Volume 6, Issue 10 , Pages 681-693, October 2009
ACR White Paper: Task Force to Evaluate the Value Add Impact on Business Models
Article Outline
- Abstract
- Introduction
- Definitions of Value and the Scope of the Task Force's Work
- Types of Models Evaluated and Considerations
- Enhancing the Value of Radiologists and Decommoditization: Core Value Opportunities That Are Broadly Available in New Business Models
- Nontraditional Business Models and Revenue Streams, Part 1
- Maximizing Practice Income: Alternative Revenue Streams, Part 2
- An Overview of Business Models Applicable to Small or Rural Radiology Practices
- Recommendations
- References
- Copyright
Radiology practices are seeing both evolutionary and revolutionary changes in their business models. The Task Force to Evaluate the Value Add Impact on Business Models was charged with considering how radiologists and their practices add value in these novel settings. Both traditional and novel forms of added value were considered. Types of new business models that were evaluated included hybrid groups of radiologists and other practitioners, regional or national megagroups, and novel services both within and beyond the traditional purview of radiology practice. Recommendations for both how to measure and how to capture this value were considered at both the practice and national levels.
Key Words: Value added, new business models, practice changes, practice growth, extension of imaging service value
Introduction
In January 2008, ACR leaders held a Forum on Future Practice Models for Radiology. After consideration of the issues raised and the recommendations made, Arl Van Moore Jr, MD, created the Task Force to Evaluate the Value Add Impact on Business Models as one of several task forces to address the fundamental changes and challenges that radiologists and their groups are facing in the first decade of the 21st century.
Specifically, this blue-ribbon panel was challenged with the task of evaluating and providing insights into the value of evolving and novel business models for the practice of radiology. This task reflects the rapidly changing business landscape for radiology services. Traditional practices are changing their modes of business, and entirely new models of imaging practice are emerging. These challenge both the traditional roles of radiologists and the stability of traditional business entities in which radiologists have participated.
This report to the ACR includes recommendations to the Board of Chancellors (BOC) to help our profession rise to these challenges. The task force's recommendations are designed to aid the ACR in helping both individual radiologists and their practices prepare for the challenges that these new business models create. Furthermore, where possible, we suggest ways that further action can be taken to better measure and capture the value that radiologists can (or should) provide in these new settings. The task force has taken the view that this should focus on long-term, lasting value for the profession and its members rather than merely capitalizing on short-term business opportunities.
In addition, this task force was asked to address Resolution 40, “Optimal Delivery of Radiology Services,” which was referred to the BOC at the Annual Meeting and Chapter Leadership Conference in May 2008, and it was agreed that it would be added to the scope of this report. The task force discussed Resolution 40 and recommended that it not be adopted by the ACR Council. For reference, this resolution is as follows:
“Resolution 40, Optimal Delivery of Radiology Services,” was referred to the BOC for follow-up.
This resolution states that the ACR regard the value of radiologists to be more than the interpretation of images. This includes interaction with patients, review of prior examinations, consultation with referring physicians, supervision of technologists and other personnel, development of protocols, participation in interdepartmental conferences and assessment of need and specification of new equipment, as well as the role of the radiologist as a researcher responsible for the education of future colleagues and development of new imaging technologies all for the future benefit of the specialty. It also states that the ACR is concerned about a model of care where the radiologist is removed from the above, risking erosion of relationships with referring physicians and patients which are considered crucial to the quality of care. And it states that the ACR regard care by on-site radiologists preferable to that of teleradiology, the latter being most useful as a supplement to on-site care for purposes such as subspecialty consultation and to provide coverage for underserved areas where the physical presence of radiologists is not feasible.
Following discussion it was noted that Frank Lexa, MD, MBA, chair of the Task Force to Evaluate the Value Add Impact of Business Models, will be asked to address the issues raised in Resolution 40.
Background on the resolution: This was referred back to the BOC to ensure that the ACR does not tie the hands of physicians in the community with the requirements placed on them. This task force's goal should be to be honest about the need for having a radiologist on-site, and make recommendations for the extent of the role of the radiologist for each of the business models considered.
Definitions of Value and the Scope of the Task Force's Work
For the purposes of this paper, we predominately follow the terminology used by Patti et al [1] in “ACR White Paper: The Value Added That Radiologists Provide to the Health Care Enterprise.” We have used a working definition of value added as the marginal (extra) value that participation of a radiologist in an enterprise provides to stakeholders in the enterprise and its processes compared with those situations not involving the participation of a radiologist. This includes the marginal value added to the enterprise itself as well as to internal and external stakeholders. This is a much more robust definition than merely the portions of the value that are currently rewarded financially [2]. The task force acknowledges that it is also more difficult to quantify than those functions that are already monetized in current models and markets. In fact, the committee has specifically excluded the core operation of image reading per se as that which is both the best understood and the most easily monetized component of value that a radiologist provides in existing business models.
