These are challenging days to be a radiologist. Decreasing payment, financial uncertainties, market consolidation of imaging facilities, utilization controls, disrupted business plans, questionable business models, and turf and contract challenges have become commonplace concerns for radiology practices. Added to these issues are equally valid concerns about the growing commoditization of radiology services, enabled by decentralized reading services based on PACS and the explosion of teleradiology-based coverage services. The prospect of competing with $40 CT interpretation fees has triggered more than a few late-night radiology practice meetings.
The hospital’s view of imaging is equally challenging in today’s market. For years, hospitals were overly cautious about investing in outpatient imaging services. Starting in 2001 to 2003, hospital investments in outpatient imaging services started to grow, just in time to collide with payor concerns about the growth and inappropriate utilization of imaging services, the market impact of the DRA, lower imaging-exam technical payments, the rise of radiology benefit management (RBM) companies, and the negative business impact of the worst recession in almost 80 years.
The net result is that imaging has an image problem. Hospital executives frequently underappreciate imaging as a fundamental patient-management tool. Conversely, radiologists have frequently overestimated or underappreciated the clinical market value of the service that they deliver. Many Washington lawmakers and policy specialists view imaging as an overly entrepreneurial business in need of more discipline and lower profit margins. Some clinicians and surgeons might commonly overestimate their knowledge of imaging technologies, and who knows the name of the radiologist who is reading for them? Hence, we have the case of the underappreciated and invisible radiologist.
The radiology market is facing more turbulent challenges than it has ever faced. On the positive side, more than half of radiologists earned, in 2008, an income greater than $400,000, and hospitals have been moving toward developing comprehensive inpatient and outpatient imaging strategies. On the negative side, radiologists are justifiably concerned about the impact of payor- and regulator-driven payment reductions as numerous hospitals stare into the financial abyss of Medicare cuts.
Radiology is a small (but highly visible) segment of the health care market that has been characterized by high cost variability, entrepreneurial appeal, high profit margins, and lagging discipline. As a small portion of the overall health care system, however, it operates in a market shaped by politics and the new math of health care economics.
The New Math
The health care market of 2009 is faced with the challenge of adapting to a new math. This new math is characterized by a term that has rarely entered US health care policy and economics dialogue: a trillion dollars. The new math (Figure 1) is a potent driver of the health care policy agenda of the White House, Congress, the Congressional Budget Office (CBO), the Office of Management and Budget, the Institute of Medicine, numerous state governments, private payors and employers, Washington’s K Street lobbyists, and Republican and Democratic politicians.
The current recession started during the fourth quarter of 2007. In late 2008, the Wall Street meltdown and subprime fiasco led to the implementation of the $700 billion Troubled Asset Relief Program, followed by the American Recovery and Reinvestment Act, which was signed in February 2009 and will have a direct, net federal budget impact of at least $800 billion between 2009 and 2019.
The 2009 federal budget deficit is $1.8 trillion, while the total US federal debt is $11.6 trillion. US health care expenditures reached $2.5 trillion for 2008 (Figure 2), representing approximately 16% of the gross domestic product (GDP). According to the CBO, this number is projected to rise to almost 47% of the GDP if the current rate of health care spending is extrapolated forward to 2082 without any major funding and process corrections. The CBO also projects that the unfunded Social Security liability through 2082 will be $15 trillion; the estimated unfunded