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