanded more value. We seem to be swimming upstream, however, when it comes to politics.

Threats to our reimbursement models have made the most notable headlines.

Legislation such as the DRA and CMS measures such as the Multiple Procedure Payment Reduction (MPPR) have made us all too aware of how tied we are to the winds of change in Washington.

Contrary to some of the more prominent headlines, radiology had some significant wins in 2011. Increases in the equipment-utilization rate (which would have resulted in decreased reimbursement) were averted in talks preceding approval of the United States– Korea Free Trade Agreement talks, as well as in the deliberations of the bipartisan committee led by Vice President Biden (leading to the Budget Control Act) and of the resulting Joint Select Committee on Deficit Reduction (the supercommittee).

The application of the MPPR to the professional component of one patient’s subsequent studies, acquired in the same session—and interpreted not just by one physician, but by any member of the same practice—was (at least temporarily) avoided. The Vermont Radiological Society coordinated a grassroots advocacy effort to defeat a 24% decrease in Medicaid reimbursement. Maryland’s legislation against self-referral was upheld by the state’s supreme court.

These political and regulatory wins are based on years of building credibility and establishing relationships.

Representation and influence in local and national politics are vital to the success of all of our practices. Right now, only a minority of those within our ranks can be seen taking up the challenge. We are leveraging only a fraction of the many talented people that we have in radiology.

How can we address these challenges?

We probably need to consider both shortterm and longer-term strategies. Our immediate need is to strengthen our grassroots advocacy. Political activism deserves the support and attention of our practice leaders, partners, and staff.

Whether we are dealing with local or federal politicians, it is at the local level that the foundations of these important relationships are developed and fostered.

In Washington, we are a relatively small special-interest group. We need to appear larger than our natural numbers. We have to enlist a disproportionate number of stakeholders to get the attention of those who are making these decisions.

Unfortunately, legislators frequently have no idea who we are or what we do.

In fact, we have a significant story to tell.

Our practices are small and medium-sized businesses. We are job creators for our communities. Medical imaging is a vital contributor to any health-care enterprise.

It might be uncomfortable or inconvenient for us, as individuals, to reach out to our congressional representatives. We might feel that we shouldn’t have to engage in these battles—or we might feel that we can simply write checks to have others fight for us in Washington. The reality is that we cannot simply abrogate the responsibility to RADPAC and delete advocacy from our task lists. We need to be consistently engaged, aware, and involved.

RAN Is Born

In recognition of the imperative to harness grassroots advocacy, the Radiology Advocacy Network (RAN) has been developed. Originally named the Radiology Advocacy Group, the program was expanded and rebranded. Although ACR® resources are being dedicated to the effort, the group’s outreach is to the whole family of radiology. The focus is the development of networks that will be mobilized immediately when critical issues are in front of Congress or regulators.

The vision is one of prompt and rigorous response when calls to action are sent out by the ACR’s government-relations staff. The effort is based on a model developed by the North Carolina Radiological Society and led

10 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

by howard fleishon, MD, MMM, FACR

by Andrew Wu, MD (AWu@WakeRad.com).

Ted Burnes, MPA, and Melody Ballesteros are the staff involved in this effort. One of the most robust networks developed to date is the residents and fellows advocacy group. Other state advocates are taking up the cause to advance radiology grassroots engagement.

At the practice level, more can be done.

We need everyone to participate. Lobby your partners and staff to respond to the calls for action. Assign a practice advocate.

Make the discussion of radiology-related legislative issues an ongoing agenda item at your corporate meetings. Make ACR membership a corporate policy, as a cost of doing business. Encourage commitments to RADPAC. Over the longer term, radiology needs to incorporate a cultural change to include a greater awareness of health-care policy and politics. Academic departments should incorporate relevant courses into their curricula. The American Board of Radiology could establish radiology health-care policy as part of its professionalism module for maintenance of certification.

Occasionally, there are radiologists who run for public office. We need more of them.

They should be included as role models for our trainees.

As a profession, we cannot be complacent. Recent events and health-care reform have made politics and regulation more a part of our professional lives than ever before. Improving productivity will only take us so far. We need to make ourselves part of the process. We will not simply be invited to the discussions. We might need to knock on (or perhaps knock down) the door.

Get involved. Encourage your staff and partners to learn what is going on; challenge your politicians. Talk to your patients. Make grassroots advocacy a part of being a radiologist. Make it part of your practice. Contact Burnes (tburnes@acr.org) and Ballesteros (mballesteros@acr.org) for more information about RAN. Howard Fleishon, MD, MMM, FACR, is a radiologist with the North Mountain Radiology Group (Phoenix, Arizona) and is speaker of the Council Steering Committee of the ACR.

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{priors} leadership

Manager to Leader: Seven Transitional Steps

I

n a landscape growing increasingly concerned with cost, quality, and results, strong leaders are needed to pave a path for the future of health care. Conventional wisdom dictates that leaders are born from a mix of experience and acquired skills. Given these requirements, managers are natural candidates, but not every manager has what it takes to become a leader.

Managers with all the experience in the world can stumble when faced with the heavy task of leading an entire organization. In the June 2012 issue of Harvard Business Review, Watkins1 explains why some managers succeed in becoming leaders—and why some fail to make that transition.

To find the secret behind successful leadership, Watkins conducted extensive interviews with more than 40 executives, including managers who had developed high-potential talent, senior humanresources professionals, and individuals who had moved into an enterprise-level leadership position for the first time.

The scope and complexity of leadership can be daunting, leaving freshly appointed executives feeling overwhelmed and uncertain. To cope with these changes, Watkins finds, executives must undergo seven shifts— tricky changes in their mental focus that require them to develop new skills and conceptual frameworks—to become true leaders.

Specialist to generalist: There is danger for leaders who excel at a particular function, especially in the medical field, where one can easily become overspecialized. New leaders can fall into the trap of their comfort zones, overmanaging the one function that they know well while neglecting the others. Leaders cannot be specialists; they must become generalists and must recognize the organization as

a set of functions (each with its own unique operational templates). Billing personnel have different responsibilities to the organization than do radiologists, technologists, and support staff. Leaders must see each department as one piece of the whole.

Analyst to integrator: Decisions can no longer be made in a vacuum, in consideration of a single function; they have to be made in conjunction with information acquired from different—and sometimes, competing—departments.

Concerns from different sectors of the organization have to be balanced. Should investment go into equipment, staffing, or programs? By using the collective knowledge of different functions, leaders can make appropriate trade-offs to solve complex organizational problems.

Tactician to strategist: Being tactical is seductive, since the activities are more concrete and the results are so immediate, Watkins writes. It becomes easy to get lost and bogged down in the small details. Executives at the enterprise level need to focus on strategic objectives and leave tactical operations to other managers. This is difficult for newcomers, since setting strategy requires navigation of murky terrain. Three skills are needed

12 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

to develop a strategic mindset: level shifting, pattern recognition, and mental simulation. Level shifting is the ability to move fluidly between the details and the larger picture, pattern recognition enables leaders to make sense of complex environments, and mental simulation considers the movement of external forces and players.

Bricklayer to architect: New leaders often attempt to make their marks by targeting elements of the organization that seem relatively easy to change, such as strategy or structure, without completely understanding the effects that their moves will have on the organization as a whole, Watkins writes. Making changes without understanding the ripple effects can lead to unexpected consequences. Great leaders can analyze and design organizational systems so that strategies, structures, operating models, and skill bases fit together effectively and efficiently.

Problem solver to agenda setter: Many managers are promoted on the strength of the ability to fix problems. When they become enterprise leaders, however, they must focus less on solving problems and more on defining which problems the organization should be tackling. The goals are not to correct current problems, but to anticipate future problems and to take steps to address them before they become harder to manage.

Warrior to diplomat: Health care is inextricably tied to a multitude of governing bodies, advocate groups, and regulatory organizations, each of which holds a different stake and sets a different agenda. A leader must be prepared to jump into this volatile environment and learn to negotiate, influence people, and build alliances. It is no longer a straightforward competition, but an effort to change the competitive landscape together. Leaders must interact with outside forces to form

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the policies and rules that directly affect the organization’s future.

Supporting part to leading role: Leaders have to be models for their subordinates, providing guidance for conduct consistent with the values and culture of the organization. Strong communication is called for to transmit these ideas and inspire large groups of

people, both directly and indirectly.

Leadership is not simply taking on more responsibility; it requires a total transformation of thought, Watkins emphasizes. These are not minor shifts in perspective: They are substantial, and they require considerable time and support to achieve.

—Thanh Le

Reference 1. Watkins MD. How managers become leaders: the seven seismic shifts of perspective and responsibility. Harv Bus Rev. 2012;90(6):64-72,144.

r e g u l ato ry i s s u e s

Image Gently Responds to the FDA

O

ne of the leaders driving lowdose, high-quality pediatric imaging is the multisociety advocacy group Image Gently®. When the FDA1 issued a draft guidance document for imagingequipment manufacturers in May 2012, Keith Strauss, MSc—a member of the steering committee of the Alliance for Radiation Safety in Pediatric Imaging (the Image Gently Alliance)—responded to governmental questions about emerging best practices with some common-sense answers honed by years in the field: He participated, with a delegation from Image Gently, in Device Improvements for Pediatric X-ray Imaging (a public workshop held by the FDA on July 16 in Silver Spring, Maryland).

By Matt Skoufalos

Strauss, a clinical pediatric-imaging physicist at Cincinnati Children’s Hospital Medical Center in Ohio, says that the biggest concerns raised by the FDA draft guidance document involve balancing those recommendations designed to add patient protection with vendors’ concerns about limiting access to imaging equipment and altering the course of dose-sensitive manufacturing processes already underway. In essence, Strauss says, these boil down to three chief concerns: user training, hardware configuration, and proposed warning labels for equipment used to image pediatric patients.

Strauss says that a significant concern in the draft guidance document was whether it mandates that vendors’ applications specialists command enough specificity about the operation of their companies’ imaging devices in a pediatric setting. “What all trainers know how to do is tell you how the controls on the machine change its performance when imaging adults,” Strauss explains. “The challenge is making sure that the operator not only knows what the controls do, but when to apply that change to obtain diagnostic images at properly managed patient doses for adults and children.”

Almost every piece of imaging equipment sold will, at some point, be used on children. As dedicated pediatric hospitals account for only about 20% of pediatric imaging performed in the United States, Strauss says, the other 80% is necessarily conducted at facilities (and using equipment) serving patients of all ages.

For that reason, he says, applications specialists must teach basic knowledge

14 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

about the imaging device needed for the proper imaging of both children and adults. “Kids are small; because their bodies are not as thick, they Keith Strauss, MSc don’t need as much radiation to penetrate the body,” he explains. “A different set of operational choices, compared with the set used in adult imaging, is necessary to allow proper visualization of small details.”

He continues, “For example, a smaller focal-spot size delivers a sharper image, lower kilovoltages compensate for the limited contrast of pediatric organs, and shorter exposure times overcome more patient motion in the uncooperative patient. When imaging children, removal of the grid designed to remove scatter radiation reduces patient dose with limited loss of image quality.”

Hardware Configuration Some of the options now provided by manufacturers might make their equipment better suited for pediatric imaging, Strauss says. The challenge is that a manufacturer might not understand the pediatric application of an option because the option was developed for a different adult application.

“Standard equipment is capable of doing good work in pediatric imaging if it’s configured correctly,” he says. “If it’s not configured correctly for pediatric imaging, the image quality may be better than necessary, with an associated patient dose that is larger than needed.”

That’s why, when the FDA’s draft

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guidance document asks questions about the appropriateness of choosing one body region to categorize pediatric subgroups, Strauss reminds the FDA that children’s body parts increase in thickness at different rates as the children age. “Growth of the abdomen is linear with age, while the head is 90% of adult size by age five,” Strauss says.

Manufacturers should determine pediatric patient sizes ranging from 500 g to 120 kg, or premature neonate to adult, as outlined in the draft guidance document.

The recommendations also stipulate that “equipment features or settings that are expected to vary depending on patient size should be evaluated for acceptable outcomes,”1 and Strauss agrees. He adds that the FDA has solicited help in identifying sizedependent tests, including automatic brightness control, focal-spot size, filter thickness, tube current, and pulse width.

