Do you think that for-profit freestanding outpatient imaging is a phenomenon destined to go the way of Tyrannosaurus rex? Some people do. Some are betting that the resurgence of hospital and health system interest in the outpatient revenue stream will eventually dwarf the freestanding market, rendering it obsolete. I’m wondering whether this is a bet worth taking, and what the smart money has to say on the subject.
The answer to this provocative question might be found upon careful unpacking of the market dynamics that will drive health care referral and consumer behavior as the gap widens between innovative and bureaucratic providers, especially in the years when aging baby boomers enter the health care system in large numbers.
One of the most important variables in the success of outpatient services is a center’s ability to provide top-level customer service to referring physicians and to discerning patients, each of whom has a choice—many choices, in fact—about where to get his or her imaging studies completed. Service is critically important to success in a consumer-driven health care market, and that is precisely what the profession is heading toward on a fast-track basis. This notion somehow adds a degree of uncertainty to the bet, based on historical customer behavior in the typical hospital environment.
Winning, in this case, is dependent on an entity’s ability to deliver best-in-class customer service. The radiology benefit management (RBM) companies know this, and it is why they consider access, convenience, quality, technology, and price as the combination of factors that will determine where they should steer their respective patient populations for care. I have had issues with the RBM business model, but it is clear that the upside of their participation in health plans is the fact that they do see a positive role for freestanding outpatient care. In an interesting paradox, RBMs just might end up being freestanding imaging’s best friend, if one can get past the increased scrutiny of utilization and the preauthorization choke hold.
The bottom line is that the best provider should win. The provider that truly understands that the referring physician and the patient are customers who require their needs and wants to be met should be the provider that prevails in any market. If the hospital outpatient center is the one delivering such attentiveness, so be it.
There are hospitals in many markets that get it, and there are hospitals that don’t understand this customer-service dynamic. I have worked with many hospitals over the years that truly understand that they are entering a consumer-driven paradigm and that have adjusted their bureaucratic culture accordingly. On the other hand, there are many that continue to muddle along within an inefficient institutional mindset that drives behavior and business right into the open arms of entrepreneurs doing a better job.
The payors will be better served in a marketplace in which innovation thrives and customers are treated like gold. It matters not whether the setting is a hospital campus or in mall-type storefront: Access, quality, and cost are the name of the game. Competition between hospitals and freestanding centers is a healthy part of a free-market system, and the provider that offers immediate appointments, extended hours, breadth of modalities, attentive staff, and engaged physicians—and has built key relationships with referral sources—will be the one that gets the business. That is as it should be.
Nonetheless, a closed-loop system (in which a hospital buys its referrals by acquiring all of the local physician practices and thus controlling referrals through patient steerage) is a short-lived and flawed business model. It is self-referral on steroids, and it will eventually fail the litmus test for determining monopolistic practices. Indeed, the Obama administration recently stated that potential antitrust activity will face a more aggressive Justice Department review, reversing Bush-era policies that took a more laissez-faire approach to such things. This could mean a more level playing field between hospitals and freestanding providers.
The takeaway message is this: It’s all about service, and whichever provider figures that out in the most efficient and profitable way will be the one that leads in market share. Service depends on an aligned and motivated staff, engaged radiologists, practice leaders who understand accountability, and an ethos