Ten Trends, Five Years: Predictions for Outpatient Imaging
While long-term forecasts are always subject to error in a changing climate, today’s market trends can provide strong, reliable indications of what to expect in the future. For outpatient imaging over the coming five years, ten ongoing trends, in particular, can be predicted based on the changes being seen in imaging now. Trend one: Demand for outpatient imaging, and the resulting procedural volumes, will continue to increase. Medicare outpatient imaging has increased for all modalities, exhibiting growth of more than 60% in some areas. CT and MRI volume growth have been exceptional, increasing at a rate of about 200% over the past 10 years. Economic factors have played a central role in imaging growth, with radiologists hoping to create a new revenue stream in the technical component, specialists attempting to augment their practices, and entrepreneurs trying to secure a historically strong return on investment. Other influences have driven growth in imaging as well. They include new technology and expanding applications for it, the aging of the population, reimbursement expansion, increased consumerism, and the practice of defensive medicine. Outpatient volumes will continue to increase as new applications add to demand. Among the volume-increasing applications and technologies are CT angiography, fusion imaging, 4D ultrasound, breast MRI, 3T MRI, functional imaging, molecular imaging, stand-up MRI, and dual-source CT. Trend two: Payors (both governmental and private) will become more organized in managing imaging costs aggressively. Health plan costs for imaging are rising 18% to 20% annually, and imaging now accounts for 10% of the total health care dollar. Advanced modalities are driving disproportionate cost increases. In response, CMS launched an imaging utilization management pilot program in November 2007 in an effort to control costs. Some commercial payors are banking on radiology benefit management companies to control their costs, while other payors are focusing on network management. For example, one major insurer will soon restrict its outpatient imaging provider network to accredited facilities; another now limits its provider network to facilities that offer at least five modalities, have an on-site radiologist, and offer extended hours. Trend three: Medicare will maintain a level playing field across all sites of service. Favorable Medicare reimbursement contributed to rapid growth in freestanding centers, with over 85% of the increase in facilities occurring between 1997 and 2008. Growth in new centers has slowed in recent years, however. One major reason for the slowdown is that many markets have become saturated. For example, the US median is 1.6 centers per 100,000 people, but some cities (such as Punta Gorda, Fla, and Ocean City, NJ) have more than seven centers per 100,000 people. The Deficit Reduction Act (DRA) has eliminated the favorable Medicare reimbursement environment for freestanding centers, creating major payment reductions from 2006 to 2007 (including a 35% reduction in technical-component payments for some IDTFs). For 2008, Medicare payments are equivalent for all imaging settings. At the same time, hospitals have become more savvy competitors in outpatient imaging and have acted to limit market opportunities for IDTFs. Some have opened competing provider-based freestanding centers, and others have partnered with radiology groups to offer a freestanding option. Trend four: Hospital provider-based centers will become more common in the short term. Hospital commercial contracts typically yield higher reimbursement. To date, only a handful of commercial payors have followed Medicare’s lead in reducing reimbursement for freestanding centers; nonetheless, hospitals often have the market clout needed to negotiate preferred reimbursement rates for outpatient imaging. In some cases, HMO/PPO provider-based payments can be made at as much as twice the per-procedure rate paid to IDTFs. Since all-payor weighted reimbursement is higher at most hospitals, imaging center operators will naturally try to tap into these better rates. Trend five: Eventually, the gap between provider-based and freestanding reimbursement will close. Commercial payors will not continue to pay a premium for provider-based imaging services that are operated exactly like freestanding centers. With increasing demand for outpatient imaging, cost pressure on payors will force them to revisit payment mechanisms for outpatient imaging. The resulting changes may include multiple-procedure reductions in all settings; at present, CMS and many commercial payors do not adjust payment for scans of contiguous body parts performed in hospitals, but they do adjust payment for the same scans if they are performed at IDTFs. Utilization management and review will also increase as payors step up efforts to leverage evidence-based medicine and IT advances to manage claims and slow demand. Trend six: The impact of the DRA will cause a shakeout (and eventual ownership consolidation) among freestanding imaging centers. Some imaging operators are clearly looking for acquisitions, and others have already made a number of acquisitions in the wake of the DRA. In the post-DRA market, there will be winners and losers. The imaging centers positioned for success will be hospital-owned imaging