The Total Value Equation: Radiology’s Future-facing Formula

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 - Richard Heller III, MD, MBA
Richard Heller III, MD, MBA

In a recent Journal of the American College of Radiology: JACR article, 1 Richard Heller III, MD, MBA, a radiologist with Radiology Partners and chairman of radiology at Advocate Children’s Hospital in Oak Lawn, Illinois, proposed a framework for understanding radiology-group value (based on specific health-system needs). He calls it the total value equation. 

“Formalizing this idea with an equation forces you to evaluate value in a very specific framework, as opposed to generalizing about what you think value is,” Heller observes. “It’s always difficult to quantify value, of course, but the equation’s purpose is not quantification—rather, it’s the process of thinking through the different variables. That formal analysis is very useful in figuring out how to provide services optimally.” 

Heller’s total value equation incorporates both interpretive and noninterpretive value. “Interpretive value is very straightforward,” he notes. “Noninterpretive value is a catch-all term for everything we do that is not reading exams—things you aren’t billing for directly through RVUs, but that add value to the system.”

Structuring the Equation

It would be tempting to view value as simply the sum of those two parts, but Heller cautions practices that this approach doesn’t account for the differences in priorities and needs between hospitals and health systems. For that reason, his equation also necessitates weighting the importance of interpretive and noninterpretive value on a case-by-case basis. “Weighting the variables helps the practice define how best to optimize the services it’s going to provide,” Heller explains.

As an example, he says, the needs of a specialty hospital will be different from the needs of a teaching hospital in a way that would affect weighting within the equation. “Hospitals are always going to want strong interpretive value, but they may want other services more,” Heller notes. “A teaching hospital will be more interested in having on-site staff for participation in rounds. A specialty orthopedic hospital, on the other hand, will want films read quickly by subspecialists, putting more emphasis on interpretive value.”

The two types of value can also be weighted by shift, Heller adds. “An overnight shift will be likely to have less emphasis than a day shift on noninterpretive value,” he says. “If you understand how value changes, depending on the shift, you can alter your staffing accordingly.”

Groups can use the total value equation to define the differences between their shifts, as well as the disparities between their customers, creating a foundation for more effective decision making. “Each client is unique, and the way you address each one has to be tailor-made,” Heller advises. “You want to be maximally efficient for each client, but that efficiency can look very different, depending on where you are.”

Noninterpretive Value

The total value equation promotes “very specific value-oriented thinking,” Heller says, and this is especially critical when it comes to noninterpretive value. “If you’re a pediatric radiologist, and you spend time talking to your patient’s family and explaining what the findings are, the parents appreciate it—and so do the pediatricians,” he says. “Now, they’re more likely to send their patients to your hospital. Given the increasing competition for patients we’re seeing now (and will continue to see in the future), this isn’t just the right thing to do, as a physician: It’s also the right thing to do from a business point of view. It adds very real value.”

Traditionally, noninterpretive value has been considered an intangible. The total value equation aims to address that problem by measuring noninterpretive value’s impact. “It’s unfortunate, in a way, that there are such easily quantifiable objective measures as turnaround time, because noninterpretive value is hard to define, by comparison,” Heller says. “Just because it isn’t easily quantifiable, though, doesn’t mean it doesn’t exist. That’s the point of the equation: It shows that you can staff two hospitals in exactly the same way, and although you haven’t changed, the value you’ve provided has changed dramatically.”

Heller points to the fact that while noninterpretive value can be thought of as intangible at the beginning of a relationship, when that relationship ends, its importance is suddenly crystal clear. “It’s very easy to quantify value, in dollars, when a contract is lost,” he notes.

The Equation in Practice

To implement

Cat Vasko is a contributing writer for ImagingBiz.com.

Reference

1. Heller RE 3rd. The total value equation: a suggested framework for understanding value creation in diagnostic radiology.  J Am Coll Radiol 2014;11(1):24-29.