Radiology and the IDN: The Big Shift

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Growing your high-tech imaging business is just not the same game that it used to be, according to William Barta, corporate director of imaging services for Fairview Health Services (Minneapolis, Minnesota). “The days of patients coming to us just because they have to are gone,” he says. “It’s a whole different mindset from what health care used to be years ago. It really boils down to the economy, and health care is late to the game, from a sales perspective.” He continues, “Disposable dollars are fewer, and gas prices are up; employers are expecting people to pay a higher percentage of their deductibles or copayments, and people are becoming savvy shoppers. We get pricing calls all the time.” When times get tough, the tough-minded must become more creative in order to bolster their positions. In Minneapolis, the company is taking advantage of the local corporate environment (which includes the headquarters of Best Buy and Target) to grow its brand through a mobile mammography business that Barta describes as thriving. It’s just one example of the ways in which Fairview Health Services is thinking laterally about driving the delivery of care to its patients. “We’re like most other providers,” Barta says. “We are looking at expanding hours, requiring and requesting physicians to work later, staggering shifts so that they work in the evenings, and trying to funnel people to their primary-care providers—so they have a relationship built, rather than an emergency-department visit.” That means purposely pushing business out of Fairview Health Services hospitals and into the primary-care setting, Barta says, which is subsequently driving its imaging business into the community. Inpatient volumes are declining steadily, Barta says, but patients are more acutely ill than ever. As a percentage of the total imaging volume, more imaging is taking place in outpatient facilities, but if you just shift patients from one setting to another, he says, “You can’t just rest on your laurels and expect to stay alive and stay in the black.” Every exam must be medically indicated—and, therefore, billable. “The key, today, is appropriate use,” Barta says. “You make sure you’ve got tools or algorithms in place so that physicians are making the right choices, from an exam-sequencing perspective. Reimbursements are down; many of the patients are paid under a DRG. It’s always a delicate balance, and you’re walking the line between billable services and putting through as many patients as you can, for staff productivity.” Fairview Health Services operates eight hospitals and roughly 70 clinics, but only two imaging centers with advanced imaging modalities. Barta describes this strategic approach as symptomatic of a greater nationwide trend whereby imaging centers are proliferating more slowly and at less distance from one another. Planning decisions are based not only on demographics and geography, but also on an economic perspective. “We are moving down a pathway of very purposefully deciding what to do with our capital resources, where we deploy them, and what services we offer,” Barta says. “At all sites, should we do cardiology, orthopedics, and interventional procedures?” Captains of Industry Fairview Health Services employs the same strategies that drove the captains of industry at the turn of the 20th century. The dictates of horizontal and vertical integration hold that success can be managed by condensing the value chain along logistical lines and controlling costs by outgrowing (or buying out) the competition. Barta says, “There’s a conversation that occurs every year, with the heads of two radiology groups, to determine what capital we need across the system. From a strategic perspective, where do we want to build or retain business, and where do we want to put another MRI system? Where does it demographically make sense to put in equipment? Where do we need to chip away at the competition?” At the back end, Fairview Health Services is harnessing the buying power of 24 autonomous facilities as part of a purchasing alliance of which the company is also part owner. The arrangement has worked well, so far, for disposable goods and pharmaceuticals, and now Fairview Health Services is hoping to bring the same approach to capital-equipment purchases. Barta explains, “Somehow or other, you have to get your arms around your total capital expenditure for the year and say, ‘How do we aggregate this, as best we can, so that we leverage buying power to get the best deal, rather than doing one-off purchases?’” The upside, according to Barta, is that these strategic decisions ultimately have a positive impact on patient care. Using capital investment judiciously, synchronizing strategies within existing infrastructure, and taking advantage of local market conditions to create new opportunities are all de facto means of obtaining additional resources for patient care (and improving the quality of that care). To maximize the benefit of these strategies, however, Fairview Health Services has to bring everything under one umbrella. That means being cautious about joint ventures because of regulatory requirements. Fairview Health Services is also working to reduce service costs by standardizing its equipment across a handful of vendors and bringing its imaging-equipment repair/maintenance services in-house. Barta explains that taking on those up-front costs involves delicate