What is unclear from the draft guidance document, he says, is whether equipment users are free to ignore—without FDA approval—vendor-developed (and FDAapproved) pediatric protocols in favor of those developed at their own sites.

“What happens if someone like me does a research project, collects data, and shows that doing something in a different way is an improvement?” Strauss asks. Even when researchers publish their findings, he says, “There’s no guarantee that the vendor whose equipment you used is

going to pick up on that, spread that message, or take it to heart.”

A Universal Phantom The draft guidance document asks whether a large adult-sized phantom and a small pediatric-sized phantom would be sufficient to demonstrate coverage of the entire range of patient sizes. They would not, Strauss says, for step-function algorithms typically used in automatic exposure-control devices. The essential features of a universal attenuation phantom would be a cost-effective polymethyl methacrylate construction with a continuously adjustable thickness.

Anthropomorphic phantoms are an additional expense, he says, and are still not capable of demonstrating safe and effective use when image-processing changes are to be evaluated. Strauss says, “I can check the image-acquisition features of imaging equipment with tissue-equivalent phantoms; I cannot check the image-quality algorithms of the equipment with the same phantoms because they do not model the subtle characteristics of human tissue that influence image quality.”

He continues, “The draft guidance document recommended putting warning labels on the equipment; this was roundly discouraged by pretty much everybody.

The warning label would state that the equipment should not be used for patents of less than a specified age if the manufacturer

had not submitted performance data for patients below that age.”

Equipment sold off the shelf can do adequate imaging of children if configured properly, Strauss says. The issue is not that this equipment is incapable of doing good pediatric imaging, but it does not typically happen automatically. “You’ve got to know what you’re doing, and it’s best if you have the options that enhance pediatric imaging, which may or may not have been purchased with the unit,” he says.

Marilyn J. Goske, MD, is chair of the Alliance for Radiation Safety in Pediatric Imaging and is a professor of radiology and pediatrics at Cincinnati Children’s Hospital Medical Center. She also gave input to the FDA on behalf of Image Gently. She believes that a final guidance document that is too prescriptive could limit access to pediatric imaging, adversely affecting pediatric patients.

Matt Skoufalos is a contributing writer for Radiology Business Journal.

Reference 1. US FDA. Draft guidance for industry and Food and Drug Administration staff: pediatric information for x-ray imaging device premarket notifications. http://www.fda.gov/MedicalDevices/ DeviceRegulationandGuidance/ GuidanceDocuments/ucm300850. htm#1. Published May 10, 2012.

Accessed August 20, 2012.

numeric

Shapeshifting in the Era of Health-care Reform

E

ngage in scenario planning to prepare for the changes ahead, Frank Lexa, MD, MBA, says. Lexa identifies six incontrovertible challenges that drove the adoption of health-care reform (and another six issues that will bedevil radiologists, moving forward) in “Healthcare Reform and the Future of Radiology: Navigating the Change,” which he presented at the inaugural ACR® Radiology Leadership Institute™ in Evanston, Illinois, on July 14, 2012.

Lexa, vice chair and professor of radiology at the Drexel University

College of Medicine, names half a dozen issues that he knows cause concern among radiologists: reimbursement; the stability of the Medicare system; accountable-care organizations (ACOs) and other new forms of care delivery; tort reform; power, relative to hospitals and primary-care physicians; and autonomy and professionalism. He recommends, however, that they focus on things to which there are no alternatives, including the issues that drove reform. “Focus on the things that are really going to rock your world in the next few years,” he says.

Readers are well aware of the first

16 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

Frank Lexa, MD, MBA

challenge, health-care inflation; costs soared from 5.2% of the GDP in 1960 (five years before Medicare was established) to

Figure. Life expectancy (in years) of individuals born in 2006 (red) and 2008; adapted from the OECD.1

18.2% in 2012. If costs continue to rise in historical patterns, Social Security and Medicare will consume 89% of incometax revenues in 2080. “Somewhere around 2080 or so, we will have to turn the lights off in the Smithsonian in order to pay for the next MRI that comes through,” Lexa quips.

The second challenge also is well understood: demographics and the aging of the baby boomers, the generation now transitioning from being net payors into the US Treasury to net recipients.

“Very quickly, it is going to go down to two workers for every one person on the system, and that is going to create problems,” he says. “If it is any consolation, the United States is not the only country in the world with this problem.” The country with the population that is aging most rapidly, in fact, is China.

Challenge number three is fiscal pressure coming from multiple directions.

Differing from the US debt, the deficit, Lexa explains, is the annual accounting of income in versus payments out, projected at $1.3 trillion for 2012. At more than 10% of the GDP, the deficit is at a level reached just twice in the past 110 years: during World Wars I and II. The US debt is considerably larger than the deficit; it represents US borrowing to cover deficits, and it now stands at almost $16 trillion. As a percentage of the GDP, it is equivalent to the annual budget of the United States, prompting the need to raise the debt ceiling.

The bigger problem, from Lexa’s perspective—and from that of others facing retirement age—consists of

unfunded obligations for entitlement programs, estimated to be between $50 trillion and $100 trillion. “Is $100 trillion more than the value of the United States?” he asks. “The answer is not quite.”

Value is the fourth concern. Lexa shares OECD data that illustrate another well-known fact: Although the United States spends more than any other country on health care, it ranks 28th in life expectancy—just above Chile and below Slovenia (see figure).

Map of Greed Lexa benchmarks the United States against itself using relative Medicare spending levels in different zip codes, which he refers to as a map of greed, as well as a map of need. Variability is a red flag, Lexa notes, and is something to which CEOs pay a lot of attention.

When the ACR reviewed variability in imaging utilization among Medicare enrollees, it found that the US city with the highest utilization rate used 3.5 times as much imaging as the and the city with the lowest rate. Lexa asks, “Would that get your attention, if you were a policy wonk?”

The fifth challenge, he says, is social justice, including the need to extend coverage to 30 million uninsured patients.

He suggests that the fact that the United States is the only nation (among those even remotely similar to it) that does not offer some form of health insurance for its citizens qualifies this issue as a serious one. The sixth challenge (and final driver of health-care reform) is the need to shift power from specialty care to primary care.

No matter who ends up in the White House in 2013, Lexa says, the passage of a bill that initially did not have a lot of popular support has moved the needle on the US health-care compass. “Ever since the bill was passed, a substantial number of people—even if they don’t like the current law—don’t want to go back to a system where there is no safety net,” he notes, adding that this really has changed how US residents think about health care.

The challenges to which there are no alternatives leave us with three choices, when it comes to solving the health-care crisis: Pay physicians less, raise taxes, or find harsh ways of rationing care. “Prepare for this, and expect it,” Lexa says.

Lexa lists seven things to which leaders in radiology should pay close attention: comparative-effectiveness research, ACOs and their descendants, bundling and capitation, public opinion, fee-forservice reimbursement, Stark self-referral laws, and loss of radiologists’ autonomy.

“Things such as ACOs and comparativeeffectiveness research are here to stay,” he says. “Anyone who gets into the White House is going to look at mechanisms like these.”

He suggests that radiologists pay particular attention to ACOs, as they offer radiologists an opportunity to take leadership roles in medicine. “This may push many of you to consider a different way of being a radiologist, beyond being a good film interpreter and a good consultant,” he says, with radiologists becoming more involved in the structure of health care and of provider organizations.

—Cheryl Proval Reference 1. OECD, Social Policy Division, Directorate of Employment, Labour and Social Affairs. CO1.2: Life Expectancy at Birth. Paris: OECD; 2011.

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 17

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Imaging Market File

Measuring the Potential Impact of the Proposed 2013 MPFS Introduction: CMS released the proposed rule1 for the 2013 Medicare Physician Fee Schedule (MPFS) in July.

This issue of the Imaging Market File estimates the impact on revenue and margins/losses for 18 imaging-center sites clustered in Washington, Missouri, and Florida (which performed 112,000 procedures) of the 2013 conversion rate and a presumed 27% sustainable growth rate (SGR) reduction.

CMS proposes expanding the Multiple Procedure Payment Reduction (MPPR) to the technical component from 119 codes to an additional 530 codes, as well as to the professional component of same-day subsequent studies of one patient read by any member of the practice. The potential loss of revenue due to the expansion of the MPPR has not been factored into the scenarios depicted in Tables 1–3.

SGR adjustment: The SGR is a statutory adjustment that has been overridden by Congress in each of the past five years.

According to CMS, those reductions now are estimated at 27% and are scheduled to go into effect in the 2013 MPFS, unless Congress acts again to delay them. The reduction would be applied to the 2013 conversion factor, which affects both the technical and professional components of the MPFS. As demonstrated in Table 1, the reductions in the sample areas would be 29.62% to 30.12% if the CMS changes are adopted by all payors—a possibility for which there is ample precedent.

Conversion-factor changes: Several other proposed changes would affect reimbursement rates for 2013, resulting in a reduction of the 2012 conversion factor from $34.0376 to $24.7124. In order to fund reimbursement increases for family practice (7%), geriatrics

(4%), internal medicine (5%), and pediatrics (5%), reimbursement is being reduced for radiology, diagnostic-testing facilities, radiation oncology, and radiation-therapy centers, to create a budget-neutral impact.

CMS has released an estimate1 (Table 4) of the impact of the proposed changes. While CMS estimates a 4% cumulative impact of the conversion-rate reduction, our analysis of the sample data from 18 sites shows an impact of 4.47% to 5.25%, if all payors adopt the new conversion rate (Table 1).

In addition, the Geographic Practice Cost Index (GPCI) 1.0 floor is set to expire prior to the implementation of the 2013 MPFS, so the proposed physician-work GPCIs no longer will include the GPCI 1.0 floor; for many locations, this will mean adjustment down to the previous GPCI levels. As a result, those sites will experience further reductions in reimbursement.

Table 1. Potential Impact on Revenue

Current Impact

2012 revenue 2013 proposed 2013 proposed 2013 proposed 2013 proposed

baseline MPFS MPFS and SGR, MPFS, MPFS and SGR, Medicare only all payors all payors Washington professional Washington technical Washington global

$2,767,275 $12,188,838 $14,956,099

–0.03% –0.55% –0.45%

–3.22% –3.34% –3.32%

–0.23% –5.25% –4.29%

–27.08% –30.84% –30.12%

Missouri professional Missouri technical Missouri global

$190,168 $711,902 $902,070

–0.14% –1.03% –0.85%

–6.46% –7.08% –6.95%

–0.59% –4.47% –3.62%

–27.44% –30.27% –29.65%

Florida professional Florida technical Florida global

$1,527,904 $4,425,767 $5,953,671

–0.18% –1.12% –0.88%

–4.83% –7.09% –6.51%

–0.99% –5.03% –4.23%

–27.73% –30.68% –30.1%

Abbreviations: MPFS, Medicare Physician Fee Schedule; SGR, sustainable growth rate

Sponsored Supplement

Table 2. Potential Net Loss

Current Impact

2012 revenue Assumed 15% Revenue after Net collections Potential

baseline contribution proposed MPFS and reduction with net loss

margin SGR reductions, proposed MPFS

all payors and SGR,

all payors Washington global Missouri global Florida global

$14,956,099 $902,070 $5,953,671

$2,243,415 $135,310 $893,051

$10,452,029 $634,574 $4,161,890

$4,504,069 $267,496 $1,791,780

($2,260,654) ($132,185) ($898,730)

Abbreviations: MPFS, Medicare Physician Fee Schedule; SGR, sustainable growth rate

August/September 2012

Imaging Market File Unsustainable: Should the proposed 2013 MPFS be implemented and adopted by all payors, Table 2 shows the impact on margins in each operation (where operations produce an approximate 15% contribution margin today). If those practices made no changes in operating budgets, the reductions based on the proposed conversion factor and the potential 27% SGR reduction would result in significant losses. The scenario represented by Table 3 assumes that the SGR and conversion factor reductions will not be adopted by private payors. In this case, potential losses to the profit margin range from 22.1% to 46.4%.

Conclusion: The proposed changes will have negative short- and long-term impacts on the technical and professional components of reimbursement. Given the current climate of intolerance for health-care cost increases, there

is a possibility that following the November election, Congress will adopt the alternative solution to the SGR problem proposed by the Medicare Payment Advisory Commission.2 It includes a 5.9% reduction for each year of the next three years (applied to all specialties except primary care), followed by a sevenyear freeze on the conversion factor.

