Denial, Disbelief,
and Anger
By Curtis Kauffman-Pickelle

One can no longer sugarcoat or deny the fact that radiology is a profession under siege. Many of those that I met with this past year across the country were scrambling simply to make sense out of the DRA cuts and in the process find ways to offset the financial hit. Most were a little stunned but held out hope that our industry representation in Washington, DC, would use its influence and skills to, if not outright reverse, at least delay such a draconian act. Hope faded and turned to denial and disbelief.

So here we are now in the first month of our new world order and it is anger that is starting its slow burn.

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Washington Report:
Health Care Back on the Table
By Jerry J. Sokol, JD, and Joshua M. Kaye, JD

As the new Congress begins a shift toward a more domestic policy-dominated agenda, health care issues are expected to receive substantial attention. While there was hope during the last quarter of 2006 that a bill proposed in the House (HR 5704) as well as one proposed in the Senate (S. 3795) would result in a moratorium on the DRA reimbursement cuts, neither bill became law. As the medical imaging industry begins to cope with reimbursement cuts, the following other legislative and federal agency actions should not be overlooked.

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The Importance of the
Marketing-Operations Synergy
By Melanie Haymond

Twenty plus years ago, as imaging gradually began its trek away from hospital environs, outpatient services rarely included a market effort. Today, outpatient imaging marketing is more than a rapid-report cannon fire in the war of what's new. It boasts brand, distinction, top-of-mind awareness, and positioning. Back then, if there was a marketing person, they were tucked away in the corner and spoke only when spoken to, separate and distinct.

Now, successful marketing departments are an active part of the center and part of its budgetary and strategic plans. It collaborates as part of the operational and executive team and is an integral part of the service circle. David Packard, cofounder of Hewlett-Packard, said it best: "Marketing is too important to be left to your marketing department. In a really well-marketed organization, one cannot tell who is really in the marketing department. Everyone in the company has to make decisions based on the impact of the consumer." Key to the success of any marketing department and plan is the recognition of value that this service arm provides in the growth and success of a center.

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Can an EMP Reduce
Center Operating Costs?
By Tina Reese

In light of the Deficit Reduction Act, which went into effect in this month, many imaging practices and physician offices that provide diagnostic imaging services, are looking for ways to reduce their operating costs. Some practices are looking at reducing staff; while others are evaluating every line item of their operating budgets. One line item often seen but not considered is equipment maintenance/service.

Equipment maintenance insurance (EMI) is not a new concept to the health care industry. In the early 1980s, EMI made its debut as an alternative to original equipment manufacturer service contracts. As with any industry, there were some reputable companies that entered the marketplace and then there were others that were not backed by the financial strength of an insurance carrier or that did not last long in the sector and left some health care providers, and in turn their vendors, with unpaid invoices.

In the late 1990s, the current EMI approach fine-tuned into what is known as an equipment maintenance program (EMP). It takes the best features of earlier versions of EMI and adds the ability of the purchaser to become the most educated consumer of service possible. A true EMP answers questions for you such as:

What are the true costs for maintaining a certain piece of equipment (or for that matter, each piece of equipment) in my practice/clinic/organization?

How much do I truly spend on equipment maintenance?

Are certain pieces of my equipment less costly to purchase but more costly to maintain?

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New Year's Resolutions
By Nicole Pliner, MBA

With the new calendar year comes the annual opportunity to make our New Year's resolutions. While these generally tend to be personal pledges for self-improvement such as going to the health club more, getting more organized, or eating better, why not use the fresh year to make some organizational pledges? Here are a few we feel will be essential to success for radiology practices in the coming year:

Patient Safety. There has never been a more important time than now to resolve to improve patient safety. While this may seem daunting, there are many specific initiatives you can embrace that will lead toward this greater goal. Examples include standardizing protocols, educating staff on magnet safety, refining the critical results communication plan, or conducting Failure Mode Effectiveness Analysis (FMEA) at each modality. Whether you choose these or others, embracing patient safety initiatives should be a priority in 2007.

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Strategic Partnerships for 2007

Drastic reimbursement reductions for MR and CT in the freestanding setting have made joint ventures with referring physicians more attractive than ever, writes Jerry J. Sokol, JD, and Joshua M. Kaye, JD, health care attorneys with McDermott Will & Emery, in an article in the January issue of Imaging Economics.

"Although some imaging centers think they have little choice other than to sell their business, there are, unfortunately, very few buyers…. As a result, many imaging centers are considering ways to obtain a competitive edge by collaborating with referring physicians."

—Jerry J. Sokol, JD,
and Joshua M. Kaye, JD

The DRA has resulted in the biggest change in the imaging reimbursement landscape since the Stark laws, wrote Sokol and Kaye. The fear and uncertainty is compounded by the IDTF rule changes and the specter of future possible changes to the Medicare reassignment rule. Sokol and Kaye described four joint venture models, three of which are premised on the In-Office Exception and the emerging under-arrangement model, which meets other applicable Stark law exceptions.

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Jumping Ship:
How to Set a Price

There invariably will be some imaging centers that are destined to be many leagues from the black in 2007, and some of them already have begun the valuation process. Unfortunately, according to several consultants in an article posted on AuntMinnie.com, there is no formula.

"There are benchmarks you can use, but generally they don't have anything to do with your center, in your market, in your neighborhood, with your infrastructure, and the way you run the business," Douglas Smith, president and CEO of Barrington Lakes Group, a healthcare consulting firm in Barrington Lakes, IL, told AuntMinnie.

"You can't just take a multiple out there that's a quoted industry standard; you have to develop for your own standard in your own practice in your own area," Reed Tinsley, a certified public accountant, certified valuation analyst, and principal of Reed Tinsley and Associates, Houston, told AuntMinnie.

According to Smith and Tinsley, the key factors of influence in determining value for a practice or imaging center are: revenue streams, referral patterns, service mix, payor mix, competitive landscape, and ownership and management. But valuators will also look at the historic data as well as develop a prospective picture, said Smith.

Data the valuators will use to arrive at those views include modality volumes, net collections, referral patterns, account adjustments, medical directorships, management services revenues, billing revenues, and special services revenues, denials, and collections.

Unfortunately for imaging centers, the valuation will also include the consideration of any legislation the will affect future revenues, ensuring that the DRA will cast a gloomy shadow over this process.

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Imaging Center Valuation:
You Can't Always Get What You Want