Bursting the Radiology Bubble

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I have written frequently about the implications of economic turbulence in radiology; we are facing some now, and others will unfold in the months and years ahead. These far-reaching implications concern nothing less than the survival of some private radiology practices and the death of fee-for-service payment. Our current economic model is obviously unsustainable: Society can’t afford it, and payors are tired of feeding this dysfunctional beast.

Key to understanding how anticipated changes in payment will profoundly affect the profession three to five years from now is the notion that ours is a marketplace in which supply and demand are unbalanced—in favor of payors.

This gives buyers confidence that continuing to squeeze costs out of imaging will not result in denied access. The wait for a study might become longer, but excess imaging capacity indicates that such delays will be minimal.

The problem arises from the payor/regulator/legislator perception that at least 30% of imaging studies are unnecessary. Add to this the conundrum of the sustainable growth rate’s so-called doc fix (which adds hundreds of billions of dollars to federal balance-sheet liabilities), and the radiology bubble begins to stretch to its limit. The fee-for-service model is under the closest scrutiny that it has ever faced, and its future appears uncertain (at best).

It gets worse. Some bundled-payment and capitation models have become attractive precisely when cultural shifts have made many younger radiologists amenable to the idea of predictable, stable hospital employment (versus risky, unpredictable, and turbulent private practice). The bubble expands even more.

Now, let’s add the macroeconomic piece. The United States is deeply in debt. The bright spot of health care is dimming, as it becomes more obvious that health reform is adding costs as it adds covered lives. The tension among medical specialties, as they jockey for turf and revenue, is creating enemies among those who were once colleagues. First on the enemies list is radiology, as its piecework payment model continues to build wealth and create lifestyles that are the envy of all.

Reality check: This bubble will definitely burst. The only questions are where you will be when it happens, what you will do about it, and how you will handle a potential reduction of 25% or so in your income. Will you have plan B ready for implementation? Will you understand the new normal and how to navigate its complexities? Will you collapse under the weight and strain of this recalibration because you remained complacent, convinced that this was all much ado about nothing?

Perhaps the best way to view these inevitable changes is just as one would look at one’s home, in an honest, objective appraisal. Yes, at one time, the home’s value might have been double or triple what you paid for it, but did you really think it was worth that much money—or were you simply caught up in the tidal wave of growth that carried you along with everyone else? This is the type of cost/benefit/value equation that payors are evaluating as they plan for a future based on a much more restricted use of fee-for-service payments.

What is to be done? First, realize that the new normal is approaching faster than we anticipated. Second, create a strategic plan that expects more severe cuts and a bundled-payment mechanism similar to DRGs. Third, get all people in your organization on the same page—aligned, understanding the stakes, and linked in ways that will tap their skills and creativity to build survival strategies. In other words, lead from the front, and use the business intelligence in your systems to imagine alternative scenarios that will strengthen your operation, in preparation for the day that bad news arrives.

I remain optimistic about the future of radiology. The specialty’s contribution is unparalleled. The brainpower is incredible. The value proposition is amazing. Soon, though, it will be a different ball game, and the rules will change dramatically.

Those who plan well, are prepared, and understand the stakes in this realignment not only will survive, but will come through in fine shape. Organizations that differentiate themselves, build top-level brand value, cultivate customer loyalty, and link their people and resources in a formidable competitive machine will thrive, no matter what payment model emerges.

Those who ignore the fiscal realities of health care must hear this: The pin is mere centimeters