The task force also did not address those areas of value that fall within traditional radiology practice models. Those were well covered by Patti et al [1], and the interested reader is referred to that report. Rather, this task force concentrated on the value that radiologists do or can provide in the new business models of imaging services.
There are two themes in how the task force evaluated the added value in these novel business models. One is the capture of additional value from activities that are closely or traditionally related to image interpretation. Because a common factor in all radiology practices includes the act of image interpretation, this core source of value can be retained or even enhanced in novel business models, particularly those using off-site reading. In those situations, the added value of radiologists can be reincorporated into the image reading function by using radiologists to help with ordering, examination design, and discussion of examinations and perhaps their results with patients using telepresence. These value components include enhanced clinical involvement with patients, technologists, and referring physicians that adds value to image interpretation itself across most business models. The second theme the task force addressed is to evaluate nontraditional roles that can add value in nontraditional and novel business models.
The task force examined the value added in both of those categories. This included traditional roles of radiologists that are not currently monetized or rewarded as well as those that are novel sources of value by radiologists in newer business models. In this report, we have chosen to highlight those types of additional value that are likely to be of the greatest interest and importance to the ACR.
Task force members agreed on two starting points in the analysis: 1) that radiology needs to be defined as more than image reading and 2) the need to acknowledge activities that do not directly deliver reimbursement but generate significant value of other types. Novel business models include opportunities both to bundle and unbundle these sorts of value. At one extreme, the complete use of teleradiology services to staff a site would remove all of the on-site value of a radiologist. However, again, the use of telepresence through video links could allow an off-site radiologist to restore a portion of the value that radiologists can provide face to face in such activities as conferences with clinicians, discussing procedures and results with patients, and protocoling and customizing studies with technologists.
The task force also noted that business models should be evaluated not only for sources of value but also for potential losses of value provided by radiologists. These have both short-term and long-term deleterious effects on the profession. For example:
We also worked to provide the ACR with a better understanding of the key areas of opportunity in which value can be best captured and highlighted to the advantage of the membership of the ACR. However, it must be stated that radiologists provide value to a wide variety of stakeholders, not all of which results in directly measurable financial reward either in the current environment or likely in the near future. The value of a radiologist to a patient, family member, referring clinician, technologist, or radiologist colleague can exist in the health care enterprise and be reflected in overcompensation, adequate compensation, undercompensation, or nonexistent compensation in dollar value received. One of the goals for the ACR that this task force sought to address is for radiologists and their institutions to better leverage their value in these categories for personal and group success and stability. That will almost certainly come through greater appreciation of our value in managing the imaging enterprise rather than through increases in per study reimbursement.
Types of Models Evaluated and Considerations
Increased Size and Scope of Current Radiology Practices
There is no doubt that the practice of radiology is going through a period of accelerated change. The first but by no means the simplest new business model is the enlargement of existing radiology practices. This is occurring now, albeit at a relatively modest rate [3], with some predictions that it may accelerate in the near future. The task force considered the logical endpoints of this transformation: the potential for statewide, national, and perhaps transnational radiology practices. This is a not just a bigger version of a traditional practice but instead needs to be considered a novel entity. This type of evolution has been seen in other types of professional groups in the United States. Interviews with an expert on how this occurred in the accounting profession suggest that there are significant parallels with the current status of radiology in America (personal communication, Joseph P. White with Frank Lexa, 2008). There are both advantages and challenges as the size of a group of elite professionals is increased. The enhanced ability to manage the risk of either a single client or a small number of major clients is one that may resonate for many groups as we enter a period when our contracts are more fragile. Multiple hospital contracts across a broad geography reduce the risk that a single difficult hospital administrator or a local economic downturn can endanger or disband a radiology group.
In these larger entities, radiologists may be able to add value at many points along the value chain in many ways, such as the internal management of appropriateness criteria for ordering rather than ceding that function to external radiology benefits management corporations, handling information technology (IT) management, taking over back-office functions such as billing, and many other opportunities that would evolve in a significantly larger entity. There would also be economies of scale from the ability to provide better call coverage and subspecialty services internally rather than relying on corporate entities.
There also are clear disadvantages that arise from size, particularly for groups that rely on very informal managerial structures. Going from 10 to 50 members is an enormous challenge for most traditional radiology groups. Almost invariably, there are complaints of poor communication, inequities in work assignments, poor coordination among sites, and so on. Most groups find that they need much more formal management structures and support to make that transition. Going to 500 members would require very substantial additional structural changes to be able to function. The interested reader is referred to a dedicated discussion of these issues in another profession by Joseph White [4].
