Radiology Practices Fight Declining Technical Revenues

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imageAlicia Vasquez
Declining technical revenues have become a way of life for imaging practices, but that doesn’t mean that they are taking the situation lying down: “Having a proactive stance and an ongoing application of strategies to compensate for decreases, head on, is a must for facilities with a will to survive,” according to Michael Bohl, executive director, Radiology Group PC, SC, Davenport, Iowa.
imageMichael Bohl, MHA
Much of the precipitous drop of recent years can be traced to the DRA of 2005. A study1 published in the September 2009 issue of the Journal of the American College of Radiology: JACR cites a Government Accountability Office report indicating that in 2007—the first year that the DRA took effect—Medicare Part B payments for imaging dropped to $12.1 billion, 12.7% less than the $13.8 billion in payments reported in 2006. The DRA cuts, however, are only the tip of the iceberg. Additional radiology payment cuts instituted by CMS and slated for gradual implementation between 2010 and 2013 will “do further damage,” Bohl says. He estimates (based on what he describes as a sophisticated model) an overall 28% reduction in Medicare revenues for large, multimodality imaging centers over the next three years. Revenues from dual-energy x-ray absorptiometry will drop by 43%; for CT, by 36%; for nuclear cardiology, by 36%; for MRI, by 33%; for general radiography, by 13%; for nuclear medicine, by 10%; and for ultrasound, by 6%, Bohl believes. Moreover, reduced reimbursements are not the only factor setting imaging-center revenues on a downward path; other catalysts continue to come into play. Increased patient use of emergency departments’ radiology services, rather than those available at private facilities, tops the list for Arcadia Radiology Medical Group in California. So, too, does the languishing economy, which is affecting patients’ willingness to undergo elective radiological examinations for which a high copayment is likely to be required, according to Alicia Vasquez, administrator. Yet another factor is payors’ growing tendency to add radiology benefit managers (RBMs) as to their cost-control arsenals. In many instances, Bohl notes, insurers will precertify radiological procedures, only to deny payments subsequently, based on RBM recommendation. “In the past, one of our bigger problems was practitioners who, instead of sending their patients to imaging centers, would bring imaging in-house,” Bohl asserts. “That trend is largely behind us. It’s been replaced, however, by the complication of RBMs, which—due to cost pressure on insurers—are here to stay. The impact on revenues will not be as great as that of declining reimbursements, but it will still be felt.” Nips and Tucks For both radiology groups, compensating for reduced revenues—no matter what their catalyst—entails the continued identification and elimination of poor income producers. “We’re a high–fixed-cost, heavy-salary business with an expensive infrastructure, so when the time arrived to consider how to handle declining revenues, we looked at where we were spending too much money for not enough return,” Bohl says. Until recently, Radiology Group maintained two radiography sites operated from two physicians’ offices. A decision was made to close both facilities, yielding considerable savings in equipment, maintenance, rent, and the salaries of two FTEs. “Operating single-modality centers, particularly underperforming ones, simply did not make sense for us on so many levels,” Bohl says. Complementing these cuts are changes in imaging centers’ personnel-utilization patterns and labor structure. It’s not surprising, according to Bohl, that many facilities have forgone wage adjustments in 2009 and 2010. Others are looking at alternative staffing arrangements, such as increased use of part-time personnel and imaging aides to support a core staff . Virtually all Radiology Group employees work on a full-time schedule. Bohl and his colleagues continue to monitor the situation, however; should conditions warrant, they will explore the limited use of part-time staff with flexible scheduling. Neither Radiology Group nor Arcadia Radiology has executed any layoffs, but both facilities have opted not to replace personnel lost through voluntary attrition. Bolstering Productivity Compensation for declining revenues also comes in the form of technology investments intended to increase radiologists’ productivity. Arcadia Radiology has integrated peer-review and mammography-tracking components into its PACS; other components will probably be added to the system as well, Vasquez says. A Physician Quality Reporting Initiative compliance program is in the works. Similarly, Radiology Group has implemented a voice-recognition system for the production of radiology reports. The move represents the first phase of what Bohl and his colleagues hope will be a migration to a centralized PACS. “Our group works at a local hospital, and we cannot implement infrastructural changes there,” Bohl explains. “By significantly streamlining report production, however, the voice-recognition system definitely allows our radiologists to be more efficient at what they do. Going to a single PACS platform and a consolidated workflow will take efficiencies to the next level.” Technology is also being leveraged at imaging centers’ front ends to enhance staff and operating efficiencies while maximizing collections. “In the past, facilities could get by with a 50% equipment-utilization rate, based on a nine-hour day and five-day work week,” Bohl says. “No longer: It’s imperative for sites to become as efficient as possible. Efficiencies can be gained by increasing throughput, taking steps to decrease cancelled and no-show appointments, offering longer hours, and being open more days, but there’s even more to it than that.” Arcadia Radiology has eschewed paper-driven methodologies, instead relying upon its RIS to assess and track reimbursement eligibility and preauthorization for all procedures. The system also handles patient scheduling, allowing the center to process an increasing volume of patients using existing personnel resources. Vasquez declines to specify the total financial savings reaped via RIS, but notes that scanning patients’ insurance cards and drivers’ licenses into the system has significantly slashed Arcadia Radiology’s front-office expenditures. “Through scanning alone, we are saving $30,000 to $40,000 per year on copying, copy paper, and storage,” she says. While practices clearly see the wisdom of spending money on technology to bolster the bottom line and make up for reimbursement shortfalls, they are curtailing equipment and supply expenditures wherever possible. Many facilities, Bohl says, are asking vendors and suppliers for cost concessions or, in the case of equipment maintenance and service, some form of shared-risk arrangement. Radiology Group has signed service contracts of this type. “For now, it’s enough, but in the future, we (like every center looking at declining revenues) will almost certainly have more difficult decisions to make when it comes to equipment,” Bohl observes. “In our case, PET will be a dilemma. Our PET equipment works well now, but when it’s time for a replacement, it will be tough to determine whether or not to buy new units at the reimbursement levels we will face, given the fact that it’s currently a low-volume modality.” With the exception of mammography, Arcadia Radiology has postponed all equipment upgrades and replacements to an undetermined date. “Mammography is a point of differentiation for us,” Vasquez states. “It’s also in greatest demand by our patients, and currently, least affected by reimbursement cuts, so in proactively deciding where to hold off on the equipment side, we removed it from the mix.” Surviving and Thriving Like many of their colleagues, Vasquez and Bohl do not believe that cost containment and efficiency-boosting measures alone guarantee any imaging center’s survival in an environment where decreasing revenues appear to loom ever larger. “No strategy will, on its own, be the reason a facility survives or struggles,” Bohl concludes. “Rather, it will be the combination of steps appropriate in a particular setting that will enable any imaging center or facility to remain viable. In the end, this is as much an opportunity as it is a challenge. The trick is to anticipate and plan your actions, not merely to react.” Julie Ritzer Ross is a contributing writer for ImagingBiz.com.