centers, hospital–radiology joint-venture imaging centers, multispecialty physician-owned centers with sufficient volumes, and chains owned by large radiology groups. Imaging centers in precarious positions are single-specialty, single-modality imaging centers; entrepreneur-owned imaging centers, particularly if they are also single-modality centers; and low-volume IDTFs in saturated urban markets or small, rural markets. Trend seven: Pricing will eventually be transparent within the freestanding imaging arena. A call for price transparency has been issued by governments, employers, and health plans because they believe that informed, cost-sensitive consumers will help control health care costs by shopping for the best prices for their care. In addition, cost shifting to consumers has increased their awareness of health costs, as have health savings accounts, high-deductible health plans, and the larger number of underinsured or uninsured patients paying full price for care. In response, consumers are beginning to demand price information; for example, a Zogby International poll found that 84% of those surveyed agreed with the statement, “Hospitals, doctors, and health plans should publish their prices.” There are potential hurdles that meaningful transparency must overcome. They include provider concerns over antitrust regulations, lack of participation among providers, and confusion among consumers about the difference between the provider’s charge and reimbursement from payors. In addition, there is a challenge inherent in balancing the price differences between an episode of care and a specific procedure. Due to a lack of coordination among quality measures, a high price may not equal high quality. Trend eight: The level of competition for outpatient imaging business will only increase. Intense competition will continue in most markets. Because many markets are saturated, imaging players will continue to fight over volume. In addition, imaging centers are largely fixed-cost enterprises and reimbursement is tightening; as a result, high-volume, efficient imaging centers will be positioned best to operate on thin margins. Disruptive innovations and business models will continue to challenge providers, with new (and sometimes unexpected) developments often raising unanticipated questions for imaging centers. For example, will teleradiology or other advances in IT alter how and where imaging services are delivered? Will the imaging center be the next MinuteClinic? What if the local drugstore or Wal-Mart adds radiology services to its stores? Trend nine: Consumers and referring physicians will continue to increase their expectations. Of course, these expectations do not match, since consumers and physicians have different priorities as customers of the imaging center (Figures 1 and 2)
Figure 1.The referring physician is still the primary driver in directing patients to imaging providers; by a large margin, referring physicians value quality of interpretation above all other factors that might influence the choice of imaging center.
Figure 2.Consumers, however, have different priorities, and they are becoming more influential in choosing imaging centers. Location and reputation are very important factors in consumer choice, but patient satisfaction relies primarily on four consumer issues: cleanliness of the facility, treatment by the front-desk staff, treatment by the technical staff, and ease of the overall scheduling process. Trend ten: Imaging providers will need to demonstrate value (quality, cost, and service). Improved quality and patient safety are being called for from all directions. The result will be value-driven health care. Because transparency leads to change, there will be pressure to reduce mistakes, especially as public reporting increases. There will be rewards for quality, safety, and affordability. Use of appropriateness criteria will be an important indicator of value, as will compliance with stronger MRI safety measures. CMS and commercial payors alike will shift their focus, placing more emphasis on efficiency and value, as well as quality of care. This will be accompanied by wider public reporting and grading of facilities and physicians. The successful imaging centers of the future may differ, but they will share many important attributes. They will provide high value at low cost in the form of procedures that are high in quality, safe, and competitively priced. Exceptional service levels will be required, including same-day or next-day appointments. Access to the imaging center will be convenient, and the center’s staff will be courteous and attentive, as well as highly qualified. Report turnaround within 24 hours will be needed, with images provided electronically via CD or online. While it may not always be possible to change the future impact of a current trend, the act of predicting where that trend will lead can, in itself, help imaging centers prepare to meet the coming challenges. By monitoring the forecast for outpatient imaging and readying themselves for changes well in advance, centers can ensure that they will be among tomorrow’s success stories. M. Shane Foreman is principal and founder of 3d Health Inc, Chicago. This article has been adapted from Outpatient Imaging: The Next Five Years, which he presented at Outpatient Outlook 2008: The Future of Healthcare in Tucson, Ariz, on February 25, 2008.