References 1. US DHHS. 42 CFR parts 410, 414, 415 et al: proposed rules. Fed Regist. http:// www.gpo.gov/fdsys/pkg/FR-2012-07-30/ html/2012-16814.htm. Published July 30, 2012. Accessed August 24, 2012.

2. MedPAC. Moving forward from the sustainable growth rate (SGR) system. http:// www.medpac.gov/documents/10142011_ medpac_sgr_letter.pdf. Published October 14, 2011. Accessed August 24, 2012.

Table 3. Potential Margin Loss

Current Impact

2012 revenue Assumed 15% Revenue after Net collections Potential Potential

baseline contribution proposed MPFS and reduction with contribution margin

margin SGR reductions, proposed MPFS margin loss Medicare only and SGR, Medicare only Washington global Missouri global Florida global

$14,956,099 $902,070 $5,953,671

$2,243,415 $135,310 $893,051

$14,459,272 $839,350 $5,566,013

$496,827 $62,720 $387,657

$1,746,588 $72,591 $505,393

22.1% 46.4% 43.4%

Abbreviations: MPFS, Medicare Physician Fee Schedule; SGR, sustainable growth rate

Table 4. CMS-estimated Impact of Proposed 2013 Medicare Physician Fee Schedule

Specialty Allowed Baseline Updated equipment Discharge

charges interest-rate transition-care

(millions) assumption management Radiology

Changes for Total radiation-therapy (cumulative procedures impact)

$4,724

–2%

–1%

–1%

0%

–4%

Interventional radiology

$202

–2%

0%

–1%

0%

–3%

Nuclear medicine

$48

–2%

–1%

–1%

0%

–4%

Radiation-therapy centers

$71

–4%

–5%

–2%

–8%

–19%

$1,982

–3%

–3%

–2%

–7%

–15%

Radiation oncology

Data and Research Provided by

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The Standard in Medical Imaging Intelligence

Regents Health Resources was formed in 1996 to assist hospitals and physicians in the development and management of their medical-imaging and oncology services. The consultancy has served more than 500 clients nationwide with a diverse range of services, from strategic planning and operational assessments to joint-venture planning, valuations, and imaging-center sales and acquisitions. www.NationalImagingNetwork.com www.RegentsHealth.com © Regents Health Resources

priors

numeric

88 New ACOs

P

hysician groups figure prominently among 88 new accountablecare organizations (ACOs) added to the Medicare Shared Savings Program’s participants on July 1, 2012. With the latest announcement from CMS,1 154 organizations are now participating in the initiative, covering more than 2.4 million beneficiaries.

According to CMS, almost half of the participants are physician-driven organizations serving fewer than 10,000 beneficiaries.

Participating organizations will be required to meet standards for 33 quality measures related to care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and patient and caregiver experiences of care.

The newly announced ACOs run the gamut of size and geographic

diversity (with the larger states being particularly well represented). Of the new participants, 10 are based in Florida and six are in California. They range in size from the 29-physician Accountable Healthcare Alliance, PC (East Lansing, Michigan), composed of networks of individual ACO practices that will serve Medicare beneficiaries in Michigan, to the 2,249-physician Mount Sinai Care, LLC (New York, New York), formed of networks of individual ACO practices and hospitals employing ACO professionals (which will serve Medicare beneficiaries in New York).

The application period for organizations that wish to participate in the Shared Savings Program beginning in January 2013 was intended to be open from August 1 through September 6, 2012. CMS, however, is no longer accepting applications for the 2013

program year, suggesting that the program is attracting greater interest than anticipated. More information (including application requirements) is available at http://www.cms.gov/ Medicare/Medicare-Fee-for-ServiceP a y m e n t / s h a r e d s a v i n g s p ro g r a m / Application.html.

Reference 1. CMS Office of Public Affairs. HHS announces 88 new accountable care organizations. http://www.cms.gov/apps/ media/press/release.asp?Counter=4404 &intNumPerPage=10&checkDate=&ch eckKey=&srchType=1&numDays=3500 &srchOpt=0&srchData=&keywordTyp e=All&chkNewsType=1%2C+2%2C+3 %2C+4%2C+5&intPage=&showAll=& pYear=&year=&desc=&cboOrder=date.

Published July 9, 2012. Accessed August 23, 2012.

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COver | Payor Demands

What Payors Want From Radiology The demands seem endless, but taking a proactive role in the payor–provider relationship can put radiology in the cockpit By Greg Thompson

W

hat, exactly, do patients, employers, and insurers want from radiology? All too frequently, the answer is more expertise, at a lower price.

This familiar tug of war between payors and providers continues to reverberate throughout the health-care community.

While a resolution is not likely soon, more understanding among all parties can help smooth the road ahead.

In the case of insurance companies and physicians, the relationship has rarely been harmonious, largely due to different notions of what constitutes quality. When AmeriHealth NJ and Radcon signed a three-year contract in July 2012, their leaders attempted to address this conflict, right from the start.

The agreement includes a quality initiative to improve patient care by making health care more patient centered, reliable, accessible, and safe. Robert M. Glassberg, MD, president of Radcon, is determined to make these noble goals a reality.

As a regional imaging entity operating through a network of 263 radiologists in 46 imaging centers (representing 19 practices, in 11 counties, across Southern and Central New Jersey), Radcon has a lot of moving parts. Glassberg also serves as president of one of the member practices in this network, Atlantic Medical Imaging, LLC (Galloway, New Jersey).

This 40-radiologist group operates nine full-service outpatient imaging centers and serves two hospital campuses.

Under specific terms of the agreement, Radcon and AmeriHealth NJ will agree on a set of quality, service, and/or value measurements, establish baselines for each, and then engage in continuous quality improvement. The network and payor will share the data with each other to support the common goals of improved

Preload: Preview v Payors want better quality, and they want it at a lower cost. Improving quality in health care is seen as one avenue to better outcomes and potential cost reductions, but payors and providers have yet to agree on quality measurement for radiology.

v Business does not believe that it is getting value for its money and wants to see better management of all health-care services, including radiology; the largest US pension plan has signaled its willingness to bypass insurers and contract directly with providers.

v Not everyone is waiting for consensus: One radiology network has entered into an agreement with an insurer to develop quality and performance measurements for improved accountability over a threeyear period.

v Appropriateness criteria are one tool in the radiology kit, and the ACRÂŽ intends to leverage its leadership by licensing the criteria to electronic health record (EHR) vendors. Payors have tools as well, and one is steering patients to lower-cost providers, but critics say that quality suffers.

22 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

quality of care, customer service, and cost effectiveness.

Paul Portsmore, vice president of health services for AmeriHealth NJ, says, “As reimbursement gradually moves toward being based on outcomes and performance, it’s essential for payors and providers to work together to ensure access to the highest standard of care, which is what our members deserve.”

Glassberg is determined to fill that tall order, and he has vowed that the transition from quality assessment to quality initiative will be in full swing after three years. “Step one is for us to make sure the providers and the payor are on exactly the same page, with regard to what should be tracked to make sure we’re defining things such as value and cost effectiveness the same way,” he says.

“We have a pretty good idea of some of the measurements we’ll use, but we don’t have a comprehensive list yet.”

Sacrificing Quality These days, insurers might not get everything that they want from radiology groups, but where do they draw the line? “The answer is determined by subscribers—specifically, by the point at which insurance companies have trouble selling their plans, either directly to employers or to individual patients,” Glassberg says. “At some price point, payors will not be able to sell their plans if their networks do not include providers of a certain level of quality.

They can’t simply sacrifice quality. They do recognize that below a certain price point—if it comes with a sacrifice in quality—it is bad business.”

When it comes to trust, it appears that payors are increasingly willing to place faith in radiology benefit management (RBM) companies. The RBM position continues to gain traction with some commercial payors, and not everyone is wholly opposed to the trend.

For his part, Glassberg can see why insurers want to continue down the RBM road. “Payors feel that putting utilization management back in the hands of imaging providers is too much like letting the fox guard the henhouse,” he says. “That doesn’t mean that they won’t ever do it, but they are jaded by

Step one is for us to make sure the providers and the payor are on exactly the same page, with regard to what should be tracked to make sure we’re defining things such as value and cost effectiveness the same way.

—Robert M. Glassberg, MD

Employers want radiologists to have strong principles and adhere to guidelines for appropriateness. They want to be certain there is not excessive use.

—Helen Darling National Business Group on Health

the history of utilization management in the pre-RBM days.”

Glassberg believes, he adds, “that radiology, as a profession, should include the responsibility of utilization management.” The RBM middlemen, however, will not go away quietly.

“We opened that door by not doing utilization management properly, but the RBM industry does provide some value for us, too,” Glassberg says. “For example, RBMs are currently helping to steer imaging from higher-priced hospitals to lower-cost freestanding outpatient centers, where quality and service are often better. From the standpoint of our private outpatient practice, I guess it’s sort of a love–hate relationship. We have some common interests with the RBMs, and we have other areas where we’re competitors or adversaries.”

No Excessive Use Like insurers, employers are deeply concerned about overutilization of radiology services. Unnecessary imaging studies lead to higher premiums, which affect employee benefits and companies’ bottom lines.

Helen Darling, president and CEO of the National Business Group on Health (NBGH), helps large employers find benefits for their employees and families. As a nonprofit membership organization, NGBH seeks topnotch care at reasonable rates.

Neither is any small feat in today’s health-care world, but Darling believes that identifying and sticking to objective standards of appropriateness could solve many problems. “We have complete faith in the ACR guidelines,” she says. “We should provide coverage relative to the guidelines: no more, no less.”

Problems arise, she says, when physicians fail to refer appropriately, based on those guidelines. “If everybody follows the evidence-based guidelines, we don’t have to sacrifice anything,” Darling says. “If we get it right, we won’t be drowning in health-care costs.”

Ultimately, Darling’s employer members are not hesitant to pay premiums for excellence, but they need to know that radiologists and referring physicians have an appreciation for the costs involved. “Employers want radiologists to have strong principles and adhere to guidelines for appropriateness,” Darling reiterates. “They want to be certain there is not excessive use.”

If insurance companies can’t keep down costs, large pension funds might bypass them and contract directly with health-care providers. One entity considering such a move is the California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the United States (with assets totaling $233 billion).

Bill Madison, information officer for health care in the CalPERS Office

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 23

COver | Payor Demands

of Public Affairs, says, “At this point in the process, we can’t say whether we are going to contract directly with radiologists or radiology centers, or include those services via contracting directly with hospital, medical, or physician organizations that have existing radiological-service arrangements.”

Follow the Money When the Center for Medicare and Medicaid Innovation (CMMI) awarded $8.4 million to the Altarum Institute, CMMI was looking for ways to limit unnecessary medical imaging in Southeastern Michigan. Altarum Institute

is a nonprofit health-systems research/ consulting organization.

In partnership with the network of United Physicians (Bingham Farms, Michigan) and the Detroit Medical Center PHO, Altarum Institute is trying to find ways to drive wider adoption of ACR appropriateness criteria and to promote better patient education on when a study might be unnecessary. Educating referring physicians to recognize when a patient’s history might be sufficient to preclude additional imaging studies is another priority.

If all goes well, the three-year project will embed clinical guidelines in the

image-ordering process, leverage health information exchange (HIE) capabilities to increase awareness of past imaging results, and use patient-education campaigns to offset patient-induced demand for medically unnecessary imaging. Dan Armijo, vice president, information and technology strategies, Altarum Institute, says that the federal dollars signal a concerted effort to determine the best form of utilization management. Essentially, government wants more effective utilization management from the radiology industry, and it is willing to spend money to find the best way to get there.

Quality: The ACR Perspective

G

eraldine McGinty, MD, MBA, chair of the ACR® Commission on Economics, explores the difference between ACR and payor positions on quality.

RBJ: Do employers, insurers, and patients agree with the radiology specialty, when it comes to the definition of quality?

McGinty: There are some basic quality measures that we, at the ACR, consider to be a bottom line and an absolute requisite, such as ACR accreditation. There are enhancements—such as participation in the various quality measures, the Physician Quality Reporting System measurement set, and things like dose registries—that we consider to be additional measures of quality.

Payors vary in the degree to which they recognize any additional measures.

ACR accreditation is a fairly widespread concept that many payors have recognized and acknowledged. In many cases, our perception is that cost is more important than quality to them. The payors would probably tell you otherwise.