New Business Models That Differ in Sector and Scope from Traditional Radiology Practice
The challenging nature of these new business models was well summarized in a recent article by Gunderman et al [5] in JACR. The task force considered many types of evolving and emerging business models:
The task force acknowledges that this is not an exhaustive list and that there are other sources of value, such as grant-supported and industry-supported research, among others. Although these situations represent significant sources of potential value, the committee placed them outside of the scope of the task force because of their specialized, niche nature. The committee focused on business models in which the relevant value would be of broad interest to the ACR membership.
Enhancing the Value of Radiologists and Decommoditization: Core Value Opportunities That Are Broadly Available in New Business Models
Before we embark on a discussion of novel sources of added value in new business models, the committee noted that there are multiple sources of “traditional” value in new business models that can be captured or recaptured by diagnostic radiologists. This can be done via either adding or enhancing key service components. A common factor in all diagnostic imaging practice includes image interpretation. This core source of value can be significantly enhanced in novel business models, particularly those using off-site reading. The spectrum of the value chain components in the traditional role of a radiologist can include preimaging consultation with clinicians, conversations with patients, protocol and customization discussions with technologists, greater involvement in clinical care through case conferences with clinicians, and so on. This can be incorporated into both traditional and novel business models through the use of digital consultation and other methods [6].
The task force identified several ways that radiologists can use both enhanced versions of traditional services as well as the novel services outlined later in this document to add to their value in the clinical setting. Specifically, the following observations were made:
Nontraditional Business Models and Revenue Streams, Part 1
There are multiple potential nontraditional revenue streams for radiology practice in novel business models. Four of these potential paths include utilization management and radiology quality assessment, radiology risk management consulting, and radiology data storage. All of these areas have significant potential, and these avenues will likely only increase in their importance in the near future.
It should be emphasized that nontraditional business models are often initially not easily accepted by radiologists. Radiologists are used to the traditional revenue stream, in which a greater number of examination interpretations translates into higher revenues. Projects such as utilization management consulting, quality consulting, participation in data storage network construction, and risk management consulting often will not provide immediate revenue. Like any new business, such nontraditional ventures require time, energy, and in some cases startup capital to see future returns. Radiologists should be advised of the risk and potential downstream benefits before undertaking a nontraditional venture.
Radiology Utilization Management
The need for radiology utilization management derives largely from trends in overall imaging usage. According to testimony from Mark Miller [7] of the Medicare Payment Advisory Commission, an independent advisory commission to Congress, Medicare physician payments for diagnostic imaging grew larger than any other type of physician service from 1999 to 2003. Stated another way, on a “per beneficiary” level, the volume and intensity of imaging services billed to Medicare increased by 45% from 1999 to 2003, twice as much as all other physician services, which increased by 22% during the same period. Large recent increases in imaging services have been noted in the radiology literature as well. According to a 2005 article in Radiology [8], on average, between 1998 and 2001, utilization per Medicare enrollee increased by 16% per year for magnetic resonance imaging (MRI) and by 7% to 15% per year for computed tomography (CT), ultrasound, interventional radiology, and nuclear medicine, whereas that for radiography increased by 1% per year.
Rapid increases in imaging utilization have also been noted by traditional payers in addition to the federal government. For example, Blue Cross Blue Shield has stated that diagnostic imaging, including CT, MRI, ultrasound, nuclear medicine, and x-ray procedures, is currently the most costly type of technology for all payers [9]. This rapid increase in imaging services has a tremendous impact in radiology, as it pushes downward reimbursement for imaging services on a per unit basis.
Although much of the rapid increases in the utilization of imaging services can be attributed to self-referral, profit motivations by referring clinicians do not account for the entire phenomenon of increased imaging rates. Defensive medicine, increasing the clinical usefulness of imaging technology, increasing reliance on medical imaging as a replacement for physical examinations, patient demand for advanced imaging, and a rising percentage of elderly and chronically ill patients have all been cited as additional reasons diagnostic imaging has increased [10].
Although there are many valid reasons for the growth of imaging, persistent questions about the clinical efficacy of large increases in imaging remain. Certainly, it is known that there is significant geographic variation in the amount of imaging performed across the country, often without a significant impact on health outcomes for patients. It has also been alleged that medically unnecessary imaging costs the United States up to $10 billion annually [9].
In response to the rapid growth of imaging, many payers have contracted with radiology utilization management companies in an effort to decrease the amount of imaging performed for their enrollees. Large commercial payers such as Blue Cross Blue Shield, Aetna, and Cigna have contracted out with radiology utilization companies such as MedSolutions, American Imaging Management, and National Imaging Associates with increasing frequency [11].
Although radiology utilization management companies can effectively decrease the amount spent on imaging by commercial payers, they do so largely by using their own proprietary algorithms. Such algorithms occasionally are not entirely scientifically based or may rely on mechanisms such as single Current Procedural Terminology® code indications for diagnostic procedures.
