Imaging’s Shifting Center of Gravity
By Curtis Kauffman-Pickelle

Curtis Kauffman-Pickelle

Outpatient imaging as a market is undergoing metamorphosis, and though unfamiliar to many in its ranks, such change is common in most every market. As any economist would attest, markets are fluid and undergo periods of growth and decline that are referred to as life cycles. It is the same with products within markets, and is quite often the same with the companies themselves that operate within the markets, as well.

A common denominator with such shifts is the requirement that those trying to stay ahead of the curve understand this dynamic as a business reality and adjust their value proposition and how they communicate that value to their customers, who will likely be faced with more choices. This is often disconcerting to those who prefer that their market remain placid, predictable, and firmly within the control that has often worked for them for many years.

Medical imaging’s marketplace is shifting in favor of those for whom change and its related demands for creativity and nimbleness are an expected part of their strategic plans, for which they have developed alternative ways of succeeding.

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Regulatory Report:
The Final Rule: Part-Time Lease Deals Out, Other Stark Measures on Hold
By Thomas W. Greeson, JD

In last year’s Medicare Physician Fee Schedule (MPFS) proposed rule, CMS described its concerns for the potential for fraud, waste and abuse of the Medicare program that may be caused by the growth of so-called “pod” or “condo” laboratories. “Pod” laboratories are laboratories that are located off-site from a physician’s office (sometimes even in another state) and operated entirely by an independent contractor physician pursuant to a reassignment arrangement for the purpose of performing pathology studies that will be billed globally by the ordering physician’s office. Typically the physician’s office pays the pod laboratory a fixed fee for a diagnostic test that is less than the global fee the physician is able to collect from the Medicare program when he/she bills for the test. Last year, CMS had proposed to amend its reassignment rules to include a new provision to attempt to take the profit from the arrangements. CMS decided to not act on last year’s proposals, but in this year’s MPFS rules, CMS has acted—and decisively so. The agency’s new rules affect pod labs, but also will have a significant impact on many imaging arrangements involving referring physicians.

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Worth M. Saunders, MHA

Worth M. Saunders, MHA, has served as chief administrator for the 32-radiologist Mid-South Imaging and Therapeutics, PA, Memphis, Tenn, since 2003. The position was a change of pace for the outpatient-imaging veteran, who worked for Radiologix for six years prior. Primarily a hospital-based practice, Mid-South serves six of the 14 hospitals operated by Baptist Memorial Healthcare Corporation, and also provides reads for numerous imaging operations located in physician offices, primarily multi-specialty clinics, billing for more than half a million CPT codes annually. The group made an early decision to participate in the Centers for Medicare & Medicaid’s Physician Quality Reporting Initiative (PQRI). Saunders talked to ImagingBiz.com about the practice’s decision to participate in PQRI and quality initiatives in general in an evolving marketplace.

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In announcing the acquisition of the assets of Papastavros’ Associates Medical Imaging for $18 million in Delaware, Los Angeles-based RadNet has claimed a major stake in its first new market since the purchase of Radiologix. The transaction gives RadNet 12 imaging centers in Delaware, a market adjacent to its Maryland position, where the company is a leader in outpatient imaging.

“This acquisition is consistent with our disciplined strategy for growth. We are entering a new market through the acquisition of an entrenched leader.”

— Howard Berger, MD

“Papastavros fits our model perfectly,” he continued. “It is a full-service freestanding outpatient operator whose centers have a presence across Delaware. We intend to use the Papastavros assets as a platform to pursue other opportunities for growth in this and neighboring markets.”

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Achieving Return
on a Dedicated 3D Service
By Jon T. DeVries

A dedicated 3D service can improve patient care and enhance operational efficiency. Building and operating such a service requires a significant investment in staff, equipment, information technology (IT), space, overhead and other expenses; however, both improving care and realizing a return on investment (ROI) on these expenditures is often a result of two underappreciated activities: 3D protocol development and training.

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Wake Radiology Reduces Risk with Tier II+ Data Center

Ronald B. Mitchell, MS

In the fall of 2005, 58-member Wake Radiology found itself feeling vulnerable. Having achieved the holy grail of the electronic practice by banishing paper and film, the practice understood that it had much to lose if it lost the network over which it leveraged subspecialized reads across three area hospitals and 11 standalone imaging centers in North Carolina’s Triangle area: Raleigh, Durham, Chapel Hill, and Research Triangle Park.

Even the telephones were running over the network via voice-over IP (VoIP). So Wake elected to tighten up its IT practices by building a Tier 2+ Data Center.

“People need to understand the cost of down time, of not having a system. An organization like ours runs on electrons. It’s like blood.”

— Ronald B. Mitchell, MSc, CIO, Wake Radiology

“Any interruption in effect takes the business down, and not every practice is that way,” Mitchell continued. “Some are still passing paper and some are still printing film. Each individual practice needs to decide for itself the cost of systems and network failure, and really go through different scenarios and try and figure out for them what the cost is, and then decide what they want to spend to avoid that cost.”

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The annual Physician Compensation and Production Survey from the Medical Group Management Association, Englewood, Colo, has never been particularly robust when it came to radiologist participation, with most of the participation generated from multi-specialty groups. But MGMA made great headway this year with its radiology numbers, including data from 878 non-invasive diagnostic radiologists (DRs) and 418 interventional radiologists (IRs), represented by 171 medical practices, including 59 single-specialty practices and 112 multi-specialty practices. The 2007 report is based on 2006 data.

