In an illustration used for hospital clients, analyst Shay Pratt pinpoints imaging centers for sale around the country: four independents on the market in California, a four-center chain in Kansas, and a larger chain in central Florida with an asking price of $22.5 million. The list, with size and price variations, continues from coast to coast.
“We talked with our member hospitals and completed 250 research interviews with different radiology departments. We asked them if they had been approached by someone wanting to sell an imaging center, and at least 75% said they had.”
--Shay Pratt, The Advisory Board Co
Pratt is managing director of the Imaging Performance Partnership for The Advisory Board Co, a Washington, DC-based company that provides best practices and strategic research to more than 2,700 hospital and health system members. He presented “The Future of Imaging Reimbursement” on June 10 in Orlando, Florida, at the 2009 Radiology Summit sponsored by the RBMA.
The reason that so many imaging centers are hitting the market is simple, Pratt says. Reimbursements have fallen, forcing reevaluations of cash flow and profit, and many freestanding-center operators are “seeing the handwriting on the wall,” he notes. A weeding process is taking weak centers out of the market as volume growth is reduced. This is a big change from the double-digit growth in imaging of the recent past.
Three years ago, Pratt notes, many of his hospital clients were contemplating the construction of imaging centers. “Now, the attention is totally on acquisition,” he says. Even that is a tough decision, he adds; after years of expansion, hospitals are making do with their existing imaging resources during the current economic downturn. Many hospitals, unable to acquire imaging centers, are now forced to try to grow using their existing equipment bases.
According to Pratt, the trends that he forecasts for outpatient imaging—decelerating growth and a fight for volume—are likely to continue through 2013. Pratt says that outpatient imaging will grow in coming years, but at a much slower rate than in the earlier part of the decade. In addition, the economic downturn has changed the near-term volume outlook.
RBMs, the DRA, and More
The factors driving down imaging reimbursement are largely familiar—the impact of the DRA, exam preauthorization regimens imposed by payors, Medicare cutbacks, and proposed reform-related decreases—but that doesn’t make them any more palatable or less painful.
A particular sore point for imaging providers has been the success of radiology benefit management (RBM) companies. “If you look at the commercial-payor market, there is incredible focus on precertification, and to a lesser extent, provider privileging,” Pratt says. “Precertification has been the horse they bet on; it’s had a major impact. If the payors are deciding whether to implement utilization management or cut prices, they prefer utilization management. If they cut prices, they feel the provider will just boost utilization. That’s been the perspective,” Pratt says.
Alternatives to RBM-assisted utilization management now exist in the form of decision-support systems that rely on computer software to help referring physicians determine whether an imaging exam is appropriate. In convincing payors to use decision support instead of precertification, however, providers and decision-support vendors face an uphill battle, given that the RBM–payor relationship is now deeply entrenched.
“In theory, for physicians, decision support should be preferable to RBMs, but I don’t know if you can make that conclusion yet. The physician has to interface with someone before the patient gets that MRI. A lot of the RBMs are offering online precertification-request portals now,” Pratt says. He adds that while referring physicians complain about the staff time taken up by precertification, RBMs are nonetheless reporting high physician-satisfaction scores. From the point of view of imaging providers, however, decision support is definitely preferable, he says, because it elevates their role in utilization management and might also result in fewer denials.
Pratt says that he doesn’t have data to quote side-by-side denial rates for preauthorization and decision support. “I’m operating under the idea that decision support will judge one-third to one-half fewer scans to be inappropriate. I think that’s why payors have not been as quick to jump to decision