After enlightening attendees about the new players in the outpatient imaging field, and educating them on where the growth potential exists, Michael Silver, PhD, read outpatient radiology the riot act in the concluding segment of his talk: “You have to know your market,” advised Silver, vice president, Sg2, the Skokie, Ill-based health care consulting group. “You have to have an aggressive marketing program, you have to monitor and measure what is going on in the marketplace, and you have to develop the skills to manage by margins, because that is going to determine who is going to be successful, who is going to survive and who isn’t.”

The business skills likely to become even more important than in the past, Silver said are a strong back office from a billing perspective, accreditation, CON skills, and lobbying. “If you are contracting with radiologists, the growing trend that we are seeing is performance-based contracting,” Silver shared. “Both hospitals and outpatient facilities want performance from the radiologists that they are working with, and they want to monitor that performance and hold radiologists to those contracting guidelines of performance. And you have to be very proactive in your marketplace with regard to lobbying and accreditation, and CON skills will probably become more important in the future.

Silver advised center operators to focus on:

• business execution;
• the products and services offered;
• productivity; and
• business models.

Business execution skills, Silver said, fall under the following three functions:

1. Focus. Silver urged attendees to allocate their resources appropriately for the strategy they want to have.
2. Execution. This function includes the development and maintenance of brand value, and the implementation of good service, appropriate technology, and people management,
3. Measurement. Margin management is imperative, Silver emphasized. “You’ve got to measure your performance and monitor and correct it in the marketplace,” he emphasized.
   

“When we look at a retracting market, which we are seeing in some parts of the country, you have to become more productive and shorten the length of exams,” advised Silver. “But you also have to focus on the quality of the service and the reports that are going out, and add more hooks into your referring physicians. That means, in part, focusing on your reports, focusing on the service, focusing on subspecialty capabilities for those specialist as well.”

Silver urged participants to strategize about adding value to their products and services. “Brand-value strategize so you are not viewed as just a commodity, because once you are a commodity, it’s the low-price spread,” he said. “P4P and quality is going to become a very significant issue for you, much more than you would have thought a few years ago. That means your radiologist will have to become involved in peer review programs, which will become mandatory, and accreditation programs. Geisinger Clinic is now providing financial guarantee on their coronary bypass surgery. If you have complications, the patient care is provided at no additional cost. We are going to see more and more discussion of those kinds of programs in the marketplace, especially from self-insured large corporations that don’t want to pay for the same surgeries multiple times, and don’t want to pay for reads that are ineffective.”

In developing business execution strategies, radiology practices must be aware of the dangers of decentralized reading. “If your referring physicians are no longer seeing your faces, it is critical that you have strategies for adding value in the marketplace,” Silver warned. “Once you have a decentralized service, its very easy for your referring physicians and consumers to view you as a commodity. So you have to aggressively work at added value, brand value, and strategize so that you are not viewed as just a commodity, because once you are a commodity, it’s the low-price spread.”

The Right Stuff
The right products and services for your particular marketplace are critical, Silver said, and encompass the following: technology and technology timing adoption, scope of services, patient access and service, scheduling, and the report.

“The biggest mistake that we see is that facilities don’t think about their strategy for the following year when they acquire technology,” Silver revealed. “You have to have a multi-year strategy. You have to think about your scheduling process. You have to think about your quality of communications and the report: Don’t over-assume that you have a great report just because you have a report. You really need to take a look at the quality of the report going out and whether or not your referring physicians feel that it’s meeting their needs in terms of managing their patients.”

Productivity is the linchpin in a retracting market, and also a blind spot for many physician imaging center operators, Silver said. “When we talk with physicians about their view of productivity, most physicians look at the schedule book, and they say, ‘See we’re full, we’re busy’, and they manage their productivity to a plateau,” Silver explained. “So, if they are busy, things must be really great. If Joe Hogan managed GE in that same manner, he probably would be celebrating his 15th year with Kraft or some other company because that is not how you manage a business. What GE knows, what other successful corporations know, is every year you take a look at your growth rates and you determine how much more productivity you need to get out of your current infrastructure, and if you need to get 5% more imaging out of it, you look at the processes to get 5% more imaging out of your sites, every year, and that’s how you need to be managing your facilities.”

Benchmarking is a key strategy in managing productivity, Silver said. “If your patients are spending more than two minutes registering at your desk, then you need to go back and look at your processes, because you are not going to be competitive in the marketplace from a productivity and customer service point of view. If you are going to do more and more MRA and CTA at your sites, do you have the facility that enables you to do IVs outside the scanner or do you do it inside the scanner and slow up the productivity that you have? Your payer mix, your exam mix, performance contracting, and CT and MR protocol authorizations are going to become important issue for you. “

Many new business models emerging, and among the most compelling in Silver’s point of view are:

• Joint venture imaging centers based in medical office buildings. “Avoid per click; look instead at JVs that involve real estate or technology ownership,” Silver advised
• Repackaging existing services into consumer-friendly models such as Tucson-based Ultra-Clinic, which advertises—and delivers—a one-day breast cancer diagnosis, from mammogram to biopsy to lab results.

The Nighthawk Factor
Silver closed his talk with a brief discourse on the evolution of nighthawk services and their likely impact on the practice of radiology. “More than 30% of all radiologists are using nighthawk-type services to do their nighttime reading for them,” Silver said. “What is interesting, is you take a look at the financials and business plan on the Security and Exchange Commission web site for Nighthawk, the largest teleradiology business in the country, in 2006, 98% of their revenue was coming from preliminary readings. But where is their growth? They are projecting by 2010 that 50% of their revenue is going to come from primary reads, not preliminary reads.”

“What do you call a group that has an IT background, a performance-focused management strategy, and very customer-focused management strategy? They have a radiology back office—they just bought the back office from St Paul Radiology—they have multiple offices in Switzerland, strategic partnerships with selected practices for subspecialty reads across the US, and reading services in Australia and Hawaii. They have a sales force, 24/7 coverage, an attractive lifestyle for younger radiologists coming out, a solid compensation program with financials, a scalable service, and they’ve got a market performance record.

“In Massachusetts alone, there are 120 health care facilities using a nighthawk-type of service, and a growing demand for them,” he continued. “What do you call a group that has all of this? I call them a radiology practice, and I think that is where the nighthawk-type groups are moving: toward becoming national radiology practices.”

Silver closed his talk with a quote from Charles Darwin worth pondering.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
—Charles Darwin

Part I of this three-part series focused on the imaging market and players, and Part II provided a clinical forecast.