So, get ready for a hail of numbers.

Diagnostic noninvasive radiologists, heretofore known as DRs, came in at a mean $449,664 in 2007, compared to $493,035 for diagnostic invasive radiologists, heretofore called IRs. Those figures represent an overall 4.73% increase in compensation for the specialty’s physicians from ’05 to ’06. Shareholder status matters more in radiology groups than many other specialties. The difference between shareholder and nonshareholder compensation was $468,177 for shareholders, compared to $373,748 for DRs; and $483,904 compared to $444,271 for IRs.

But shareholder status meant even more in the following specialties, all of which meant more than an additional $100,000 for the privilege: Allergy/Immunology, Noninvasive Cardiology, Dermatology (Mohs Surgery), Hematology/Oncology, Nephrology, OB/GYN (Reproductive Endocrinology), Opthalmology (Retina), Othopedics (Foot & Ankle, Hand, Hip & Joint, Spine, Sports Medicine), Pediatrics (Adolescent Medicine, Critical Care Intensivist), Radiation Oncology, and Surgery (Oral, Trauma).

Radiologists were among the most productive physicians when it came to churning out RVUs for professional services: the median annual RVUs for a DR was 15,565, and 16,437 for IRs. Radiologists in the 90th percentile produced 24,997 RVUs. Only certain subspecialty opthalmologists, orthopedists, and cardiovascular and neurological surgeons were as industrious by the RVU measure.

Median physician compensation per RVU for DRs was $31.77, and for IRs, it was $33.92. The median collections—defined as actual dollars collected that can be attributed to professional services—per RVU for DRs was $68.67 for DR and $63.50 for IRs. The compensation to collections ratio was .654 for DRs, and .704 for IRs.

How did the agency that administers the Medicare and Medicaid programs come up with the terminology “stand in the shoes”, and why did it dangle this puzzling proposition and then promptly shelve it for further investigation? The phrase is innocuous enough. It could be a Native Indian name or a song by the Blues Brothers. It shimmers with ambiguity, like a Victorian idiom intent on avoiding any reference to personal habitus. No way does this innocuous phrase suggest the fear and panic it instilled in the hearts everywhere of self-referring physicians…and their partners.

What does it mean? Essentially, it takes aim at the indirect compensation exception to the Stark laws, the practice of insulating oneself from the jurisdiction of a particular law (Stark in this case) by constructing a new corporate identity. Here is a description of the provision found on the web site of law firm McGuireWoods LLC.

Stand in the Shoes: “A physician’s relationship with an entity providing designated health services (such as a hospital) through a direct single intervening physician organization (such as a group practice) may no longer take advantage of the favorable provisions of the Stark Act’s indirect compensation exception. The physician is deemed to “stand in the shoes” of his or her physician organization. Therefore, the relationship between the physician organization itself and the entity providing designated health services must meet a Stark Act exception.”

According to a posting on the web site of law firm Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, the stand-in-the-shoes proposal is the agency’s attempt to address the subject of indirect financial relationships on the DHS entity side of physician-DHS entity financial relationships: “The proposed amendment provides that a DHS entity which owns or controls an entity to which a physician refers Medicare patients for DHS would be deemed to ‘stand in the shoes’ of the entity it owns or controls, so that the DHS entity is further deemed to have the same compensation arrangements with the same parties and on the same terms as does the entity it owns or controls.”

By way of illustration, CMS provided the example of a hospital that owns or controls a medical foundation that contracts with a physician to provide physician services as a clinic owned by the medical foundation. The hospital would be deemed to stand in the shoes of the medical foundation and to have a direct financial relationship with the physician contractor under the proposal, according to the Baker Donelson posting.

Two unresolved questions raised by the proposal, and on which CMS has requested comment, involved: 1) the fact that DHS entities owned by another DHS entity represent only one of the relationships that, under the current regulations, would create an indirect compensation relationship, and; 2) the definition of control, which invokes the stand in the shoes clause, and therefore would include the hospital side of hospital-physician joint ventures that rely on the indirect compensation exception.

Because the CMS received approximately 1,100 responses to its proposed reinterpretation of the Stark laws, it chose not to implement the stand-in-the-shoes clause and most of the other Stark-related changes contained in the proposed 2008 MPFS.

However, like the anti-markup clause, which was mentioned in the 2007 proposed MPFS and instituted with the final 2008 rule, “stands-in-the-shoes” is likely to return in some form. In fact, CMS has stated that it has enough input to make a decision on this and other Stark-related issues contained in the proposed 2008 rule and has promised to do so.

There is the possibility that the agency could expand the clause to refer to other indirect arrangements outside the DHS realm. Here is an interesting comment found on the law firm Davis Wright Tremaine’s site:

“CMS’s choice to focus solely on DHS entities in its “stand in the shoes” analysis is somewhat puzzling. To be sure, “DHS entity owned by a DHS entity”—is a relationship where an indirect compensation arrangement could arise. However, there are a host of other indirect arrangements—many of which would appear to present a greater potential for abuse that the agency does not address.”

Needless to say, this phrase is far from innocuous and has the potential to put the brakes on many hospital-physician joint ventures that are so much in vogue at the moment by severely limiting application of the indirect compensation exception.