Operating an Imaging-center Chain in the Postapocalyptic Era

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It began with the DRA, and ever since, CMS and Congress have set upon outpatient imaging like dogs on a bone, culminating in a new round of cuts to the technical component contained in the health-reform law. As a result, operations at many outpatient-imaging organizations came into acute focus in 2005, and they continue to be scrutinized.

imageClete Madden

Radiology Business Journal talked with Clete Madden, COO of Touchstone Medical Imaging (Brentwood, Tennessee), an OIC company with 18 locations, but this was no pity party. Madden is downright upbeat about the future of outpatient imaging.

RBJ: After DRA implementation, cuts to the technical component of outpatient imaging resulted in a significant blow to revenue for outpatient-imaging providers. Have you done the math on how the changes to the equipment-utilization rate and multiple-procedure discounts will affect revenue in 2011?

Madden: We’ve done certain calculations on that, and the impact depends upon your payor mix, obviously. We’re well under 20% for Medicare in our payor mix, so it’s not as severe for us as it might be for others. We’ve definitely done the math and have a feel for what the impact could be, and we continue to monitor it. It will have a noticeable impact, but it is not something we can’t overcome, just as we did with respect to the DRA.

RBJ: If it is like many other imaging-center companies, Touchstone tightened operations considerably after the DRA. As COO, where will you look for cost-cutting opportunities?

Madden: Anybody still in the will-look stage has got some scrambling to do. We’ve been looking at this for quite a while now, knowing that something was coming down the road. We’ve looked at every expense line item and prioritized the highest-cost line items first. We looked at payroll, radiology reading-fee contracts, equipment-maintenance arrangements, facility leases, and billing/collections, and we are pretty deeply into several initiatives that involve cost cutting in all of those areas.

RBJ: As the COO of an IDTF, you have been in a good position to test the quality and the prices in the teleradiology marketplace. Have you been able to achieve any savings here in cost or turnaround time?

Madden: We’ve looked at that, and we’ve had some people approach us. At present, we are not too deeply into teleradiology, with a couple of exceptions. Our focus has been making sure that radiologists are on-site at our centers, for a number of reasons (including covering contrast administration and being available for consultation with referring physicians).

A couple of things that we have done in teleradiology have been more payor driven. In one part of the country, we have an initiative where the payor has reduced its network and let in fewer radiology imaging centers. You have to meet certain quality metrics and technology metrics before the payor will let you in, and as part of that, we have a backup teleradiology arrangement in place. If there is not a neuroradiologist with a certificate of added qualification available, the backup is through this teleradiology provider.

We have a couple of instances where we have carveouts on the radiologist contracts we have, because a particular referring physician wants a particular national group to read his or her studies. Aside from that, though, we have not done a whole lot with that.

RBJ: Are there opportunities to increase volume to offset reimbursement reductions? Where are the short-term referral opportunities?

Madden: For us, the first and foremost concerns are continuing to provide high-quality care to patients and timely reports to referring physicians (and not compromising on that), holding hard and fast to our bread and butter. Payors are getting more astute with respect to quality requirements, which is the reason for one of the teleradiology arrangements I mentioned earlier. Showing that we can get into those arrangements is helping our volumes and keeping out competitors that can’t meet those metrics.

We’re still talking about our pricing because we are definitely a better option than many hospitals and hospital/IDTF joint ventures, and much more convenient, and the consumers are getting more savvy every day. That’s creating opportunities for us with some of the payors. We have a couple of arrangements in which the referring-physician pool is actually incentivized, through a bonus pool, to steer imaging out of hospitals. We’ve become part of those.

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