As such, radiology utilization management presents an opportunity for radiology practices and radiology entrepreneurs. Radiology practices that mine their own data should have access to their own rates of positive examinations in various clinical settings. Individual radiology practices also know which of their referring physicians order examinations more frequently than others and are aware of the most effective examinations for various clinical scenarios. This situation presents the opportunity for radiology practices to meet with their local payers and develop their own criteria in lieu of sometimes arbitrary criteria put forth by utilization management companies. In doing so, radiology practices may be able to “bypass” the prominent utilization management companies and recapture some of their revenue that would have gone to such companies.
Partnering with utilization management companies to perform “utilization reviews” is also an area that could represent a nontraditional revenue stream. Some larger radiology practices perform utilization consults for a set fee. Such consults often consist of reviewing whether a particular imaging test is appropriate for a given clinical scenario and then recommending whether payment should be approved. Utilization management consults can diversify the revenue stream of a practice.
The opportunity for radiology utilization management is not limited to local practices. Through its access to the top experts in radiology, the ACR should also be actively convening scientific panels to publish algorithms that can used by payers in lieu of the currently used algorithms payers use, which are written by utilization management companies. Radiology outcome studies are published frequently by the scientific community, but the ACR is in a unique position to be able to evaluate these studies critically and construct imaging pathways that can be used by payers to ensure appropriate reimbursement for medically necessary radiologic procedures.
The ACR Appropriateness Criteria® are a start, but they can be expanded into more specific recommendations that can actively compete with those written by utilization management companies. This opportunity to create new value extends to developing IT tools for incorporating such criteria into online ordering tools and utilization monitoring.
It is important to realize that radiology management is here to stay. The cost of imaging is too prohibitive for current levels of imaging growth to be sustained without drastic reimbursement cuts. Radiology departments and the ACR can either participate and potentially benefit from the process or continue to see their autonomy and remuneration erode as utilization management increasingly is delegated to external companies.
Radiology Quality Management
Intrinsic quality variance is inherent in radiology. Imaging technology varies from facility to facility, as do imaging protocols. Indications for a variety of tests vary as well. For example, one facility may use intravenous urography as the initial test to diagnose a ureteral stone, whereas another facility relies on noncontrast CT for the same purpose. Although such variance is part of the art of medicine, in the era of increased scrutiny and falling reimbursement for diagnostic imaging, quality issues such as whether the appropriate radiologic test was used and whether the examination was interpreted correctly are playing a larger role in the minds of commercial payers and the public at large [11].
There is a potential role for local radiology practices to meet with their payers and set up quality criteria. Potentially, an opportunity for nontraditional revenue exists if a local practice performs a “quality audit” for a payer for a set fee.
The ACR also has a unique role to play in the opportunity of radiology quality management. Although other professional societies, such as the American College of Cardiology, stress their commitments to quality [12], the ACR can point to the unique training of radiologists in radiation safety, radiation biology, and image interpretation. Although the ACR's Medical Excellence in Diagnostic Imaging campaign [13] is a start, it does not fully capitalize on the opportunity for the ACR to partner with commercial payers in constructing certification and quality projects for all aspects of radiologic imaging in addition to mammography. Comprehensive quality projects have the potential to steer revenue from other specialties that perform and interpret diagnostic imaging back into the hands of radiology.
Radiology Data Storage
It is estimated that up to 10% of all radiologic procedures are performed as retests because prior examinations were unavailable to health care providers at the time the health care services were rendered [10]. Companies that work on fixing this problem will encounter a huge revenue stream. One possible solution is cloud computing, whereby data are stored on a central server and accessed by multiple peripheral machines [14].
Privacy issues and laws such as the Health Insurance Portability and Accountability Act (HIPAA) present obstacles to implementing central storage of health care data, but these issues almost certainly will be overcome technologically, given the overwhelming economic and clinical forces driving health care data storage. Remote computerized imaging storage is clinically efficient and effective for patients and makes economic sense for payers and society at large. Individual radiology departments may be able to find new ventures partnering with storage companies or may have opportunities for consulting with companies designing products for this line of work.
Risk Management Consulting
Many radiologists are familiar with medical-legal consulting, and most radiology practices have a least one radiologist working with plaintiff or defendant attorneys in reviewing images, medical records, and depositions for medical malpractice lawsuits. Such consulting projects are normally reimbursed by the hour and can occasionally earn a radiology practice more revenue than clinical work on an hour-by-hour basis. The opportunity exists, however, for another type of consulting: risk management consulting. Radiology departments that track their lawsuits can begin to categorize the reason such lawsuits occurred. Often, lawsuits against radiologists can be categorized into allegations of missed diagnoses, allegations of poor test result communication, allegations of poor informed consent or procedure complication management, and allegations of a lack of patient supervision in a radiology department [15]. After categorizing their lawsuits, radiology departments can begin to construct and deploy risk management strategies to minimize their medical-legal exposure. Particular risk management strategies may include hiring radiologist assistants to facilitate the communication of test results or instituting more robust quality measures. Whatever the technique used, the experience gained in the process can be used to perform risk management consulting for other radiology departments as well as for insurance companies. Such consulting projects may take the form of writing a risk management questionnaire or performing a site visit. The experience gained in risk management can also be used to negotiate lower malpractice rates with a particular department's malpractice carrier, translating into increased revenue from cost savings.