There are programs where patients are offered rebates to choose a cheaper facility, without really being told that it is not the facility that their physicians requested they go to; this suggests that there is more of an emphasis on reducing the cost of the service, as opposed to respecting the relationships the referring physicians might have with the imaging providers they chose.

I wrote an article1 for the ACR Bulletin on this topic. Anthem in New Hampshire has a program called Smart Shopper.

There are other Geraldine McGinty, programs where MD, MBA there are rebates to patients for choosing a cheaper facility.

Believe me, we are certainly committed to patients getting the best value, but patients aren’t necessarily getting all the information they need about the fact that this might not be the imaging facility that their referring physician felt was the most appropriate.

If I work with a clinician, and we’ve developed a relationship, there is an ability to communicate. There is an understanding.

I get comfortable with the level of concern that the physician has, and he or she gets comfortable with my readings.

Clinicians also are comfortable with calling me to ask, “Is this the right test?” rather than ordering a test that might not be the most appropriate. That’s what we see lacking when patients are steered solely based on cost, and that’s when the insurance companies don’t value what we do.

RBJ: How much are payors willing to sacrifice for lower prices?

McGinty: It is difficult to speak about payors as a homogenous group. When we see programs where patients are steered to other providers after their referring

24 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

physicians have recommended an imaging facility, we have to wonder whether the value of that consultative relationship is something that the payors also value. I would have to assume they are willing to sacrifice that relationship.

RBJ: What is the consequence of such a sacrifice?

McGinty: The sacrifice is potentially not getting the right image the first time. If you send patients for a follow-up study, and they go to a different facility, it’s possible that the second facility may not have, or may not get, the prior imaging, and so the reading might not be as accurate. It’s not that they are not doing a good job; it’s just that they would not have the history and the prior exams to compare.

Obviously, if (as a payor) you are just sending a patient to a cheaper facility, you might be prepared to sacrifice that quality.

I would very much hesitate to include every payor in that scenario, however.

RBJ: Whom do payors trust?

McGinty: The ACR has been a leader in the development of appropriateness criteria. That process has been a significant collaborative effort of radiologists, radiology benefit management (RBM) companies, and other specialties—because obviously, some of our tests are performed by other specialists as well. We believe the appropriateness criteria are the very best way to manage appropriate utilization.

According to Armijo, the idea is to do advanced clinical decision support in the context of a whole community, using ACR guidelines to support evidence-based decision making and increased provider awareness of past imaging studies.

What if decision support turns out to be ineffective? “Whatever we find, we find,” he says, “but we feel this is going to be part of the answer.”

This summer, the ACR announced that it had entered into an exclusive agreement with a Massachusetts startup to provide a technical platform, support, and licensing of the appropriateness criteria under the name ACR Select,

Many payors use RBMs. It’s our position and our belief that the potential savings offered by those RBMs are not real savings.

They just transfer costs onto referring providers, who then must spend a lot of time getting authorizations. They make care difficult for patients.

Of the tests that they deny, the large majority meet their own medical-necessity criteria, so we believe that having physicians consult with physicians about appropriate testing is the best way to make sure patients get the right tests.

RBJ: Payors want a lot from radiologists, and it seems that they want it for less and less. Is there a fundamental disconnect between what payors will pay and what radiologists believe that they are worth?

McGinty: There are business decisions that payors make about what they are prepared to pay for care. I think radiologists are an extremely valuable and integral part of the delivery of high-quality and highvalue care.

We are the very best medical professionals to help referring physicians and patients navigate through the very complex array of tests out there. We know, better than anybody, which test fits which clinical scenario, and we are a very valuable part of the care team.

RBJ: Do nonradiologist physicians feel the same way?

McGinty: When physicians are asked

what the key medical innovations over the past decades are, CT and MRI are way at the top. Radiology, imaging, and radiologists have contributed a huge amount to the health-care field, and utilization has flattened. Further cuts would seem absolutely unfair and unwarranted.

Utilization is back to the levels where it was in the early 2000s. I think radiologists provide a very high-value service in the delivery of integrated care. These are lifesaving tests. These are tests that can keep people out of the hospital. These tests can pick up cancer while it’s still extremely treatable and curable.

RBJ: Where do payors want reimbursement levels to be in the future— and where do you think they will be?

McGinty: Certainly, radiology and radiologists have been hit with successive cuts, from the DRA to the various Multiple Procedure Payment Reductions (MPPRs).

Most recently, we have seen the really egregious professional-component MPPR of 25% when two physicians read studies on the same patient on the same day.

We are continuing to fight back on that because it’s a flawed policy. The recent proposed application of it across group practices is even more specious. We certainly think radiology has been unfairly targeted, in the recent past, as being a significant contributor to the growth in health-care costs.

The administration and CMS have made

it very clear that they want to improve reimbursement for primary-care physicians, and this is a way to take funds away from one specialty and give them to another. Their rationale for the 25% MPPR is that there are efficiencies when the same physician provides two services, and that there are efficiencies when different physicians in the same group provide two services.

We published a paper2 last summer demonstrating that those efficiencies—if, indeed, they exist at all—are negligible. If I were a patient, I would want both of my studies to be read at 100% by the physicians, not by one at 25% less. When two separate physicians provide separate services, it is really hard for me to understand how they can rationalize the MPPR. —G. Thompson References 1. McGinty G. Cost is not everything.

ACR Bulletin. http://www.nxtbook.com/ nxtbooks/acr/acrbulletin_201206/index. php?startid=23. Published June 2012.

Accessed August 17, 2012.

2. Allen B, Donovan WD, McGinty G, et al. Professional component payment reductions for diagnostic imaging examinations when more than one service is rendered by the same provider in the same session: an analysis of relevant payment policy. J Am Coll Radiol. http://amclc.acr. org/LinkClick.aspx?fileticket=9tQqA4TLwd 8%3D&tabid=62. Published 2011. Accessed August 17, 2012.

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 25

COver | Payor Demands

We are talking about giving ordering physicians the tools to increase some aspects of utilization and decrease others. It’s not about reducing the total number of images, but using the diagnostic tools in the most effective manner possible.

—Dan Armijo Altarum Institute

which will be marketed to EHR companies and other vendors of health information systems in an integrationready form.

The idea behind the ACR’s appropriateness criteria and decision support is to provide information to clinicians at the point of care, making it easier for them to make the right decisions. Armed with proper criteria and information, referrers can be clearer about the clinical value of an exam and can have a better discussion with patients about rewards and risks.

Whether It Works The ACR and the Medical Imaging & Technology Alliance recommend the use of evidence-based decision support—along with patient education, dose management, and accreditation— to advance appropriate utilization. It all sounds perfectly reasonable, but the CMMI investment is an attempt to find out whether the practice matches the theory.

“The mere fact that CMS funded our effort, in partnership with the ACR, might be a hint that it agrees,” Armijo says. “It wants to evaluate the impact of decision support in the community setting to promote the use of guidelines developed by the radiology community about appropriateness.”

Armijo continues, “We are talking about giving ordering physicians the tools to increase some aspects of utilization and decrease others. It’s not about reducing the total number of images, but using the diagnostic tools in the most effective manner possible.”

Another part of Armijo’s mission is to increase providers’ awareness of past

imaging studies using HIE mechanisms.

In combination with a robust IT infrastructure and EHR adoption, this will allow ordering physicians to gain a greater awareness of prior studies and avoid duplication.

Decision support might also loosen the grip of RBMs, which are approving or rejecting imaging requests based partly on appropriateness criteria, but also on insurer-specific criteria. “Along with the ACR, we put forward to CMS that we could investigate this matter on a large scale—3,000 physicians and more than a million patients in Southeastern Michigan,” Armijo explains.

He continues, “Let’s implement decision support and provide some targeted guidance at the point of ordering.

When someone who is not a physician is trying to influence decisions and saying you can’t order a test, let’s see if we can demonstrate that decision support reflects the appropriateness of imaging studies.”

At its most basic level, government scrutiny stems from 2005, when significant growth in advanced imaging studies for Medicare enrollees was observed. CMS wants to pay less in all areas, including radiology. Like other medical specialties, radiology must invest time and resources in justifying its cost.

Fortunately, an objective and focused justification might ultimately work wonders and prevent further cuts. “Just because there is growth in imaging does not mean it is inappropriate imaging,” Armijo says. “Technology changes, equipment becomes modernized, and there are new approaches to diagnosis.”

Greg Thompson is a contributing writer for Radiology Business Journal.

26 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

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FINANCE | Strategic Growth

Financing Growth in a Changing Imaging Environment Imaging providers with an interest in growth are encountering fair weather in the credit markets

P

ractices, imaging centers, and hospital radiology departments continue to keep an eye on expanding their service lines and market reach. In part, this expansion is an effort to counteract the negative effects of declining reimbursements while meeting demands to provide better care. Mergers and acquisitions, as well as the procurement of equipment, are the catalysts for such growth—and players are looking at myriad ways to finance their endeavors.

By Julie Ritzer Ross

Preload: Preview v Hospitals, radiology practices, and imaging-center companies with good balance sheets and the potential to grow are discovering that it is a good time to raise capital. v Banks are loosening their purse strings when it comes to financing growth for

28 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

imaging companies. For-profit hospitals willing to take the bond route reap the tax benefits; tax considerations also should be factored into technology-financing choices. v As always, cash on hand is the cheapest way to finance growth—if an entity is willing to tie up those resources.

Joseph White, MBA, is a principal with CliftonLarsonAllen, an accounting and financial advisory company with operations in 13 states. He says that hospitals currently enjoy a tremendous ability to raise capital, assuming that their cash on hand and profit margins are good. In addition to bank debt, for-profit institutions have the option of tapping into the bond market or issuing stock.

Interest paid by hospitals on bonds issued to procure capital is contingent upon the bond rating assigned them by Moody’s Investors Service and Standard & Poor’s.

For example, White reports, hospitals with the best (AA) rating can now finance projects via 30-year bonds at the extremely low interest rate of about 4%.

For hospitals with poor ratings, interest rates can approach the 8% mark.

White adds that one key advantage of issuing bonds (rather than stock) is that the interest on bonds is tax deductible.

Dividends on stock do not qualify for such deductions. It’s just as significant that while stockholders are given ownership status in the institution and benefit from it financially, bondholders do not have such status—meaning a lesser degree of control for them.

Moreover, White says, just as banks have relaxed their criteria on the mortgage side of lending, they are viewing hospitals’ loan requests more favorably.

He explains, “They aren’t retaining capital as much as they were before and have built up reserves. It’s not as easy as it once was to secure a bank loan, but it’s easier now than it was a year ago or six months ago. This is a positive thing.”

[Banks] aren’t retaining capital as much as they were before and have built up reserves. It’s not as easy as it once was to secure a bank loan, but it’s easier than it was a year ago or six month ago. This is a positive thing.

—Joseph White, MBA CliftonLarsonAllen

He notes that in determining whether to grant financing to imaging centers with partial hospital ownership, to their independently owned counterparts, or to radiology practices, banks carefully evaluate the entity’s market dominance, whether it is exhibiting any growth or has viable growth potential, and the solidity of its management. Current compensation levels are also assessed.

“With radiology groups, the issue of high physician compensation comes into play; banks like to see that there is flexibility to reduce compensation so as to make the debt payments,” White says. “Smaller groups may be asked for personal guarantees by their partners.”

The Private-equity Path Mark Stolper, executive vice president and CFO of RadNet, Inc, corroborates White’s comments on bank financing for imaging centers and radiology groups, observing that local banks with which operators already have relationships are becoming amenable to granting financing.

“I would venture to say, though, that floating stock—while fine for hospitals— is not an option for 99.99% of imaging-

center chains,” he says, despite some having probably contemplated it briefly.

He adds, “To go public, you need north of $100 million in annual sales.”

RadNet has 237 owned or operated freestanding imaging centers, including 23 joint ventures. It has typically executed acquisitions using $25 million to $40 million in cash flow per year, but it also has a revolving credit line totaling $121 million. “We are somewhat unusual in that we have such a substantial credit line, but because it is a less expensive way to go in the long run, we always look to cash reserves first when making an acquisition,” Stolper says.

For its part, CDI has successfully accessed bank debt multiple times to meet financing needs, according to Robert Baumgartner, CEO of the newly merged company. The imagingcenter chain recently followed another approach, however, harnessing privateequity capital in its merger with Insight Imaging.