negotiation. “Service is a revenue producer for vendors, and over the course of 10 to 20 years, it averages out in their favor,” he says. “We were averaging more than $12 million a year in service contracts. Those are real dollars. Our goal is to save roughly 40% of that.” In sum, Barta says, health care is still “very schizophrenic: We’ve got a lot of competing goals, from more volume and productivity to appropriate use and less use; from hospital administrators and general-management people who are being given incentives from a local perspective,” he says. “I think the system approach is the right approach, but having competition in a market area is the right approach because it drives quality at lower costs. Within each IDN, I think leveraging your scope, size, and best practices is the way to go.” Across the Continental Divide At Intermountain Healthcare (Salt Lake City, Utah), David Monaghan, MHA, assistant vice president of imaging services, says that the same types of conversations have been governing questions of resource deployment: What is available, what is needed, and where is the best place to put it? As in the case of Fairview Health Services, Monaghan says, Intermountain Healthcare is focusing more on the effective use of capital equipment than on new spending. “The hospitals in our health system have the complement of technology that they need,” Monaghan says. “The question is whether they need to recapitalize or add capacity as much as they have in the past.” In Monaghan’s thinking, Intermoun-tain Healthcare is on the cusp of a much-needed change. In recent years, he says, the company has increased its focus on segmenting or segregating the services that it delivers on campus. In some cases, he says, that has meant favoring the continuous deployment of technology; in others, Intermountain Healthcare is exploring the best ways to put equipment directly at the point of care—and that doesn’t necessarily mean keeping it in the hospital. “We don’t have a ton of excess capacity in terms of where the equipment lies today,” Monaghan says. “Everything’s being used pretty well. What we’re looking at is possible overcapacity, in some areas, and a probable need to deploy additional imaging assets or redeploy existing capacity outside of the hospital.” Currently, the Intermountain Health-care capital-equipment team is evaluating equipment inventory and any proposals to purchase equipment, centralizing those decisions from a systemwide coordination point. “It’s a fundamental shift in thinking,” Monaghan says. “We don’t want to put equipment in hospitals if an outpatient environment would offer the population what is needed to ensure that patients, referring providers, and payors are satisfied with the quality and cost of the services being provided.” In migrating care to outpatient locations, whether those are freestanding facilities or integrated sites that provide complementary service lines within the health system, Monaghan says, Intermountain Healthcare is preparing for health reform, aggressively, in the next three to five years—despite the absence of a top-down methodology for the exclusive government of its imaging-service deployment. That could mean pairing imaging with another Intermountain Healthcare division—such as laboratory services, obstetrics, or medical-group locations—if that’s the best way to achieve multiple goals in all service deployments in the area. “We don’t have a blueprint because we determine the best strategy for each region based on the geographic need there,” he says. “We’re really looking at how we can best care for patients in the many communities we serve.” According to Monaghan, Intermountain Healthcare decided that, in terms of the deployment and coordination of its imaging services, it needed to run imaging as a systemwide enterprise; in fact, he says, that’s why he was hired. “We developed a team around this,” Monaghan says, “and within a short period of time, the paradigm of the future was becoming apparent. We were looking at all these things—maybe, a little bit, from the old thinking, with regard to competing and appropriate market-share growth—and we quickly got to the point where we’re moving toward population-based care management. All of those strategies still applied; it’s just that the focus is now a little more urgent and is part of a bigger picture.” Like Fairview Health Services, Intermountain Healthcare tries to keep as much under its own aegis as possible. All of its sites are wholly owned. Although Intermountain Healthcare might outsource components of its business—for example, a third-party marketing company executes its physician-liaison strategy—the company finds that it hews closest to its mission when all the moving parts are under one roof. Monaghan reports that, by many accounts, it’s working. “We have measured a noted increase in referring-provider satisfaction and loyalty from that work,” he says. When the conventional wisdom fails to satisfy the needs of a health system, changes are already overdue. Future, patient-centered models of equipment deployment must necessarily reflect the needs of the communities they serve, even if they do not resemble anything previously explored within them. How well such models function within the hierarchy of their health systems could determine not only the amount of revenue that they generate and the number of patients they reach, but the overall viability of the systems themselves. Matt Skoufalos is a staff writer for Radiology Business Journal.