Radiology in an Economic Downturn Strategies for Success

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In the near term, radiology practices must turn their attention to managing expens­es instead of growth. Physicians in radi­ology who believe that the current eco­nomic downturn will somehow bypass their practices, and who do not gird themselves for the new reality, may be left on the scrap heap of failed enterprises. Because we are in a service industry, we are susceptible to the vagaries of available disposable income. Those practices currently exploring strate­gies for adjusting to the ongoing chaos will thrive. Those not engaging—right now—in strategic planning will suffer. The graphs of increases in imaging services provided to CMS participants are misleading. Not only are the data from 2008 not readily available, they include imaging services pro­vided by nonradiologists, where the largest growth is occurring. While it is clear that self-referral and subsequent overutilization are hurting our industry, they hide the fact that our own growth in the past two years has flat­tened, and that was in bullish times. How do we survive when utilization falls? It’s coming. I believe that the decline in health services will result from:
  • the existence of fewer employer-sponsored health plans, and an increase in the number of uninsured people;
  • the performance of fewer elective surgeries, such as cosmetic procedures and vein stripping;
  • the choice, by injured patients, of medical therapy of rest and immobiliz­ation instead of orthopedic procedures;
  • reductions in screening studies (such as mammography, virtual colonoscopy, and bone densitometry); and
  • the lag time before any government-based or tax-credit–based program is instituted, if any such program is created at all: I predict that the tax credits will be used for basic household expenses and not for medical care, particularly when health care premiums exceed tax credits and the choice becomes one of buying food and making credit-card–debt payments versus purchasing health care coverage.
How do we survive when utilization falls? We must either contract/conserve or com­bine. One key to surviving when utilization diminishes is to manage compensation expenses. Our largest expenses are salaries and benefits, and now is not the time to be overstaffed. Look carefully at the number of employees engaged in an activity. Compare your situation with industry standards avail­able from peer organizations, such as the RBMA. Consider offering part-time positions and/or outsourcing a limited part of your practice. Is it time to implement voice-recog­nition dictation fully, to cut transcription costs? Prepare your physicians for the possi­bility of salary cuts. Be circumspect about your benefits pack­ages. If laying off people is anathema to you, explain to your employees that they may be limited to lower-cost health care/disability programs. Converting to an end-of-year IRA program (for employees who work the full year) may create savings, as opposed to a monthly plan, if you can afford a retirement plan at all. Consider reducing business allowance accounts. Some people will use money unnecessarily if you give it to them; reevaluate what is fair value for practice expenses. Optimize your IT solutions to reduce costs. Is it finally time to go filmless, or is the upfront cost too high? Should you provide CDs instead of film to your patients? Absolutely! Eliminate storage costs by electronic means, even if your physicians want to continue to be film readers. In so doing, you may also be able to reduce film-handling personnel. Employ Economies of Scale Another key to managing expenses is tak­ing advantage of economies of scale. By employing economies of scale, one can bet­ter negotiate with vendors and managed care organizations (MCOs). Consider consolidat­ing radiology groups into larger buying groups. Being a major player in the market will allow the negotiation of more favorable rates with providers and vendors. Consider consolidating capital-equipment purchases with single vendors to obtain greater discounts by virtue of the size of the purchase. Bundle purchases and garner savings. The same is true for service contracts. Using a single-source vendor to service all of your multi-vendor equipment is common at academic institutions, and it allows excellent savings (and efficiencies, with one-call service requests). Apply economies of scale to malpractice insurance. Ask your carrier what quality-assurance procedures would lead to reduc­tions in your rates: double reading of emer­gency-department cases, computer-aided detection for mammography, and/or auto­mated physician-notification schemes? Remember that the insurers have also suf­fered economic losses of investment income in this market. Expect a potential fee hike, but be aggressive about staving this off with innovative ideas. Leave no stone unturned as you seek opportunities to manage expenses. Convert to electronic just-in-time payment schemes. Eliminate postage and mailing costs, as much as possible, and automate the process to reduce the number of administrative billing personnel. Employ just-in-time deliv­ery of supplies. Managing inventory appro­priately can reduce storage/maintenance costs, insurance costs, and expired supplies. Lobby Congress to prevent further reim­bursement cuts and support legislation against self-referral. Make sure your team is focused and aware of the environment. Engage its members in brainstorming cost-cutting ideas. Be wary of your accounts receivable in a down market—people are less apt to make their copayments, and MCOs may also delay payments. Stay on top of this. The playing field has changed. Those who are prepared will weather the storm and maintain their profitability. Rather than expecting the revenue growth that has driven our industry in the past, I believe that today’s focus should be on expense management.