As a result of the merger, the combined company maintains a footprint of 116 fixed imaging centers (in 25 states) and 90 mobile MRI and PET/CT units. CDI

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 29

FINANCE | Strategic Growth

We are somewhat unusual in that we have such a substantial credit line, but because it is a less expensive way to go in the long run, we always look to cash reserves first when making an acquisition.

—Mark Stolper RadNet, Inc

Our intent, in working with private equity for the merger with Insight Imaging, was to access liquidity for the previous majority owner—which is a big benefit.

—Robert Baumgartner CDI

30 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

partnered with Black Diamond Capital Management, LLC, an alternative assetmanagement company with more than $11 billion in assets under management across four investment platforms, including private-equity funds. Black Diamond (through funds that it manages that collectively own a majority interest in Insight Imaging) led an investment in Insight Imaging that bought out the owners of CDI. Private-equity capital is unlike traditional venture capital in that the latter is traditionally a financing option for startup or early-stage companies. In a private-equity scenario, investor groups and funds make investments directly into companies that have significant operating history. Capital for private equity is raised from retail and institutional investors.

“Our intent, in working with private equity for the merger with Insight Imaging, was to provide liquidity for the previous majority owner—which is a big benefit,” Baumgartner says. In his experience, private-equity capital is easier to obtain when there is a solid five- to 10year earnings history.

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FINANCE | Strategic Growth

The deal with angel investors is that they not only want to relate to or understand what they are investing in—meaning that a wealthy patient may make a good investor for a radiology group—but they like to put their money into local entities.

—Jennifer DePalma O’Melveny & Myers LLP

Baumgartner concedes that prior to taking the private-equity route with Black Diamond, CDI considered going in two other directions—allying itself with a strategic investor or taking the organization public. A strategic investor can be an entity or an individual (CDI considered an entity).

Unlike a financial investor, a strategic investor not only takes ownership, but the strategic investor also typically becomes involved in the operation of the business.

Involvement might include day-to-day operation of the imaging center/practice, or it could entail higher-level decision

making about its direction, service lines, and the like.

CDI did not see a logical match with a strategic investor, Baumgartner says, noting that candidates lacked a cultural fit, managerial synergy, and agreement about business strategies (such as future growth and geographic markets). “With Black Diamond there is strong alignment in these key areas,” Baumgartner adds.

Going public, he adds, was determined to be a poor idea (in part, because it would have meant making significant additional expenditures). Another strike against such a move was that similar radiology

32 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

entities currently were not being valued at strong multiples in the stock market.

Angels and Other Avenues On a smaller scale, some radiology players might want to consider courting angel investors—wealthy individuals or groups acting as a source of financing.

This is especially true for smaller imaging centers, chains, and practices.

Jennifer DePalma is a partner in O’Melveny & Myers LLP, a law firm with practice areas that include health care.

She says that the practice now is working with a physician group that has found an angel investor willing to provide partial funding for a potential acquisition.

“The deal with angel investors is that they not only want to relate to or understand what they are investing in— meaning that a wealthy patient may make a good investor for a radiology group— but they like to put their money into local entities,” DePalma says. “More than that, they crave involvement: They want to sit on the board and make their opinions known.”

Another smaller-scale alternative— usually (but not always) an adjunct to a bank loan—is requesting a capital infusion from radiologists within the practice. White deems this a somewhat difficult proposition, as few physicians are accustomed to investing in their own organizations, and many will not (or cannot) put up as much money as outsiders might. He says, however, that the radiologists’ returns on investment can be great: 5% on a five-year debt and 6% on a six-year debt.

Still, identifying viable sources of capital for mergers, acquisitions, and other growth initiatives represents only half the battle. Several issues merit investigation before proceeding with the application process. It is critical to ascertain that the lender being considered understands imaging services.

Stolper says, “If the bank (or other type of lender or investor) is familiar with at least the basics of imaging—and possibly, where the specialty is headed— all the better. Any entity that isn’t will set up more barriers.”

Financing Technology For technology acquisitions, hospitals, imaging centers, and practices can arrange bank loans; these, however, traditionally require a down payment of 15% of the total price of the equipment, involve high initial out-of-pocket costs, and tie up valuable working capital that might be better earmarked for other purposes.

Other options exist, including signing lease agreements with (or securing financing from) one of many equipmentfinancing companies. Such organizations are generally bank affiliated, and they work with several different equipment and software vendors.

Stephen J. Jasiukiewicz is vice president of sales at Key Equipment Finance, a company that offers equipment leasing and financing to clients in a variety of industries. He says, “From a pure money standpoint, both choices afford distinct advantages over bank loans. Since a lease frequently does not call for a down payment, it can be equivalent to 100% financing.”

He continues, “Imaging providers can take the capital they would have used as a

Imaging providers can take the capital they would have used as a down payment and reinvest it somewhere else in the business.

—Stephen J. Jasiukiewicz Key Equipment Finance

down payment and reinvest it somewhere else in the business. In addition, it’s possible to forecast the cash requirements for equipment accurately because the amount and number of required lease payments is preset—and with leases, there are no floating fees.”

Each option also presents its own set of benefits and drawbacks. Lease payments, Jasiukiewicz notes, are a minimum of 10% lower than payments made on financing agreements, with the difference varying by equipment type. The more long-lived the equipment is (and the less likely it is to become obsolete), the higher its residual value—and the smaller the payment will be. Jasiukiewicz cites ultrasound and MRI equipment as examples that fall into the category of extended life, high residual value, and small payments.

The IRS considers certain leases, including imaging-equipment leases, to be tax-deductible expenses, rather than purchases. Monthly payments, therefore, may be deducted from overall income, reducing the net cost of leasing.

Flexibility, too, comes into play here.

Should an imaging provider’s needs change during the term of the lease, other types of equipment can be added, and/or upgrades to existing modalities can be executed. At the end of the term, lessees may renew the lease or return the equipment, but they can also purchase it at fair market value.

Moreover, leasing simplifies asset management. The leasing company, rather than the lessee, assumes and manages the risk of technology ownership, including the cost of any necessary repairs. If the equipment is returned at the end of the lease, responsibility for its disposal lies with the company alone.

On the other hand, imaging providers

that finance their equipment acquisitions own the assets outright at the conclusion of the financing contract. They can also deduct equipment depreciation from their organizations’ incomes.

For small organizations, two shortterm tax breaks favor prompt equipment acquisition. The section 179 IRS deduction permits small businesses to deduct the cost of equipment in the year of acquisition (instead of depreciating it). For 2011, the maximum up-front deduction was $500,000; for this year, it will be reduced to $125,000. By 2013, it is expected to total only $25,000.

A second break, bonus depreciation, allows exceptions to the standard depreciation formula and rules. Under the bonus-depreciation umbrella, small businesses are permitted equipmentexpense deductions that exceed the amount allowed under section 179. In 2011, the deduction was 100% of these expenses; for 2012, it will phase out at 50%.

Jasiukiewicz notes that while the decision of whether to follow the leasing or financing route can involve subjective elements, Key Equipment Finance typically advocates leasing if the equipment in question could quickly depreciate.

This limits the risk of being stuck with technology that is obsolete (or close to it).

“Hospitals tend to lease for this reason, and so do imaging centers and practices that compete on the basis of having cuttingedge technology,” he observes.

Clearly, hospitals, imaging centers, and radiology practices will need to address financing avenues repeatedly as the industry itself changes. Those that remain open to multiple options stand the best chance of success.

Julie Ritzer Ross is a contributing writer for Radiology Business Journal.

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 33

Top 20 Imaging-center Chains | Third Annual Report

2012’s Top 20 Imaging-center Chains: Third Annual Report Numbers of imaging-center sites, patient visits, and annual procedures all show growth since last year’s report

By Cheryl Proval

D

espite serious reimbursement pressure, the imaging-center market appears to be on the move again, adding 131 sites as of the first quarter of 2012. While this year’s expansion does not approach the tremendous growth rates of the period between 2000 and 2008, when the market more than doubled (from 3,068 centers to 6,431), it does return the sector to slightly more than the size it was in 2008 (6,514 centers), before it contracted.1 Readers might wonder why the total number of sites in this year’s report is 691 more than last year’s total, instead of the 131 reported (Table 1). Due to a discovery by our data source of 560 diagnostic imaging centers that had not been counted before, it turns out that the market is 560 centers larger than previously thought. We are reporting the total size of the market at 7,074 sites, which includes the 560 previously unreported imaging-center sites, as well as the 131 new sites.

For the purpose of assessing growth, we have excluded the new centers from the total count, but have noted the new total market size parenthetically in Table 1. We were, however, unable to carve out the newly discovered centers from the other tables in this report. Therefore, all centers added this year are considered new centers, for the purpose of analysis.

Why, in this era of extreme reimbursement pressure, do we see any growth at all? Anecdotally, we hear that hospitals receive multiple requests annually from imaging-center owners interested in selling their sites. One trend that could be behind the growth is that of payors pushing imaging into lowercost outpatient sites, causing hospitals

34 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

and networks to expand their footprints in the outpatient setting. Another is the consolidation of centers in the hands of sharply run imaging-center chains that have the operational expertise necessary to survive on increasingly small margins.

Our data set, including the newly discovered centers, shows just one more imaging-center chain than last year (Table 2). Whether in anticipation of an estimated 31 million new patients (who could become insured under the Patient Protection and Affordable Care Act) or simply by following care into the lower-cost outpatient arena, those chains appear to have added 144 centers in the year ending March 31, 2012.

This is the third annual report on the imaging-center market produced by Radiology Business Journal and its data partner IMS Health, which recently acquired SDI (formerly Verispan). IMS (and SDI, in the case of the previous two reports) provided the data on which this report is based, as well as the comparison information that the company collected and analyzed in earlier years.2 The scope of this report is freestanding imaging centers only; imaging centers on hospital grounds are not included in the counts.

In 2012, the top 20 imaging-center chains (Table 3) experienced their own miniboom, totaling 114 more than 2011’s top 20 for an aggregate of 1,048 centers held by the country’s largest imagingcenter chains. RadNet maintained its number-one position, adding 32 centers (and another 12 since the end of the first quarter of 2012), for a total of 220. HCA maintained the number-two position, with a total of 100 centers (six more than last year). The total of the number-three chain, Novant Health, declined by one, to 80 centers, while its wholly owned

Table 1. Chain Affiliation

Year

Total centers Chains’ centers Affiliated sites Single sites

2003

5,163 2,499 48% 52%

2004

5,450 3,281 60% 40%

2005

5,753 3,818 66% 34%

2006

5,969 4,478 75% 25%

2007

6,241 4,572 73% 27%

2008

6,455 4,700 73% 27%

2009

6,150 4,383 71% 29%

2010

6,311 4,433 70% 30%

2011

6,383 4,533 71% 29%

2012

6,514 (7,074)

4,677

subsidiary, Medquest Associates, bulked up by 13 centers, for a total of 78.

SimonMed Imaging leapfrogged three chains, by acquiring 21 centers, to occupy the fifth spot, with a total of 56 centers (displacing CDI). Owned by a physicianbased practice, SimonMed bills itself as the largest and most advanced medicalimaging provider in the Southwest, with 10 3T MRI systems and comprehensive breast-imaging services. Since forging a partnership with Catholic Healthcare West (now Dignity Health) in 2009, SimonMed has expanded its footprint outside the Phoenix, Arizona, area (where it began) into California, Florida, and Nebraska.

Had the imaging-center count been taken today, however, CDI—through its merger with the ninth-largest imagingcenter chain, Insight Imaging—would easily have claimed the number-two spot.

Black Diamond Capital Management, which owns a controlling interest in Insight Imaging, facilitated the merger by leading an investment in Insight Imaging

Table 2. Chain Growth

66%

34%

Year Chains Centers 2003

351 2,499

2004

506 3,281

2005

687 3,818

2006

995 4,478

2007

1,011 4,572

2008

1,030 4,700

2009

953 4,383

2010

945 4,433

2011

902 4,533

2012

903 4,677

that will make possible the buyout of CDI’s owner, Onex Corp.

The top 20 welcomed three chains into the ranking this year: Dignity Health, which has 40 hospitals in California, Nevada, and Arizona, entered the top 20 at number 10, with 50 imaging centers.