Maximizing Practice Income: Alternative Revenue Streams, Part 2
Traditional income for radiologists centers on the professional revenue garnered from image interpretation for clinical services, usually to a local medical center (a hospital or an imaging center). Although this revenue stream remains at the core of most radiology practices, alternative sources are available, some commonly practiced, others less well known. In essence, how do radiologists use their intellectual property to maximal advantage, allocating time and resources toward those ventures that ensure maximal revenue without the opportunity cost associated with time-intensive, poor-revenue-generating ventures? Although some services may initially seem less profitable, it could well be through innovative workflow redesign that these become profitable and therefore should not be discounted at the onset.
There are a variety of non-core clinical activities that radiologists could be performing to ensure maximal revenue streams. These groups need to critically evaluate each one and determine which offers the highest “quality” revenue stream, that is, which has the least overhead, lowest opportunity cost, and highest profit. It could be for large organizations that all of these services (and others) could be enacted, although this will be less likely for smaller organizations. In an environment of reducing third-party payments for clinical services, branching out into alternative revenue streams may make the difference between success or failure for radiologists and their departments.
Teleradiology
This is already well established, although the bulk of for-profit teleradiology services are now performed through entrepreneurial companies dedicated to the off-hour market. Typically, the structure of these companies requires radiologists to be partly or fully hired by the companies, and income is structured on a base salary with a fee for services above a certain volume. Other radiology groups are providing teleradiology services for daytime services, for off-site imaging centers, smaller medical facilities, prisons, and Native American reservations, among others. Reimbursement for these services is provided either on a fee-for-service basis or by direct professional fee billing.
More recently, there has been a trend for radiology practices to be absorbed into larger radiology groups. Indeed, the radiology professional market in the United States is facing a period of consolidation as groups merge in an attempt to provide a broader range of services. At times, this can be fractious as groups that are deemed to be failing (usually because of lack of subspecialty coverage or perceived poor customer service levels) are being replaced outright by competing radiology groups. These competing groups are able to cover host organizations with reduced staffing and perform the remaining image interpretations at a remote location, more convenient to the radiologists. This not only reduces travel time but can also help radiologists be more productive because they are no longer required to perform the ancillary tasks typically performed by on-site radiologists (eg, consultations with referring physicians, discussions with technologists, conferences). Being more productive, these radiologists can generate significant revenue at relatively little cost compared with a conventional practice. Frequently, the studies are of higher complexity (more relative value units), generating greater revenue. Although this can be a lucrative proposition to these acquisitive groups, there may be criticism from referring physicians and administrators for the very reason that these groups can be very productive, namely, the disengagement from the on-site traditional duties. Therefore, although hospitals are looking for faster report turnaround times, subspecialty reads and an overall willingness to grow the hospital's business, the radiologists performing these teleradiology services risk being marginalized as they disengage from active on-site clinical duties. Therefore, there exists a delicate balancing act for these teleradiology groups, which need to ensure that they foster and promote relationships between radiologists and referring physicians.
Academic centers have also entered the teleradiology market, primarily on the basis of their ability to provide subspecialty readings, a key stakeholder demand. This can potentially result in a lucrative revenue stream, although several factors can negatively affect the ability to maximize revenue. First, teleradiology images may not be from similar vendor equipment or may use dissimilar protocols to the receiving site, potentially slowing down the read process and at times frustrating the radiologists as they attempt to read what they consider substandard images. Second, the interpretation process could be further slowed because the images may reside on a separate PACS, and the reporting process could be cumbersome because it is unlikely that the sending site's RIS is immediately compatible with that of the academic center. The teleradiology operation may therefore need to resort to a system of faxes and paperwork, an inherently inefficient and potentially inaccurate solution. Third, academic radiologists are generally far less clinically productive than their private practice counterparts. Because teleradiology is a highly competitive market, the revenue margin per imaging study may not be sufficient in this relatively unproductive environment. Some academic centers have therefore carved out separate teleradiology divisions with different payment incentives to the traditional academic radiologists who can now be as productive as private practice radiologists, sometimes more so, because they now are not burdened by the typical hospital on-site responsibilities.
