Two Views of Value: The Practice–Hospital Entente and Kaiser Permanente

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What policymakers and payors want from radiology departments is not volume, but value. If radiologists can help hospitals contain costs, improve quality, and increase market share, then these radiology providers will be well positioned to carry their hospitals—and themselves—into the era of quality- and performance-based pay.

Determining the exact nature of value-based radiology, however, is a work in progress (and that nature is likely to vary, depending on location). Although they aren’t sure how these changes will play out, hospital administrators and radiology chiefs have already seen that value will be the new king.

On December 1, 2011, at the annual meeting of the RSNA in Chicago, Illinois, Vijay M. Rao, MD, presented “Value-added Services of Hospital-based Radiology Groups,” an influential paper defining what value-based radiology tries to do. Rao highlighted six action areas: patient safety; exam quality; radiology-report quality; service, especially report-turnaround time; cost containment; and building hospital business.

Perceiving value-based imaging in the big picture is one thing, but what does that mean on the ground? How do radiologists and radiology departments go about delivering value-based care? What are the expectations of hospital administrators? What must radiology groups demand of themselves? Radiology Business Journal interviewed representatives operating in two very different models—the private practice–hospital collaborative and Kaiser Permanente’s captive-group HMO—to understand how these questions are being answered in practice.

The Hospital–Practice Collaborative

In 2008, administrators at St Elizabeth Healthcare (Covington, Kentucky)—the oldest and largest health-care provider in Northern Kentucky—and the leaders of RANK, a 29-radiologist private practice, signed an agreement laying out financial incentives and goals to be met. Once the original radiology-services agreement (which simply delineated services to be provided) had been executed between St Elizabeth Healthcare and RANK, discussions between the partners soon turned to working toward higher levels of collaboration.

These were based on definable measures that, if achieved, would result in a higher-quality product and experience for the patient community, with a lower cost of delivery. The partners then created a leadership agreement that would define a series of operational and strategic measurements—with significant financial incentives attached. It was collectively decided that the original leadership agreement would have six measures: reduction in average turnaround time; percentage of self-edited reports; results of a survey program (involving technologists, emergency-department staff, hospitalists, and patients); development of an interventional-radiology oncology program; creation of a continuing-education program for technologists; and development of a comprehensive coronary CT angiography program.

Upon completion of the first year and significant progress toward the six original goals, the partners expanded the leadership-agreement efforts to include 14 measures, ranging from continued decreases in turnaround time and increases in the percentage of self-edited reports to spine service-line collaboration, a comprehensive cardiac-imaging program, reduction of inpatient PET volumes, and strong programming in management of the quality of image interpretation and delivery.

RANK provides 24/7 subspecialized imaging-exam interpretations for St Elizabeth Healthcare’s four hospitals and three outpatient imaging centers (in 2012, interpreting half a million studies). The practice also operates its own vascular/interventional center and reads for a smattering of nonradiologist practices that have their own imaging equipment.

Brad Miller, MD, an interventional radiologist and RANK’s president, says that the 2008 agreement through which the radiology group formalized its relationship with St Elizabeth Healthcare came after years of reading for the hospitals, based (more or less) on a handshake. “We both agreed to formalize an agreement,” Miller says. “RANK wanted to put skin in the game.” The practice committed itself to developing measurements to improve service, and it sought to tie compensation to performance.

RANK’s CEO, C. Chad Wiggins, MHSA, adds, “We recognized that St Elizabeth Healthcare does well when we do well. We have a symbiotic relationship.” Wiggins says that the practice also believed that a closer collaboration would make it easier for the group to maintain independence.

External and Internal Benchmarks

The leadership agreement came just at the time that St Elizabeth Healthcare was implementing a PACS tied to a voice-recognition system for radiology reports. “We built that into the equation as well,” Miller says.

A key benchmark in the original agreement established an ambitious turnaround time of 90% of exams being reported in less than three hours, according to James Roebker, MD, diagnostic radiologist and St Elizabeth Healthcare’s system director of imaging. A related benchmark is producing 90% self-edited radiology reports. Self-editing speeds up turnaround time and holds down costs for St Elizabeth Healthcare, which needs to employ fewer transcriptionists when more reports are self-edited, he explains.

“All of those goals are tied to monetary values,” Roebker says. “We don’t get the money unless they are met. The money is actually significant.”

The practice has made considerable progress in reducing turnaround times since the agreement was put into place. When first measured, the turnaround time for 75% of reports was less than five hours. Through September 2013, the turnaround time for 91% of reports is less than 2.2 hours.

Miller uses the emergency departments at St Elizabeth Healthcare as an example of how well the measurements in the leadership agreement have served patients and the hospital. Turnaround time in the emergency departments is now 30 minutes or less.