Dignity Health has moved aggressively

into the outpatient arena through partnerships with SimonMed and with United Surgical Partners International, as well as through its recent acquisition of U.S. HealthWorks, which operates 172 occupational-health and urgent-care facilities in the United States.

Outpatient Imaging Affiliates, long

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 35

Top 20 Imaging-center Chains | Third Annual Report

a significant player in the outpatient market through joint ventures with academic medical centers, also entered the ranking this year, with 22 centers.

Another chain with highly engineered operations, Shields Health Care Group, also showed up on the list, with 22 centers at the end of the first quarter of 2012; the company now states that it has 30 centers (including four radiationoncology centers) and 15 joint ventures with hospitals.

The number of imaging-center chains (owners of two or more centers) grew significantly in the first several years of the past decade and then leveled off in 2007,

reaching its peak (1,030) in 2008. Since then, the number of chains has declined, and this year remained flat: 903 chains (up from 902 in 2011), which added 144 centers, in the latest count As noted in last year’s report,3 imaging centers owned by chains continue to be concentrated in fewer hands, and the trend was particularly evident among the largest integrated health networks (IHNs), defined by IMS Health as entities that align health-care facilities in order to deliver integrated health-care services to payors (by improving quality and reducing costs in a defined geographical area). The 10 IHNs with the greatest number of imaging-center

relationships (not necessarily owned, managed, or leased) account for 26.2% of imaging-center relationships with these larger entities (Table 4). The top 10 IHNs increased their number of relationships with outpatient imaging centers from 418 last year to 473.

Membership in this elite club remained fairly stable, with a bit of musical chairs among the IHNs on the list for three years running. Bulking up by 15 new centers, HCA, with 100 centers, assumed the top spot this year. It displaced last year’s number-one IHN, Novant Health (80 centers). Ascension Health held its number-three position, adding eight new

Table 3. Top 20 Chains

Chain Headquarters Centers, Centers, Centers, Change

2010 2011 2012 2011–2012 RadNet

Los Angeles, CA

198

188

220

+32

HCA

Nashville, TN

89

85

100

+15

Novant Health

81

80

–1

MedQuest Associates

Winston-Salem, NC 93 Alpharetta, GA

65

78

+13

SimonMed Imaging

Phoenix, AZ

23

35

56

+21

Tenet Health System

Dallas, TX

55

49

55

+6

CDI

Minneapolis, MN

35

52

53

+1

Dignity Health

San Francisco, CA

–

–

50

–

Insight Imaging

Lake Forest, CA

54

50

48

–2

Doshi Diagnostic Imaging Services

Hicksville, NY

38

35

36

+1

Cleveland Clinic Health System

Independence, OH

31

30

35

+5

Community Health Systems

Franklin, TN

34

32

34

+2

Ascension Health

St Louis, MO

45

34

31

–3

Tri State Imaging Consultants

Rockledge, PA

34

29

28

–1

Catholic Health Initiatives

Englewood, CO

30

29

27

–2

A1 Medical Imaging Diagnostic Centers

Sarasota, FL

24

25

25

0

ProScan Imaging World Headquarters

Cincinnati, OH

23

23

25

+2

Outpatient Imaging Affiliates

Nashville, TN

–

–

23

–

South Texas Radiology Group/Imaging Centers

San Antonio, TX

24

24

22

–2

Shields Health Care

Quincy, MA

–

–

22

–

924

934

1,048

Cumulative total of top 20 chains

36 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

Business Intelligence Series: Radia FOuRTH PROFIlE In A SERIES OF SIx

The Data-driven Approach to Patientcentered Imaging Radia leverages business intelligence to improve service continuously to providers and patients Radia Inc, a physician-owned, 85-radiologist practice based in Everett, Washington, prides itself on providing high levels of service to patients across its service network of 19 hospitals and 16 clinics across the state.

The practice’s motto is “patient-centered imaging,” and over time, that focus on optimizing care has led to significant technology investments, says Richard W. Satre, MD, CEO. “We believe in closely collaborating with hospitals and clinics to expand the range and quality of imaging procedures offered,” Satre says. “We have invested significant resources in technology. Our physicians, in combination with our technology, allow us to offer our partners customized radiology solutions designed to meet the specific needs of their organizations.”

“Our physicians, in combination with our technology, allow us to offer our partners customized radiology solutions designed to meet the specific needs of their organizations.”

— Richard W. Satre, MD, CEO of Radia

Two years ago, practice leadership noticed that one area of operations needed improvement to provide optimal service and care to client organizations and their patients.

Zotec Partners. The total solution.

“Our legacy billing platform was not positioning us well for current revenue optimization, or the significant change we saw coming down the pike,” recalls Ward Hinger, chief administrative officer of Radia. “We recognized that our legacy system was antiquated, and would require a significant investment of time and money to upgrade.

“We were also aware that the change to coding with ICD-10 nomenclature was in the near future, and did not want to deal with that implementation on top of the change in billing systems,” Hinger adds.

Positioning for Change Radia took both regulatory changes and changes in its local market into consideration in searching for a new billing solution, says Satre. “Our market, like many, is undergoing rapid change,” he observes. “Former fierce competitors are now in one system. This is changing our relationship with them, although it’s too early to tell whether this is for the better. In addition, many of our hospitals are changing their IT infrastructures, challenging our ability to get information into and out of the different hospitals and clinics.”

After considering three billing providers, the leadership team at Radia selected Zotec Partners and began the transition to the new billing system in the first quarter

PROFIlE of 2011. “The decision to outsource revenue cycle management can make leadership a tad uneasy given the impact on cash flow and revenue, as well as the overall brand of an organization, if such a transition doesn’t go well,” Satre notes. “It was only after significant research and due diligence that our board of directors made that decision, and I am delighted to say that both the ramp-up and sustainment of our new partnership have exceeded expectations.”

Hinger notes that one factor that strongly influenced the decision was Zotec’s control and customization over its electronic billing software and accompanying interfaces.

“We are witnessing rapid changes to our customers’ electronic billing interfaces, so having a revenue cycle management partner who has designed, developed and actually controls its billing software is critical in order to respond to environmental changes in a timely manner,” he says. “We have acquired new service sites, and have current service sites that have changed billing systems. Our ability to begin or maintain collections has been truly impressive.”

Efficiencies and Intelligence Achieving efficiencies in the billing cycle was only the first step, however. As Hinger explains, “One year later, I am pleased to report that the efficiencies, including cost avoidance, that we projected are being realized. In addition, we are doing a much better job in fully capturing charges so that the appropriate credit is

both routine and ad hoc metrics from Zotec’s system daily,” Hinger says. “In addition to the monthly and quarterly reports used in development of our financials, we consistently pull data to evaluate books of business as well as to explore new opportunities.”

“We leverage both routine and ad hoc metrics from Zotec’s system daily. In addition to the monthly and quarterly reports used in development of our financials, we consistently pull data to evaluate books of business as well as to explore new opportunities.” — Ward Hinger, CAO of Radia Zotec has assigned the practice a director of client services who collaborates with Hinger and Radia’s revenue cycle manager and director of finance on operational and performance issues. “If there is something we want to measure or analyze for the first time, Zotec’s seasoned staff members are always willing to assist us in developing a framework to ensure the data we are pulling is clean and accurate,” Hinger says.

This leads to efficiencies downstream in charge capture and enables improved payor relationships, he notes.

“We are able to monitor billing files closely to detect variances that should have been paid, which facilitates a positive and proactive stance with our payor partners,” Hinger says. “Even slight payment variances are quickly recognized, which allows for timely reconciliation and mitigates impact on revenue. The business intelligence through Zotec is recognized by our payor partners as being accurate, which facilitates timely resolution.”

“It was only after significant research and due diligence that our board of directors made that decision, and I am delighted to say that both the ramp-up and sustainment of our new partnership have exceeded expectations.” — Richard W. Satre, MD

Service to Providers and Patients

received for all of the work our physicians do.” next, Radia began to focus on the business intelligence Zotec provides through its reporting tools. “We leverage

Radia has always strived to provide optimum patient care, which, Hinger notes, is a goal that includes ensuring the availability of necessary imaging exams and providing these exams and their results in a timely and cost-effective

Zotec Partners. The total solution.

Sample demonstration data only

manner. “We listen to our referrers and our hospital partners’ leadership, and we work with them and their staffs constantly to evaluate how we can improve,” he says.

Today, business intelligence plays a strong role in meeting this goal. “We frequently review referral patterns by physicians and physician groups, demographic shifts in the patients we serve, payor mix, volume by modality, RVus by modality and site, and so on,” says Satre. “Such data is frequently shared with our hospital partners to serve our patients better.”

Referring physician data gleaned from the Zotec system is also used to develop surveys, which Radia administers to referring physicians on behalf of its hospital clients.

“The data comes from Zotec, and we use it to design questionnaires that provide statistically significant information and benchmarks,” Hinger explains. “We can measure from there to see whether we are improving or digressing with regard to the services we provide to referring physicians and their patients.”

So far, Hinger says, Radia has offered the surveys to two of its hospital sites, and the practice is preparing to roll them out to all of its hospital partners soon. “They find that service very valuable,” he notes.

Additionally, Satre says, partnering with Zotec has enabled Radia to provide strong service to patients

following their diagnostic studies. “I think it is safe to say that no one likes to pay bills,” he says. “When they do, however, we want our patients to interface with a billing system that is intuitive and user-friendly for them. Zotec understands the importance of making what may be the last interaction between the patient and Radia as pleasant as possible, and has demonstrated its commitment to employing best practices in this area.”

Looking Forward As the practice’s relationship with Zotec continues, Hinger looks forward to developing further initiatives aimed at improving provider and patient service using business intelligence. “From the time a patient or referring physician calls to getting the finalized report back to him or her, we closely monitor every step of the process to evaluate how we can assist both the physician and the patient by providing optimal diagnostic support at the right place, time and cost level,” he says. “That is something we are all engaged in, and it’s a continuous effort.”

Additionally, business intelligence is leveraged by the practice to plan strategically for the future. “Our leadership meets annually to review our 12- and 24-month strategies,”

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Satre says. “Our board of directors frequently leverages business intelligence to determine whether our strategy, goals and key initiatives are materially moving our organization in the direction and at the speed needed to maintain relevancy to our customers.”

Business intelligence comes into play when planning workflow distribution across the practice’s network, Hinger says. “As the geographic area we serve continues to grow, having timely data on these sites allows us to develop and maintain the right footprint,” he explains. “We know what level and type of specialty support we should put on-site versus in our network. Identifying and maintaining the right mix and FTE strength allow us to optimize our subspecialty support and turnaround time.

The practice also uses business intelligence to support radiologist recruitment, Satre says. “Monitoring work RVus by physician and specialty helps us proactively maintain the appropriate bandwidth for our specialties,” he notes. “That is a key strategy in our physician recruitment activities.”

Radia is again on track to perform over a million

interpretations in 2012, making it a record-breaking year for the practice, Hinger says. As its growth continues, he anticipates continuing to leverage business intelligence in new ways both to strengthen its mission of providing patient-centered imaging and to prepare for the future.

“Our legacy system would not have served us well in this age of rapid transition, given the time lag it would have needed to address the frequent changes in our hospitals and clinics, as well as their EHRs,” he says. “Zotec establishes, refines and monitors the electronic interfaces with our facilities to obtain data from hospital systems required in the billing process.” That attention translates into strong, up-to-date business intelligence for the practice, Hinger concludes: “I can confidently say that the business intelligence metrics available through Zotec have taken Radia from fair in data analytics to very good.”

11460 N. Meridian St. Carmel, IN 46032

317.705.5050 sales@zotecpartners.com zotecpartners.com

Table 4. Integrated Health Networks’ Centers

Integrated health network (IHN) Headquarters Centers Share of 1,808 IHN relationships HCA

Nashville, TN

100

5.5%

Novant Health

Winston-Salem, NC

80

4.4%

Ascension Health

St Louis, MO

57

3.2%

Dignity Health

San Francisco, OH

50

2.8%

Cleveland Clinic Health System

Independence, OH

45

2.5%

Catholic Health Initiatives

Englewood, CO

36

2%

Community Health Systems

Franklin, TN

36

2%

ProMedica Health System

Toledo, OH

23

1.3%

Providence Health and Services

Renton, WA

23

1.3%

Trinity Health

Novi, MI

23

1.3%

Total

473 26.2%

centers. Dignity Health stormed onto the scene with 50 imaging centers, and Providence Health and Services also made a first-time appearance on the list.