Independent Image Analysis for Pharmaceutical Development
There is an increasing trend toward surrogate endpoint imaging for measuring drug efficacy in clinical trials. As such, there is also an increased demand by the US Food and Drug Administration for images to be interpreted independently, away from the investigator site, where there may be variation in reading ability and technique between investigator sites and because of the potential for a conflict of interest between the pharmaceutical company and the investigator site (there is the risk that both are too motivated to find a positive outcome for the drug). Many clinical research organizations now exist that cater to this increasing market. Similar to teleradiology services, some clinical research organizations exclusively employ radiologists, but many employ radiologists on a consultancy basis. This is often directed toward academic centers, where there may be a wealth of subspecialty-trained radiologists for the particular disease and therapy in question (ie, a novel oncologic drug for the use of breast cancer). Academic radiologists are often attracted to this consulting work (partly because of their lower baseline salaries compared with private practice physicians, and partly because the work is less onerous, and generally, there are reduced medical-legal issues). Payment is usually on a fee-for-service basis, so the more one reads, the more one is paid. It is up to radiologists to negotiate the read fee per case. Much consulting has been performed by these radiologists independently, that is, without the implicit support or knowledge of their host organizations, and as such, the consulting is, or should be, performed off hours. However, an alternative strategy is for these consulting services to be controlled and managed from within the radiologists' group or department. There are several advantages to this approach. First, the department can leverage a larger group of radiologists who can now perform the consulting work transparently, often during regular work hours, because it is now sanctioned by their departments (this could increase quality because radiologists are not working a full day and then providing the consulting services). For this to occur, the radiology department itself will likely retain some of the revenue to justify the release of radiologists during work hours (eg, a 50/50 split between the radiologist and the department). Second, because an academic department can now potentially provide a greater number of radiologists, it is possible to provide a single read team for the pharmaceutical company, potentially reducing error and variation. Third, because the consulting can now be managed by the department (often as a separate business unit), contracting, pricing, and credentialing can now be provided by the department rather than the individual. Given the opportunity, it is possible that some departments may earn in excess of several million dollars annually from these ventures.
Consulting
Although the intellectual focus of radiologists is generally considered to be the ability to perform image interpretation (whether traditional clinical, teleradiology, or drug trial reads as discussed above), many radiologists also retain the technical, management, and leadership expertise required to operate a contemporary radiology department. This information and expertise is often sought after, given that a successful technical operation can sometimes mean the viability of hospital's revenue stream. Some academic departments have therefore taken advantage of this opportunity in the market because of their historical experience and expertise, and offer consulting to academic and nonacademic departments on a range of issues. These often include the acquisition and implementation of information systems (PACS, RIS, and speech recognition). These consulting groups, when combined with physician and nonphysician staff members, are able to guide organizations through the vendor process, purchase, and implementation. Given the significant investment organizations may be making into these information systems, some see it critical to obtain third-party advice. Other consulting services might include business intelligence, the ability to reengineer the department's workflow, and ensuring that expensive equipment is used to maximal efficiency with optimized staffing ratios. Other services include marketing advice, “turf battle” resolution and strategies, leadership expertise, and radiologist productivity analysis. As such, some organizations find it easier to initiate the necessary change when suggested (or sometimes implemented) by a third party rather than from within. In short, the gamut of challenges that face contemporary radiologic services can be evaluated and advice provided.
Imaging Center Joint Ventures for Academic Medical Practices
Hospitals often find it challenging to meet both inpatient and outpatient imaging demands. Inpatients often take priority over outpatients who may then find it difficult to schedule examinations at convenient times or may find their appointments delayed on arrival at the CT suite. Imaging growth strategies are frequently a challenge to hospitals, where space can be at a premium. In truth, outpatient and inpatient imaging are different businesses, with inpatient demands routinely disrupting a hospital's imaging workflow, whereas outpatients can, or at least should be, scheduled and scanned at predictable intervals.
Because outpatient imaging, particularly for CT and MRI, remains relatively financially lucrative for hospitals, a hospital, ideally, should maximize its outpatient volume. Any outpatient delay or lack of appointment availability therefore threatens the financial stability of the organization. Furthermore, existing customers (referring physicians and patients) may decide to obtain the cross-sectional imaging elsewhere, should they deem the hospital to provide a poor outpatient service. Once these patients are lost to the competition, it may be very hard to persuade them back to the hospital practice, particularly because much of the competition focuses solely on outpatient imaging. The independent operators usually provide a flexible appointment schedule for outpatients and can frequently accommodate “add-on” patients, a specific request often demanded by referring physicians. Furthermore, independent operators usually find it easier to provide appropriate customer service levels to the differing clientele, with personalized service, convenient location, free and easy parking, and pleasant ambiance, among others.