“By using the metrics, we have increased the value of our product to patients and to physicians in the emergency department,” Miller says. “Triage is much quicker now because the exam reports are available to the physicians by the time they see patients.”

The agreement has had the effect of creating value for health-care consumers, Wiggins believes. “The beauty of this relationship is that it’s not just the classic interpretation and dictation,” he says. “This really is a collaborative effort, and the outcome is a better product: better outcomes and lower cost to the patient. The overall transition is to one that’s forward thinking in working for payors and consumers.”

RANK holds itself accountable for meeting performance measures both with its external business partners and within the practice through a program that holds the radiologists to rigorous standards of quality production. A tiered system with radiologist scorecards for performance assessment was adopted in 2009 to improve the alignment of physicians’ quality and productivity efforts with the practice’s goals. 

The system works in conjunction with quality programs, overlaying the worklist with the goal of peer review and resulting in reduced variability in reading outcomes. The practice maintains peer review as a core recurring goal and has amassed in excess of 100,000 peer-review data points.

The tiered system evaluates radiologists’ performance (both quality and productivity) compared with the group’s median; this results in a significant portion of personal income being tied to individual performance. For 2014 and beyond, RANK is working to develop a collaborative approach to quality management by collaborating with other large national practices to benchmark performance across all modalities (in preparation for entering risk-based payor agreements).

Regional Impact

RANK has cut turnaround time to the point that 95% of all exams are now finalized in under four hours, with emergency-department and critical-findings reports in the hands of ordering physicians in less than 30 minutes. With turnaround time under control, the focus has shifted to some of the other measures to which RANK committed itself under its leadership agreement, according to Jason Wessel, MBA, St Elizabeth Healthcare’s assistant vice president of patient-care services. Wessel previously served as health system radiology director.

To understand the importance and potential impact of the collaboration between the radiology practice and the hospital, it’s important to understand the nature of the Greater Cincinnati region; for example, as Wessel says, “The Cincinnati airport is actually in Northern Kentucky.” Southwestern Ohio, Northern Kentucky, and Southeastern Indiana converge near Cincinnati.

St Elizabeth Healthcare is the dominant provider on the Kentucky side of the Ohio River, Wessel says, but it faces competition from five major health-care systems operating in Greater Cincinnati. To stay dominant, St Elizabeth Healthcare is relying on RANK for more than around-the-clock coverage in its facilities, Wessel says. It wants RANK to be involved in hospital leadership in a variety of ways.

In addition to undertaking the initiatives outlined in the leadership agreement, RANK has already trained CT technologists for cardiac screening, which is underway. Wessel says, “It’s a program that saves lives. The patient pays $300 for the cardiac screening, typically out of pocket. There is a consultation with radiologists—and a high-quality image, acquired with a low radiation dose.”

St Elizabeth Healthcare and RANK are also working on a new intervention collaboration that will allow the health system to expand services and stay competitive in its market—or (better yet) ahead of the game. “It’s an effort to offer more advanced procedures,” Wessel says. “One of them is an yttrium-90 treatment for metastatic disease of the liver.”

RANK, Wessel adds, has been helpful in the way that it has designated a single member of the radiology practice to administer each quality/performance initiative with St Elizabeth Healthcare, whether it’s the yttrium-90 program, turnaround-time reduction, cardiac screening, or something else. “I only need that one opinion,” Wessel says.

Standardization and Cost Containment

Cost containment through standardization is another key initiative that is tied to the agreement. “We have developed committees composed of all the frontline technologists and radiologists for each modality,” Wessel explains. “The goal is to define best practices and then work with those for better prices in return for market share. By allowing our frontline staff and radiologists to take leadership, we’ve accomplished—in about a year—what I thought would take years. We’re about 95% standardized, across the system.”

Wessel reports that his assessment was confirmed by the Advisory Board Co; following a review of the imaging-service line, it described RANK as meeting best-practices criteria for all benchmarks. Wessel adds that St Elizabeth Healthcare’s cost-containment efforts are not undertaken to enrich the organization. “The collaboration is more about reducing the cost of care to the consumer,” he says. “We try to remain cost competitive in the market. The way to do that proactively is to reduce cost. RANK has been a big part of that.”

St Elizabeth Healthcare has not yet formed an accountable-care organization. The hospitals are collecting the technical-component reimbursement for imaging exams, and RANK is billing for the professional component. The future, however, is clearly going to bring some other payment model. “I think it’s inevitable,” Wessel says.

Wessel adds that the collaborative agreement between St Elizabeth Healthcare and RANK leaves the radiology group at risk for the loss of financial incentives if the established levels for performance/quality measures aren’t met—but that’s not the biggest risk that the group faces. “They are at risk financially, but they are more at risk on the exclusivity side,” he says. “We could always open ourselves up to an outside group. As long as the goals and metrics, with RANK, are met, we have no reason to do that. I’ve worked with a lot of radiology groups, and they’re one of the best.”