Overall, the number of imaging centers increased from 6,383 in 2011 to 6,514 (7,078) in 2012, increasing the percentage of single-site operations to 34% of all sites, up from 29% the year before. At the same time, affiliated centers dropped to 66% (down from 71% the year before), a level not seen since 2005 (Table 1).

Considering the increasingly difficult reimbursement and regulatory environment, we can only speculate about the thinking behind these new single-site operations. Are the owners radiology practices with the imaging expertise and ability to meet increasingly strict accreditation requirements? Are they multispecialty (or other physician) practices that can provide a steady stream of referrals? Are they entrepreneurs thinking that a potential 31 million newly insured health-care customers make the imaging business an opportunity again, despite declining reimbursement?

Working with the expanded database of imaging-center sites, every region appears to have added capacity (see figure, page 42). The Great Lakes, Pacific,

and Southeast regions are 100 centers or more larger since the last count.

Nearly all regions showed an increase in the number of visits per center; New England and the North Central region were the exceptions. The visitor counts, however, were from 2010 (not 2012), so the impact of the increased number of sites on 2012’s average patient visits per site will not be known until 2014, when the 2012 patient-visit counts will be completed.

Imaging centers in the Rocky Mountain region continued to have the highest average annual visitor counts (17,646), followed by the Mid-Atlantic (17,096), Southeast (16,645), and Pacific (16,394) regions. Centers in the Great Lakes region registered the lowest average annual patient visits, at 11,904.

Imaging centers in all regions except one experienced increased visitor counts, compared with last year’s report.3 Centers in the Rocky Mountain region added 1,124 to their average annual patient visits, for a total of 17,646, giving that region the highest average number of annual visits. Annual visit counts in New England, however, dropped by 517 (to 13,024), perhaps as a result of increased utilization management due to healthcare reform in Massachusetts.

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 41

Top 20 Imaging-center Chains | Third Annual Report

Rocky Mountain 460 145 63

13

13

33

59

98

716 189

15

26

208 34 273

82

395 339

139

81

128

28 130

530

60

56

2

MidAtlantic 1,212

12 141

50 129 287 60 9 169

182

123

96

48 50 108

585

21

14

95

36 31

Great Lakes 1,019

11

12 Pacific 961

New England 353

North Central 373

Southeast 1,507

193

97 646

22

Southwest Central 812

South Central 362

Puerto Rico 14 Virgin Islands 1

Total 7,074

Figure. US imaging centers (by state and region), 2011.

Just as every region added capacity, compared with last year,3 nearly every state did the same, with the exception of Montana, the District of Columbia, and South Dakota, each down one center (see figure).

Some states added significant capacity; they include California (97 centers), Texas (59), Illinois (45), and Pennsylvania (35). Massachusetts, considering that its population is one-fourth that of Texas, also should be included among the states with significant growth, with 22 new centers. Florida, also a populous state with a large Medicare population, added just 24 centers, for a total of 646, retaining its status as the state with the second-greatest number of freestanding diagnostic-imaging centers.

With this year’s data from IMS Health arrived the procedure counts for 2010, which leapt to 298—38 more procedures per week than the average for the prior year. Looking back at 2010, the year that we reported1 that the market had shrunk to 6,033 imaging centers (from 6,150 the year before), it appears that weekly

procedure counts benefited from the reduced capacity.

This year’s increase in the number of imaging-center sites raises a number of questions. As the sector resumes growth, albeit modest growth, how will the increase in the number of centers affect the annual procedure and visitor counts per site— figures that have increased in all of the past three reports (reflecting 2008, 2009, and 2010)? Because these counts lag behind the present by two years, our data will not provide the answer until 2014.

Downward pressure on reimbursement has made it difficult for many singlesite operators to survive, fueling a consolidation trend in recent years. The market grew by 131 new imaging centers this year, and IMS reports that about half, or 66, are sole proprietors, prompting this question: Will they find the operations expertise needed to survive until the expansion of the health-care market in 2014?

Cheryl Proval is the editor of Radiology Business Journal.

42 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

References 1. Kyes K. The top 20 imaging-center chains. Radiology Business Journal.

2010;3(4):30-35.

2. SDI 2008 Diagnostic Imaging Center Market Report. Yardley, PA: IMS; 2008.

3. Proval C. The top 20 imaging-center chains of 2011. Radiology Business Journal. 2011;4(4):40-47.

About Our Partner IMS Health is a health-care–analytics organization that was founded in 1982. Its clients include pharmaceutical/biopharmaceutical manufacturers, medical- and surgical-device manufacturers, financial institutions, and the federal government, among other health-care organizations; www.imshealth.com.

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Accountability | Imaging and the IHN

RBMA Spring Summit Roundtable: Imaging and the IHN

Industry experts imagine radiology’s future role in the integrated health network

O

By Kris Kyes and Thanh Le

n May 22, “Imaging and Accountability: Imaging’s Role in the Integrated Health Network” was presented at the RBMA 2012 Radiology Summit in Orlando, Florida. This discussion has been excerpted from the statements of that panel, which was composed of a practicepresident radiologist, a hospital president, an imaging-chain executive, and an industry analyst.

Chad Calendine, MD, a diagnostic radiologist, is president of Advanced Diagnostic Imaging, LLC (Goodletsville, Tennessee).

Josh Gray is managing director of the Financial Leadership Council of The Advisory Board Co, specializing in strategic finance, performance improvement, and imaging-performance partnerships.

Curtis Kauffman-Pickelle (facilitator) is publisher of Radiology Business Journal.

Robert LaDouceur is vice president of operations in business development for CDI, one of the oldest and largest chains of freestanding imaging centers.

He is responsible for sales, operations, profit, and new-center development in Missouri, Kansas, and Florida.

Marion McGowan, RN, is president of Lancaster General Hospital in Pennsylvania (a 525-bed regional and referral hospital); president of Women & Babies Hospital, Lancaster (a 98-bed specialty hospital); and vice president of Lancaster General Health, a regional notfor-profit health system.

Cheryl Proval (moderator) is editor of Radiology Business Journal.

44 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

Proval: Many people in health care agree that coordination of care is a necessary step in achieving the triple aim of reducing cost, improving quality, and widening access. In your market, what kinds of conversations are you having about alignment with health-care systems, payors, and physician practices?

McGowan: Generally, we’re trying to understand what the heck’s going to happen.

There’s a question about how we might be able to work together to be as successful as we’ve been in the past—specifically, how we move from a production orientation to that of better alignment to help us reduce fragmentation, improve coordination, and succeed economically.

We’re talking about how we change the model to support population health and value-based purchasing. How do we change the incentives? How do we change the team roles and systems of support?

For the independent physicians, there’s a deeper and more challenging discussion. How do we handle clinical arrangements so that they can stay independent as long as they like, yet find a way to work together so that we can be more successful?

We have a strategy based on priorities and on coordinating care in a way we haven’t been able to do in the past. One powerful strategy involves incentive pay associated with outcomes; other arrangements in certain specialty areas include bundled payment.

I think it’s unwise for radiology groups to continue to look for subsidies and medical directors’ fees. You’re inviting hospitals to look at you as a cost center.

—Chad Calendine, MD Advanced Diagnostic Imaging, LLC 106FOTO/RBMA

Kauffman-Pickelle: In 2011, we assembled the CEOs of five radiology benefit management companies and had a spirited discussion to kick off this series.

It was followed, later that year, by the assembly of the executives and an architect of decision-support systems to talk about utilization management. Now, for our third RBMA panel, we have a radiologist representing a new practice, an analyst, an operations person who is running imaging centers, and the president of a hospital. Together, they will give us a very interesting and diverse perspective on the issues affecting radiology’s future in the integrated health network (IHN).

Calendine: We are a 30-person private radiology group for a number of reasons—one being to remain relatively independent—but I understand the need for alignment. Several years ago, we started looking for an opportunity to align. We had built and grown three imaging centers in Nashville, Tennessee.

We subsequently acquired four additional imaging centers. We had significant market share in outpatient imaging and were competing with some of the hospitals, and we realized that would not be a long-term solution for us.

We were approached by the health system with the largest market share in our area. It wanted to enter into a joint venture with our existing centers; it contributed two centers, one in the suburbs and one in Nashville.

It also contributed its outpatient volume and the name of its Nashville hospital. After two years of discussion (and large legal fees), we put together a joint venture for our outpatient imaging and all of its outpatient imaging. It has been in place for a year.

I think the health system took a great and bold step, moving its outpatient imaging from a higher-cost, less-efficient, provider-based model to an outpatient model. It knew that it was going to get some decrease in reimbursement on the existing volume, but at the same time, it was buying into a large volume that it really didn’t have access to otherwise.

We’re increasingly integrated with the

hospitals and health system. We’ve been successful. The other health system in the area has kept outpatient imaging on its campuses (at a higher cost) and is not providing much in the way of significant competition for outpatient imaging; we’re continuing to see our market share grow.

LaDouceur: I represent a for-profit corporation that develops new imaging centers and is involved (very heavily) in acquisitions. There seems to be a new model out there, with for-profit companies and hospitals coming together for partnerships. It presents an opportunity for two aggressive competitors to form an alliance in a structure whereby increased access for patients can be achieved in places where people live and work, but hospitals are not always present.

Once you form these alliances, pricing for imaging can present challenges because payors are steering patients away from higher-priced hospital outpatient facilities right now. Should hospitals and partnerships accept lower outpatient pricing, betting that more volume will come to those centers?

A hospital might take the risk, by decreasing its prices 20%, but not pick up the volume to compensate. It’s a strategy that can work, but it has to be examined very carefully.

Gray: We’re hearing about a lot of struggle with the growth of accountable care, which is much faster than I would

www.imagingbiz.com | August/September 2012 | Radiology Business Journal 45

106FOTO/RBMA

Accountability | Imaging and the IHN

have predicted. The greatest risk for imaging is the shared-savings contract, which rewards providers for decreasing the overall cost of care. There are dozens of those taking shape around the country; in a year, there could be 200.

We’re in a low-growth environment.

What was thought of as a recessionoriented decline in volumes began in 2008 and 2009, but we’re not really seeing imaging volumes increase. We have been used to seeing high single-digit or low double-digit growth; I think those years are gone.

Proval: We’re seeing providers attempt to align through acquisition. How prevalent is this in radiology? Is there an interest in acquiring radiology practices?

Gray: I think not: Health systems have invested very heavily in acquiring physician practices—not just in primary care, but in high-revenue specialties as well. The typical sequence of events is that the health system makes the acquisition and then needs to subsidize the practice, often to the tune of a low six figures per physician.

I don’t think that is sustainable. Health systems are going to deplete their cash reserves, and they’re going to think twice about acquiring radiology practices.

Calendine: I think you have to find a way to align with a health system, whatever options there are in your market. As with all things in life, you only negotiate from a position of strength. You’re not going

Some of our partners can provide actuarial services and populationhealth economic modeling; this is giving us amazing insight. We’re seeing more clearly where our opportunities are to improve care.

—Marion McGowan, RN Lancaster General Health

to get there with your hand out, so I think it’s unwise for radiology groups to continue to look for subsidies and medical directors’ fees. You’re inviting hospitals to look at you as a cost center.

You’re setting yourself up for a short-term win but a long-term failure.

Proval: Are you taking steps to build accountability?

McGowan: Yes, and they aren’t just foundational steps. We’re trying to be just in time as things change, particularly on the contracting side. We’re working on cost management. We passed the pricepoint question, and now we’re beginning to ask how we’re going to become more valuable.

We’re looking at the infrastructure for taking on more value-based purchasing, which includes the electronic health record and all the analytics necessary to support us, as well as some serious changes in episode-based care and a new business model for primary care. We’re also looking at partnerships. The big question, for health systems, is how big you have to be to bear risk.

We’re looking at other partners and providers at the payor level so that we can keep all options open, in terms of scale. Some of our partners can provide actuarial services and population-health economic modeling; this is giving us amazing insight. We’re seeing more clearly where our opportunities are to improve care.

Our radiology team has started

46 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

a diagnostics group looking at ways to evolve its role from a production orientation to decision support. This is where radiologists can make a major contribution. Seeing and adapting to that role will be invaluable.