To provide this tailored service to their outpatient customers, hospitals are often obliged to follow the competition and provide outpatient imaging facilities themselves. However, hospitals typically have many competing capital requests from other service lines (eg, cardiology, surgery, oncology), which could mitigate the willingness to invest the appropriate funding for such an outpatient project. Outpatients, under this scenario, are left to compete for appointments with inpatients, and the hospital risks alienating its customers.
Given that many nonacademic radiology groups in the nation have seen the financial opportunity of either owning an imaging center outright or through a joint venture with their organization, there now exits an increasing number of radiologists who are taking an active role in the operations and management of such centers. Without the financial incentive, radiologists may feel less inclined to aggressively pursue volume growth for an imaging center, given that most of the revenue would be distributed elsewhere, usually to the owners of the site itself. Even though there are some benefits to radiologists under such scenarios (increase in professional revenue), any owner of the imaging center (eg, an academic hospital) may well see reduced profits (and service levels) if radiologists are excluded from the technical component of the reimbursement structure. Academic medical centers should therefore strongly consider joint venturing with their radiology practice to open an imaging center dedicated to the hospital's outpatients, which should encourage superior customer service levels (both to patients and referring physicians) and growth prospects for that center. The radiologists are also free to attract new customers, either those already lost from the hospital to the competition or, ideally, new patients from out of network [16, 17, 18].
Under such an arrangement, all stakeholders should benefit. First, outpatients can be scanned conveniently and with minimal disruption to the workflow (outpatient imaging is generally predictable, with relatively few disruptions). Patients frequently state that they prefer to be scanned outside a hospital, particularly if they know that the imaging center is of a similar brand to the hospital. Indeed, it should be marketed as such, making it implicit that the same radiologists, equipment, protocols, and information systems are used as at the main hospital. Second, radiologists benefit directly in several ways, the most obvious way being financial. However, as they now become intimately involved in the success of the venture, they often learn new business skills, not always apparent in the traditional professional fee-for-service model. This can raise productivity and improve the level of customer service provided to patients and referring physicians, presumably a good thing. In turn, these radiologists can then use these newly acquired business skills to help improve the hospital-based services. In fact, this should be mandatory, as any attempt by radiologists to give preferential service levels to the imaging center patients (where they have a financial incentive to do so), compared with the hospital-based practice, will likely be viewed with suspicion by referring physicians and hospital administrators. Third, referring physicians should benefit from the perceived improvement in customer service levels, by being able to refer patients at will and not needing to refer patients out of network. Last, this arrangement should benefit the hospital administration as both outpatient and inpatient customer service levels improve (inpatients can often be accommodated more expeditiously), with the net effect of retaining, and ideally growing, market share.
Despite these advantages, many hospital administrators are still reluctant to engage with radiologists on such ventures, fearing that they may lose significant technical revenue in the process. However, this approach is often shortsighted because they are unlikely to reap the maximal benefits for themselves or their customers without a joint venture structure. The challenge is to find the right joint venture structure, suitable to both parties. In an academic setting, this can be difficult because of the organizational structure within the hospital or medical school. Many physicians or physician specialty groups are not independent practitioners, like at many nonacademic hospitals. Many radiologists at academic centers may be part of a larger physician group practice. Indeed, it may be the group practice itself that would be providing the funding for the physician component of the joint venture. Under such circumstances, it may be prudent for some of the profit generated for the imaging center to be distributed to the physician group as a whole, although not too much, so that the radiologists do not lose their incentive to innovate and increase patient volumes. It may also be that the dean of the medical school will require some form of “academic tax” from the resulting profits. In other words, it is likely that the revenue generated from such a venture should be prudently distributed to the relevant stakeholders, while making sure that the radiologists, who will likely take most responsibility for the success of the operation, obtain the largest stake of the profits.
Finally, in some circumstances, the hospital may choose not to joint venture on such an operation and give consent to either the radiology group or the physician practice to raise the capital and open an imaging center, under the guise of the hospital brand. This may service the hospital well because it can use its limited resources elsewhere while at the same time, hopefully, trust that both its inpatients and outpatients are being better served. However, given that many hospitals will be uncomfortable in taking no part in the revenue stream, the radiologists or physician group can gain share with the hospital (ie, willingly give up some of their profit) to ensure that all stakeholders feel appropriately compensated.
An Overview of Business Models Applicable to Small or Rural Radiology Practices
The value added by radiologists in a small or rural practice setting depends on their ability to use a limited number of on-site staff members or placement in a rural location to bring better care to patients and improved service to their referral sources.
Which business model is most effective depends on the character of the physician members of the organization, the scope and quality of their services, satisfaction of their patients and referral sources, and the local political and economic climate.
