Teleradiology Providers Open the Door to Cost Savings

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Community hospitals, like their larger counterparts, continue to encounter financial challenges as they strive to deliver cutting-edge imaging services. For some institutions, engaging a full-service teleradiology provider could result in cost savings. In a white paper produced by Franklin & Seidelmann (Beachwood, Ohio), the national teleradiology provider lays out a matrix of hospital costs associated with providing an uninterrupted radiology service and identifies areas of potential savings that can be captured through contracting with a teleradiology provider for full-service coverage, including final interpretations. Although the paper does not include any details on the costs of the teleradiology service, it does provide food for thought for community hospitals seeking an alternative to their current radiology-service providers. Most system investments in radiology contribute to a key workflow step in the process of delivering imaging services. By electing, instead, to contract with a teleradiology provider for full-service coverage, a hospital will be able to transfer responsibility to the teleradiology company for all of the systems needed to read the study and dictate, transcribe, and communicate the results (Figure 1).
imageFigure 1
Some of the greatest cost-saving opportunities and benefits identified in the paper focus on equipment, with the ability to decommission selected systems topping the list. Specifically, under the traditional model of several radiologists reading in the department, multiple high-resolution/high-brightness workstations are installed in the reading room, as well as in radiologists’ offices within that department. When most studies are read remotely by a distributed services provider, however, unused workstations can be decommissioned, with a subsequent reduction in IT support requirements. Similarly, hardware and software systems commonly carry support/maintenance agreements. If hardware components like workstations or dictation systems have been decommissioned because a teleradiology provider has been brought on board, the support agreements covering them can be terminated and the savings immediately made available (unless annual contracts have been prepaid). Even a modest-sized community hospital can reap an annual savings of $50,000 from this move alone because the value of maintenance contracts is always based upon a high original capital investment. Hospitals can also reap savings through the cancellation of planned capital purchases. Radiology budget cycles typically incorporate allotments for replacing obsolete equipment or for completing new purchases that have not been prioritized in previous years—for example, old dictation equipment that needs to be swapped out or upgraded for voice recognition. Moreover, many community hospitals are attempting to fund expensive new digital mammography or 3D reading stations. Assuming that the teleradiology provider under consideration possesses the most up-to-date tools, institutions need not make the assumed investments necessary to keep their own imaging services in state-of-the-art condition. Per-exam Expenditures Other cost-conservation opportunities afforded to community hospitals by teleradiology services revolve around per-exam charges. Transcription expenditures incurred on a per-exam schedule, which can add up quickly, generally range from $2 to $2.30 each. Transferring the responsibility for on-site reading of studies by radiologists, and their use of existing dictation/transcription processes, yields a variable savings that could total more than $50,000 annually, if voice-recognition software is not used. Even greater savings (with the white paper claiming savings of more than $100,000 per year for modest-sized community hospitals) result when other customary professional fees are removed from the equation. Hospitals frequently cover the cost of night and weekend teleradiology coverage for on-site radiology groups, though this coverage produces only preliminary reports. Final reports must be completed by the contracted radiology group on the following day, and the group then bills the full professional fee for each exam. In contracts with teleradiology providers, final night and weekend interpretations are provided at no extra cost to the hospital. In addition, hospitals that lack sufficient radiology-staff resources to cover vacation time routinely retain locum-tenens radiologists at a minimum cost of $10,000 per week. National teleradiology provider partners that offer distributed reading services make those services available 24 hours a day, every day of the year, taking incremental locum-tenens expenditures entirely out of the budgeting picture. Case Study The white paper offers an example of a community hospital that performs a total of 50,000 exams per year, amortizes capital expenses over a five-year term, and pays an average of 17% for support/maintenance contracts to illustrate the potential savings of following the teleradiology-provider route. The institution probably has two standard radiologist workstations (at an estimated annual cost of $40,000 for hardware and $6,800 for software), a 3D workstation (at an estimated annual cost of $75,000 for hardware and $12,750 for software), and a dictation system (at an estimated annual cost of $100,000 for hardware and $17,000 for software). Annual support costs total $36,550; periodic capital costs, $215,000; and annual amortization costs, $43,000. The hospital’s administration assumes costs incurred for a radiology group, including $150,000 in preliminary teleradiology coverage and $100,000 ($2 per exam) in transcription services, plus some manner of stipend originally negotiated to attract the group to the area. According to the white paper, assigning the identical 50,000 exams to Franklin & Seidelmann would probably entail using one on-site radiologist to handle general radiography and interventional work, with the remaining 30,000 to 35,000 studies interpreted off-site and around the clock by subspecialty-trained radiologists. All final dictations would be transmitted to the institution’s RIS or hospital information system using HL7; neither further transcriptions nor the involvement of a teleradiology third party would be necessary. Two of the three radiologist workstations and the 3D workstation would be decommissioned, and their attendant support contracts would be canceled immediately. Further, software for critical findings and quality-assurance peer review—incorporated into the budget to make a favorable impression at the hospital’s next Joint Commission inspection—would be cut from the list of intended capital purchases, slashing an additional $20,000 worth of expenditures per modality. A high-resolution digital mammography reading station (required to accompany a new digital mammography system) would no longer be necessary, saving another $65,000. “Large radiology departmental expenditures have, in the past, been as predictable as the seasons coming and going,” the white paper concludes; however, “with the advent of high-quality technology-enabled distributed reading services, a new option is now available to the community hospital senior management team. The long-standing capital investment model can be materially changed by looking to a radiology professional services provider to use its own technology infrastructure to deliver and communicate strategic imaging reports. When executed properly, costs can be reduced and the subsequent quality improvements can have the complementary effect of improving incremental outpatient imaging volume.” Julie Ross is a contributing writer for