OIC Deployment: Buy, Build, Sell, or Hold?

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Tight credit markets may have lengthened timelines, but hospital systems across the United States continue to move aggressively into their communities to fulfill outpatient imaging strategies. The consulting group Sg2 (Chicago, Illinois) predicts 19% growth in outpatient imaging in the 10-year span between 2008 and 2018, representing 90% of total imaging growth over the next decade. Hospitals clearly intend to partake of that growth.

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Kevin Cook, COO

A recent article in Radiology Business Journal underscored just how important outpatient imaging is to health care systems today. Kevin Cook, president/COO of Mercy Health Partners–Northeast Region, Scranton, Pennsylvania, calls outpatient imaging a key component of the system’s strategy to meet community needs.

John Couris, COO and administrator, Morton Plant North Bay Hospital, New Port Richey, Florida, Morton Plant Mease, BayCare Health System, agrees: “Outpatient-radiology revenue is extremely important, and it continues to grow as we grow volumes. I’m not sure of the percentage, but it is a very large piece of the outpatient-revenue pie.”

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John Couris, COO

Scott M. Black, CPA, vice president of business development, Clarian Health Partners, Indianapolis, Indiana, reports that a recent emphasis on outpatient imaging reflects a shift in Clarian’s historic focus on inpatient care. He says, “In 2008, outpatient services represented approximately 46% of Clarian’s gross patient revenue. We have a target of increasing that amount to 50% in the next several years.” Nonetheless, he acknowledges that the credit markets have had an effect in delaying a number of new facility developments and capital investments. He is exploring developer-based financing.

Mercy Health Partners has purchased a few centers, upgraded several more, and invested in one new building project recently. In response to the tight credit markets, the system sold several centers to generate cash, and it has resorted to leases, rather than purchases, in order to keep on track with technology acquisition and replacement.

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Scott M. Black, CPA

Couris says that some Morton Plant project timelines have been extended, but it moved forward with a joint venture with a radiology group that is 100% capital lease financed, whereas the system took a longer-term view of a new, large outpatient building, financed through the capital process. Couris says that Morton Plant is using the economic downturn as an opportunity to retool strategic plans and reengineer processes.

Management Varies

Each system takes a different management approach to its outpatient imaging sites. Morton Plant has an entrepreneurial organizational structure, with the managers of each center accountable for their business units.

At Clarian, radiology services at three hospitals and 11 imaging centers report up through the president of operations. At Mercy, a team approach is taken, consisting of the site manager, a regional imaging director, and a corporate executive service-line sponsor. Outpatient imaging, however, is equally central to the ambulatory strategy for each health system.

Clarian’s strategy entails planting outpatient facilities throughout the Indianapolis metropolitan area; these facilities include imaging, laboratory, and surgery services, along with physicians’ offices. The system plans to continue opening similar sites throughout central Indiana, Black says.

While both Baycare and Mercy are open to joint ventures with physician groups, Clarian is not. “For imaging only, we have only had the centers owned by the hospital,” Black reports. “We do not have any joint ventures for imaging only.”

Morton Plant also frequently pairs imaging with other ambulatory offerings, usually in a full-service imaging center format, according to Couris. “Radiology is critical; it is the biggest piece of the ambulatory-care pie for us. Radiology is also a modality that is critical to the diagnosis and treatment of disease. As technology and the science of radiology evolve, so will their application in health care. I believe the appropriate utilization of radiology procedures can actually help drive the total cost of health care down,” Couris notes.