Many years ago, the term radiologist connoted a medical professional who was trained across the fields of diagnostic and therapeutic radiology. These specialties then separated. For a brief period of time, diagnostic radiologists who were able to provide a full scope of care in what was then state-of-the-art imaging became known as “general radiologists.” Despite the rapid evolution and specialization of diagnostic radiology, the term general radiologist persists as a colloquialism. However, most diagnostic radiologists now view themselves as at least somewhat “subspecialized” [19]. Thus, in the context of engendering additional value to patient care, the term general radiologist is arguably inaccurate and outmoded and does not reflect the reality of most contemporary practice settings.
The American Hospital Association reported that of 5,747 hospitals registered in the United States as of 2006, more than 2,000 were classified as “rural community hospitals” [20]. Like their counterparts in the largest urban centers, these facilities require the availability of appropriate medical imaging services. Instead of dwelling on the terms general or subspecialized, incumbent medical imagers in more rural or small practice settings must instead concentrate on strategies to contend with the increasing denominator of examinations, techniques, and patient pathology.
Internal Expansion
Possibly the most obvious and well-worn strategy to add value, independent of practice size, is ongoing education. A single generation has watched the invention, development, and deployment of radical new imaging techniques such as CT and MRI. Almost all diagnostic radiologists practicing during this time period have been forced to gain at least an understanding, likely competence, and occasionally mastery of these technologies.
Although it is unlikely that any single human can maintain competence on all the technical permutations in our field, it is possible to identify the most important and relevant of these techniques as they bear on a local practice setting. Practitioners can then focus themselves and their ongoing professional development as needed by patients and referring providers. At some point, isolated or small group practitioners will recognize a need to provide interpretive or procedural skills that they may not possess or do not perform with adequate frequency to maintain a level of comfort or competence. This juncture is an opportunity to add value through a variety of mechanisms.
Outsourcing
The most frequently cited and familiar outsourcing in diagnostic radiology has gone under the name nighthawk or teleradiology. Although it is currently primarily a mechanism to cover after-hours interpretations, there are corporate and professional entities that see this model as a way to capture entire practice venues. These types of predatory business plans have engendered comment both in the professional and lay press [21]. However, there are firms that recognize the importance of an alliance with local providers and offer a competitive resource that may be used to offset the intellectual isolation of a small or rural practice.
Asking for a second opinion among members of one's local group should not be cause of paranoia or jealousy. Similarly, a properly structured business and professional arrangement with off-site providers can bring added value through a wide variety of available subspecialists who may perform a primary reading on uncommon tests or provide second opinions on unusual cases. Interested academic facilities may also be available as a resource, but to do so, they will have to compete with the entities that have currently made such arrangements as simple as a phone call.
Practice Networks
Small groups are faced with continual manpower shortages, especially in the context of call coverage. An alternative to outsourcing with a national firm is establishment of a “practice network.” Such an entity could potentially evolve into a complete merger of groups across a wider geographic area. The value added with such a construct would be continued autonomy of local providers, the dilution of call responsibilities, the opportunity for participants to recruit more esoteric subspecialists to be used by all network participants, and potentially other economies of scale.
These initiatives do not come without some risk. There are barriers relating to institutional and personal politics, hospital and practice credentialing, governance, and potential antitrust actions [22, 23].
Some state professional societies are exploring cooperative teleradiology links to facilitate network development. Recent attempts at intrastate network development in Pennsylvania have been thwarted by disparities of expected payments vs expected charges and a relative lack of interest on the part of rank-and-file membership (personal communication, Richard Taxin and Eric Rubin, Pennsylvania Radiological Society, 2008 ACR Annual Meeting and Chapter Leadership Conference). The ACR has previously initiated an online forum called the Practice Alliance Network to help college members facilitate such alliances. Despite interest voiced at various state society meetings and advertisements related to the availability of this resource, the effort folded because of a lack of member participation (Geoffrey Smith, personal experience, while overseeing the ACR General, Small, and Rural Commission).
The Satellite Provider
Another variant of added value in rural or small practice settings is that of the satellite of a much larger practice. This paradigm allows a large group to diversify its geographic footprint, bring subspecialty care to the fore as it is needed, maintain economies of scale for the underlying business, and yet provide a physical presence of a physician in the local facility and community.
Another Type of Small Practice: The Single Subspecialty Radiology Provider
The term small practice does not necessarily equate to full service or general radiology. Subspecialty radiologists may practice within the context of a solo practice or small practice limited to their areas of expertise [24]. This arrangement is most prevalent within interventional radiology, with some practitioners “rebranding” themselves as “endovascular surgeons” or with other monikers [25]. These providers may find robust opportunities in either urban or rural environs. This model of small practice may bring value to locations where such services would otherwise never be available and in turn provides autonomy and a more limited scope of practice to interested practitioners.
Recommendations
References
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PII: S1546-1440(09)00282-8
doi:10.1016/j.jacr.2009.06.008
© 2009 American College of Radiology. Published by Elsevier Inc. All rights reserved.
Volume 6, Issue 10 , Pages 681-693, October 2009