Proval: How do you compete, as an imaging-center chain, in a market where it seems that payors and health systems are in the driver’s seat? Is consolidation resulting in unhealthy market forces?

LaDouceur: When you have the predominant market share, that obviously gives you leverage. The difficulty is that payors can agree to a good pricing structure, but then steer patients away from your facility to one that offers a cheaper price, but a lower quality of service.

Proval: Many health-policy experts believe that fee-for-service reimbursement promotes the overuse of medical services. Are you (or any of your payors) proposing gain-sharing arrangements in your market?

Gray: There’s a ton of gain sharing. The challenge for radiologists is that it’s not a given that they will play a major role in lowering the cost of care. We’re still in the early stages; it’s certainly not impossible.

There are a good number of progressive radiology groups around the country that can take the initiative to get a seat at the table for discussions of accountable care.

McGowan: At least in our case, radiologists are not going to benefit from gain sharing. Over time, if radiologists demonstrate the value of managing unnecessary testing and making sure that imaging is done well, there could be a participant role for the radiologist.

Proval: Do you have the tools needed to project and manage utilization so that you can become part of gain-sharing arrangements confidently?

McGowan: Absolutely not: I don’t think anybody does. We’ve been trying to align ourselves with others on the top rung of getting ready for accountable-care

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Accountability | Imaging and the IHN

organizations and bearing risks. What we can see is that there are things we can do right now. Those should help fund us, in terms of capitalizing the infrastructure for bearing risk. What we also recognize is that we’re going to need partners—and in our local marketplace, we definitely need a payor for a partner.

Proval: Payors and employers are using incentives (such as smaller copayments) to steer patients to lower-cost providers.

There are clearly winners and losers; are payors considering quality when they build preferred-provider networks, or is price the only consideration?

LaDouceur: Payors assign a quality grade based on equipment, upgrades, hours of operation, radiologist subspecialization, and other criteria, but it’s not as difficult as it may appear to be qualified as a provider. This levels the playing field, in the eyes of the payor. Although comparisons should be about patient care, quality of equipment, and quality of radiologists, often, price is the real criterion.

Imaging is becoming a commodity, and we can’t let that happen. We have to take the message directly to the consumer and the payor: There’s a difference in quality. Quality will win, in the end, but there’s a price that we’re going to pay. It’s a battle, but I think it’s one we can win with the quality message.

Gray: There is a movement toward price transparency in the market. There

On the health-system level, executives realize that in the past, the industry has seen pendulum swings and cost pressures.

That’s over. There’s no backswing on the pendulum anymore.

—Josh Gray The Advisory Board Co

are some companies where the entire business model is based on providing employers and their employees with more transparent pricing information.

When you add the fact that a large proportion of the insured are now on high-deductible health plans (where they’re responsible for the first $3,000 to $8,000 spent), you’ll see a lot of individuals making the choice to go to lower out-of-pocket situations.

Proval: On the inpatient side, are specific cost-containment benchmarks being set at the executive level or are practices being hit, across the board, with costcontainment goals?

Gray: On the health-system level, executives realize that in the past, the industry has seen pendulum swings and cost pressures. That’s over: There’s no backswing on the pendulum anymore.

Cost pressure is going to be more or less permanent.

In my finance work, I’ve noticed some significant changes. There’s more top-down benchmark setting and more holding operational managers accountable for costs. It’s taking a while for this to reach imaging, but I think you’ll get it.

McGowan: Value is not only cost management, but making sure utilization is appropriate. We’re really pushing appropriateness and getting value from the imaging side, not just the cost side.

48 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

Proval: What do IHNs want from radiology?

Gray: One factor is appropriateness.

There is a long-term role for decision support. You can think about overuse, to be sure, but also misuse and underuse.

There are hundreds of thousands of imaging referrals that are never used.

There are probably some modalities that are underused.

To say that decision support reduces utilization is missing the point. I don’t think we want to eliminate utilization; we want the correct mix, timing, and high impact of imaging services. With time, there will be more information on which scans should happen when and on how to prevent more costly downstream episodes.

You’re not going to win if your unit cost is lower. This is not a viable longterm strategy. Adding costs—as long as you can demonstrate a very high quality of practice—is fine. There’s a hunger to work with radiologists who understand that it’s not a volume-driven operation anymore. Just communicating commitment to mapping out disease states and understanding where the critical junctures are will probably go a long way, in many cases.

Proval: What role can radiology play in reducing health-care costs?

McGowan: Technology continues to offer us new opportunities to improve turnaround time for certain imaging procedures. The other roles are in appropriate utilization and in getting involved with organizations profiling patient experiences, at least at the episode-of-care level.

The misuse, overuse, and underuse of imaging can be unbelievable. There’s a lot of opportunity to manage that inappropriate use. Work to engage yourself not only with providers and physicians, but with health systems. Be part of decision support and analytics at critical points where you can influence appropriateness protocols or retrospective reviews.

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Accountability | Imaging and the IHN

Those two strategies deflected the price definition and created a quality definition that we can control.

—Robert LaDouceur CDI

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magic is in decision support, taking an active leadership role, and looking at the episode of care, if not the population experience.

in the past 10 years). Radiologists are consulted more routinely on managing patients, so we are taking on a more active role.

Proval: What part might radiology have in managing population health?

Proval: In your market, how is quality in radiology being defined?

Calendine: We’re still going to be largely a referral-based specialty where, to some extent, this is somewhat out of our control, but we need to be involved in decision support. At times, we have failed to emphasize some of the prior wins (such as replacing more invasive procedures) and the costs we have already saved.

There hasn’t been a physician trained in the past 15 or 20 years who hasn’t largely been dependent on radiology findings to manage patients, so we do need to be involved in decision support and involved more clinically (although our clinical involvement has increased

LaDouceur: We sat down with our hospital partner and our radiologists and had a strategic-planning session to identify what we do well. What is our niche? In our market, we identify women’s imaging as something we do exceptionally well.

We also got the radiologists to create a sense of their own identity for quality messaging, in terms of identifying their own subspecialties, their broad coverage, their backgrounds, and their areas of expertise. Those two strategies deflected the price definition and created a quality definition that we can control.

50 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

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Proval: What is the ideal role of radiology in the IHN? McGowan: It’s working with other specialists to help promote earlier diagnosis, more appropriate use of imaging, and good decision support.

LaDouceur: Radiology is the first element of diagnosis, in many cases. Radiologists are here to stay; we’ve got some battles to fight, but we’ve got to support ourselves.

We must get ourselves out there and say that we are key in the IHN and the continuum of care—and what that means to patients, throughout their lives.

to develop relationships that will offset the dismissal of radiology’s relevance.

I have heard, from clinical colleagues in other specialties, that when we talk about gain sharing, radiology is certainly irrelevant to the process, whether on the risk side or the gain side. Why are we irrelevant? Maybe we weren’t in the room at the right time, maybe we didn’t have that right relationship, or maybe we have not really told our story and tooted our horn about radiology’s value proposition.

I am encouraged by the fact that there is a lot of underutilization out there. We’ve got quite a story to tell, especially in the areas of utilization and participation in IHNs, as well as in outreach and in branding ourselves—delivering that message so that our relationships are truly developed along lines of mutual understanding.

Kris Kyes is technical editor of Radiology Business Journal. Thanh Le is editorial coordinator of the journal.

Gray: The role of radiology is to take a balanced and somewhat frugal approach to high-quality diagnostics. Collaborate with the health system and other clinical partners to manage not just the imaging component, but the total cost of care.

Over the next decade, try to configure the knowledge base—because we know so little about how imaging fits into the continuum. There’s a major role to play, not just in academic settings, but for community providers committed to analyzing the process and establishing which excellent practice patterns should apply.

Calendine: Look carefully at your local market. It’s going to be different for everybody, but try to align with one of the leading health systems there. Find your place at the table, because you’re not going to have a place if you don’t. We’ve been fortunate in that respect, but we don’t take this for granted.

We continue to work actively to be a good partner. To some extent, you have to change the radiology culture (which is not appealing to hospital administrators).

We need to have more collaborative arrangements with health systems.

Kauffman-Pickelle: This has been a fascinating discussion, emblematic of the cultural transformation that we all face.

Wherever you sit in the process, I think it’s undeniable that moving from this isolated, production-orientated mentality to one where you’re really involved in the IHN speaks volumes about the mandate www.imagingbiz.com | August/September 2012 | Radiology Business Journal 51

FinalREAD

The Hospital As a Business Increasingly, successful hospital enterprises will resemble Fortune 500 companies

By Curtis Kauffman-Pickelle

T

he rhetoric has been pretty hot as the presidential candidates face off in the final sprint to the finish line. Much of the discussion concerns the Patient Protection and Affordable Care Act, but no small amount of attention has also been paid to a debate about the respective roles of business and government, beyond health care, in the broader economy.

It is a somewhat timeless debate, and one that is full of philosophical disagreements that go to the core of our republic and the vision of its founders. Which of our institutions is better able to navigate the uncharted waters that are the result of a stressed-out global economy? Are they mutually exclusive, or are they inextricably tied in a unique way that is emblematic of our nation’s exceptionalism?

Indeed, one of the most fascinating reads, this summer, has been a book by historian Arthur Herman,1 Freedom’s Forge: How American Business Produced Victory in World War II. It is a gripping account of the crucial role played by US business and industrial leaders in winning World War II through their innovation, dedication, and ability to transform and ramp up the country’s manufacturing capabilities to supply the military. It was a nearly impossible task, and business leaders made it happen—a perfect alliance between the military establishment and the entrepreneurial ethos that has been unique to the United States.

What are the implications of this for today’s hospitals? Are they businesses subject to the ebb and flow of traditional market-based economic principles and models? Can hospitals learn, from entrepreneurs, the best ways to position themselves for success in a chaotic and changing environment that requires the ability to move quickly, act decisively, and take risks? Do hospitals rely on customers and their loyalties to sustain their revenues? Do hospitals create value for

their stakeholders? Do hospitals function within a competitive landscape subject to their ability to differentiate themselves?

Is a sophisticated system of analytics and information not the most crucial element of modern health care?

This sounds suspiciously like a business, and my guess is that today’s health-care executives are trying to learn everything they can from the best and brightest in the business world—so that they can succeed in a model that will look increasingly like a Fortune 500 enterprise.

If you are among those health-care executives who still find business somehow less than attractive as a construct, you are most likely to find yourself at the wrong end of the negotiating table when it comes time to align with the entity that embraced, early on, the principles, strategies, and tactics of today’s most successful businesses.

I had lunch recently with the CEO of a rather large hospital that is part of a significant health system, and I was intrigued by his choice of words and descriptions as he reviewed the challenges facing the institution. He talked of the need to package the products and services offered by the hospital in ways that will clearly articulate their value to its various customers.

The organization has been successful, but is being tested in ways that its leaders might not have imagined only a few short years ago. Physician relations are much

48 Radiology Business Journal | August/September 2012 | www.imagingbiz.com

more complex; competitive pressures are much more acute; and sophisticated branding, messaging, and broad-based marketing are much more essential.

These are the tools of business. Make no mistake: They will be the most important elements in the hospital’s survival strategy.

Of course, clinical quality and patient care are the foundations of the enterprise; that goes without saying. In an era, though, when many hospitals can claim top levels of quality, technological parity, and impressive outcomes, the key differentiators just might be customer service and the ability to create a platinum-level patient experience.

The message for the hospital’s future success is clear. If you are among those health-care executives who still find business somehow less than attractive as a construct, you are most likely to find yourself at the wrong end of the negotiating table when it comes time to align with the entity that embraced, early on, the principles, strategies, and tactics of today’s most successful businesses.

Hospitals have always reached out to local business and industrial leaders for their development boards and trusteeships.

Health-care CEOs have historically understood that they need business support. What they face now, however, is different. They are increasingly trying to migrate their own models toward those more reflective of contemporary business practices, and they are doing so in increasing numbers (and at a record pace).

Memo to hospital CEOs: Team up with a businessperson, or maybe even supplement your MHA with an MBA. This is the way to embrace the future.

Curtis Kauffman-Pickelle is publisher of imagingBiz.com and Radiology Business Journal, and is a 25-year veteran of the medical-imaging industry.

Reference 1. Herman A. Freedom’s Forge: How American Business Produced Victory in World War II. New York, NY: Random House; 2012.

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