Outpatient Imaging Forecast: More Volume, Slower Growth, Heightened Competition

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon

With imaging representing the hospital’s greatest source of outpatient profits, hospitals must rewrite their playbooks to compete with more aggressive freestanding providers.

Strong growth, particularly for advanced imaging studies like CT, MRI, and PET/CT, has increased imaging volumes and profits at an unprecedented rate over the past decade. Strong growth will continue, despite recent payment cuts and utilization controls. Hospitals, however, will continue to face strong competition from freestanding centers as both attempt to maximize revenue in a tightening market. With the years of double-digit growth likely to be behind us, now is the time to rethink imaging-program goals.

While hospital executives know that diagnostic imaging plays an important role in keeping the hospital enterprise profitable, many are surprised to discover how profitable the service line has become, relative to other, more top-of-mind business lines. Advanced imaging volumes have been growing seemingly unabated throughout the past decade, with CT, MRI, and PET experiencing double-digit annual growth. Building on this cumulative growth, diagnostic imaging now represents the largest source of hospitals’ outpatient profits. According to Advisory Board analysis, diagnostic imaging contributed over $21 billion in 2006, besting outpatient surgical procedures (which brought in $19.8 billion).

imageFigure 1. Total contribution to 2006 profits of hospital-based outpatient services, according to the Innovations Center Futures Database, The Advisory Board Co, Washington, DC; EGD=esophagogastroduodenoscopy.

At the procedure level, imaging’s dominance is even more impressive. Imaging examinations—CT, radiography, and MRI—are the three leading contributors to overall profitability and five of the 12 most profitable procedures overall (Figure 1). Diagnostic CT alone, contributing $7.5 billion in profit in 2006, generated more dollars for hospitals than colonoscopy, cardiac catheterization, radiation therapy, and sports medicine procedures combined.

Although imaging will continue to grow at a brisk pace throughout the next decade, utilization controls and reimbursement cuts will exert significant downward pressure on imaging growth. From a clinical perspective, imaging is reaching a saturation point for many indications. For example, how many more imaging studies can be ordered for a patient with abdominal pain? This saturation is also likely to curb growth. Similarly, rising perpatient utilization is raising concerns about the downstream effects of radiation exposure; public awareness and physician sensitivity may further serve to curb growth in radiation-based imaging modalities.

While quantifying market demand may prove challenging, Imaging Performance Partnership data analysts have developed a set of forecasting tools that estimate imaging growth by both procedure and modality over the next 10 years. These forecasts indicate that MRI and CT will grow 5% and 6%, respectively, per year (Figure 2). Only PET/CT will continue to see doubledigit growth through the next decade. Our forecasting models can also assess growth potential in local markets (as defined by county or ZIP code) of individual member hospitals. These local analyses of markets across the nation confirm that nearly all areas are likely to see similar reductions in growth, moving forward.

Outpatient Competition

Although hospitals have seen unprecedented growth in outpatient imaging, freestanding centers and physician-office–based providers—hospitals’ major competitors for this business— have experienced even more robust growth. Imaging Performance Partnership analysis indicates that nonhospital volumes for advanced imaging grew 13% more quickly than hospitalbased volumes between 2003 and 2006. With nearly all major markets experiencing rapid growth in the number of imaging business competitors over the past decade, more than half of hospitals now report the presence of three or more nonhospital competitors for imaging business, according to Advisory Board member surveys.

imageFigure 2. National hospital-based outpatient imaging volumes, 2006–2016, as projected by the Imaging Performance Partnership Outpatient Imaging Forecaster; CAGR=compound annual growth rate.
imageFigure 3. Migration of outpatient imaging volumes from the hospital setting predicted by the Imaging Performance Partnership Outpatient Imaging Forecaster.

Although recent reimbursement cuts have targeted freestanding