Leading an HCO in an Era of Scarce Resources: Implications for Radiology

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It’s no surprise that so many provider organizations threw their weight behind the recently passed health-reform bill. In 2009, 72% of hospitals reported increases in uncompensated care.¹ The vast majority also reported decreases in both elective procedures and inpatient admissions, difficulty acquiring capital, and moratoria on capital projects (both planned and started).¹ Clearly, the economic downturn has disproven the old adage: Health care is not recession proof. Such stringencies have led to renewed scrutiny of costs, yielding encouraging results for one hospital system. William Barta, corporate imaging director, Fairview Health Services, Minneapolis, Minnesota, reports that in the past 18 months, the system has increased its operating margin fourfold, from 1% to 4%, in spite of the downturn. He described recent and ongoing cost-containment efforts in the radiology service line that are going straight to the bottom line.
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“Generally speaking, the imaging department is the largest revenue producer in the system—at least one of the largest, depending on the site—so it has a tremendous impact on the financial health of the system.”
—William Barta, corporate imaging director
Fairview Health Services, Minneapolis, Minnesota
With responsibility for imaging operations across the seven-hospital health system, Barta oversees inpatient and outpatient operations, business development, and systemization. Just as bringing on a new service line at the right time can have a positive effect on the overall financial health of the institution, so can the overestimation of capital needs (and failure to control expenses or capture charges) negatively affect profitability. Vital Focus Areas Since Barta’s arrival 18 months ago, the imaging leadership team has focused on four key areas to bring costs under control and maximize revenue: equipment service and support, identifying and systematizing best practices in productivity, leveraging capital buys, and optimizing outpatient charge capture. In-house Versus OEM Service.—Fairview Health Services has launched a major initiative to bring engineering in-house, to be rolled up through Barta. “We are paying a substantial amount of money to OEMs—a staggering amount—and we believe that over time, we will be able to lower that cost by 40%,” Barta explains. “It’s a matter of looking for a low-cost alternative for which we don’t have to sacrifice service, either. From my experience in other systems, there is a pride in ownership—an energy and a zeal to give you better service than someone coming in from the outside would give you.” The only modalities that Fairview Health Services engineers will not service will be the one-off units (for instance, a single 3T MRI system, if one is acquired). If there are multiple units, a Fairview Health Services engineer will be sent for service training. Improving Productivity.—The second-largest cost-containment initiative at Fairview Health Services has been a focus on productivity based on studying the system, retaining consultants, and uncovering and disseminating best practices. “We continue to work on best practices, looking at our system and looking at our people: How are they doing from a productivity perspective, how are they doing from an expense perspective, what are they doing differently from the other sites, and how can we roll out that best practice?” Barta says. “We are always tweaking our productivity numbers and the way that we look at our productivity, considering the fact that payroll is one of our largest expenses.” A System Approach to Imaging Capital.—An ongoing initiative of Barta’s is to create what he calls a funnel through which capital-equipment purchases are filtered for the purpose of uncovering opportunities to leverage not just capital buys, but time-of-year buys offered by vendors. While Barta is quick to state that he is not interested in steering clinical capital decisions, he does admit frustration with highly fragmented purchasing practices for imaging equipment across both hospitals and departments. “All of the imaging folks are doing their own thing, and working the justification process to buy what they need when they think they need it,” he acknowledges. “They call the vendors, do the due diligence, and negotiate the pricing.” Barta plans to have all imaging capital requests—whether originating in radiology, cardiology, obstetrics/gynecology, or another department—go through a designated person or department. This will be done, first, to recognize which technology can be attributed to a specific vendor, and second, to aggregate those purchases into a single opportunity to leverage the buy. “I believe we are leaving substantial dollars on the table because we are not leveraging capital buys,” he states, “and we are not leveraging time-of-the-year buys. Vendors have group buying times when they offer buys during particular months of the year. By staggering your purchasing, you can capitalize on those times, and that represents substantial savings as well.” Since arriving at Fairview Health Services, Barta has also made an effort to move aging capital equipment around the system (rather than simply disowning it) to extend the life of the equipment. “This year, we literally have moved three different general diagnostic rooms from hospitals and clinics we were upgrading into clinics that have lower volume,” Barta says. “We could get maybe four or five more years out of that equipment before we actually trade it in or scrap it.” Accurate Outpatient Charge Capture.—The fourth opportunity that Barta has been assisting with is revenue-cycle management: keeping on top of coding changes within the electronic record. The department recently discovered that while radiology codes were regularly updated in the hospital information system, this was not happening on the outpatient side, resulting in denials for procedures performed. “Keeping up with that piece of the revenue cycle, to make sure we are always capturing the dollars that are coming to us, is a formidable task,” Barta emphasizes. “It sounds simple, but some of those codes change every single year, and sometimes, several times a year.” A Team Player In addition to looking inward, Barta explains that Fairview Health Services invests considerable time and capital in being a community player. This philosophy has been fortuitous in areas as divergent as access to capital and physician relationships. “As a system, we’re focused not only on our own survival, but also on the survival of some of the stand-alone institutions around the state, and we participate in their success,” he explains. During the last capital-access crisis, 10 to 15 years ago, a former site president formed an independent cooperative among dozens of hospitals in Northern Minnesota to buy capital for hospitals and systems that couldn’t afford it on the open market. Barta estimates that the system has deployed six MRI and CT systems that are actually owned by the cooperative. “What they do is they lease the capital equipment to the hospital or system, so that it comes out of operational expenses, rather than capital,” Barta explains. “Then, at the end of the year, based on profit and on the percentage of cooperative business, we get a rebate, as with any cooperative.” As Barta describes them, relations between providers in the Twin Cities area are more collegial than competitive, and Fairview Health Services works at that. The system has assembled an assortment of smaller, unrelated providers in its area to partner in its position in a buying group. “They are using our position in the buying group to leverage our discounting,” Barta says. This cooperative approach extends to outpatient positions in the community. “Our modus operandi, from what I’ve seen in the 18 months I’ve been here, is to partner,” Barta says. “Rather than going out and being opportunistic and aggressive in taking things over, we tend to partner with physician groups that are struggling to keep their local imaging within their own clinics operating.” Fairview Health Services has several partnerships in imaging centers in the community, including one with a physician group and another with an imaging-center company. “It’s helping us build great relationships with physician groups that are independents, not our own physicians, and certainly it’s a source of revenue for us as well,” he says. Cheryl Proval is editorial director of Medical Imaging Review and vice president, publishing, of imagingBiz, Tustin, California.