It doesn’t seem to bother the RANK administrators that so much of their practice is tied to a single client. “The reality is that we don’t think in terms of seeing them change radiology providers,” Wiggins says. “When a medical practice thinks it’s irreplaceable, that is when it’s most vulnerable. We believe that how well St Elizabeth Healthcare does is how well RANK does.”

Miller adds, “When it comes to bundled payment and those kinds of models, we clearly see that. We’re not blind to the things in front of us. Radiology is being viewed as a commodity, but we view that as both a threat and an opportunity. With our coverage, and with the value-added services we provide, St Elizabeth Healthcare can’t get anything better than what we give it.” That is one on-the-ground view of value-based radiology: When services are so good, there is no reason to change.

Kaiser Permanente

In 1945, when Henry J. Kaiser founded Kaiser Permanente (Oakland, California) to provide health care for his employees and their families, he was a shipbuilding, steel, aluminum, and automobile-manufacturing magnate. Now, the Kaiser industries have been absorbed into history, its cars are collectibles, and the Kaiser name is best known in association with the country’s largest provider of managed care.

Kaiser Permanente has grown to be huge: It serves nearly nine million plan members through 37 hospitals and medical centers and 611 medical offices. According to the company, it has about 168,000 employees and 14,600 physicians on staff. In its most recent reporting year, Kaiser Permanente had operating revenues of $47.9 billion, with net income of about $1.6 billion. SCPMG is just one of the health-care giant’s regional entities; its 12 hospitals and medical centers are administered both corporately (from Oakland) and regionally, in southern California, by SCPMG.

Danny N. Chang, MD, an interventional radiologist, is regional chief of radiology for SCPMG. He is also chief of radiology at Kaiser Permanente Riverside Medical Center (KPRMC), a hospital and integrated-care center that serves about 350,000 Kaiser Permanente plan members.

Chang is busy: He practices interventional radiology full-time and handles his administrative duties part-time, he explains. “I meet with the other radiology chiefs once a month to go over regional directives,” he says. “I report to SCPMG. The management of the radiology service is in the hands of the medical group.”

SCPMG, Chang says, is a key segment of the Kaiser Permanente administrative structure. It is a for-profit partnership composed of Kaiser Permanente physicians. SCPMG has about 5,500 physician partners, about 200 of whom are radiologists, Chang says. He adds that the SCPMG radiologists read about 3.5 million exams per year—approximately one exam for every Kaiser Permanente plan member in Southern California.

Physicians hire into Kaiser Permanente as employees and follow a three-year track to partnership in the medical group. With partnership comes voting rights in leadership decisions, Chang says. The actual operational decisions are in the hands of the medical chiefs and (in the case of radiology) of the radiology-department chiefs, he adds.

KPRMC’s staff includes about 15 radiologists, Chang says. He reports that each hospital carries out an SCPMG regional policy directive that addresses affordability, access, quality, and patient satisfaction.

Screening As Value

One of the organizational goals for SCPMG radiology is mammography screening, Chang says. As Kaiser Permanente is a managed-care company with a set yearly patient-care budget, almost every department—including radiology—becomes a cost center, Chang says. As a result, Kaiser Permanente puts emphasis on preventive care, and at KPRMC, Chang has gained a reputation for pushing the mammography-screening program hard.

In 2003, Chang says, mammography-screening rates for SCPMG were considered low; about 75% of eligible women, aged 52 to 74, were being screened. Chang began aggressively pushing mammography first at KPRMC. Kaiser Permanente, he says, had the advantage of robust electronic medical records for each of its plan members.

The record keeping is integrated, and plan members, based on the nature of their health coverage, are basically locked into the Kaiser Permanente network of facilities. The mammography-eligible women essentially couldn’t escape being flagged. If they showed up for an appointment for some other condition, they were reminded that they hadn’t had a mammogram yet and were encouraged to schedule one.

Chang went so far as to assign staff to call patients at home to schedule mammograms. He worked with the SCPMG radiology directors to extend the effort regionwide. In less than a decade, SCPMG had achieved the highest screening-compliance rates in the nation, at around 90%, Chang says. Mammography has since become somewhat controversial, and the screening rate now is about 88%, he adds.

Mammography and follow-up care belong to radiology at the outset, Chang says. “For any abnormal findings, the radiologists are responsible for doing further imaging and conducting a biopsy before referring the case to a surgeon. If we see something abnormal, we’re committed to working patients up in radiology in three days, and then getting them to a surgeon within another three days. We want to decrease the waiting time, when the patient has cancer. The outside world is not as integrated as we are.”

Chang says that the value of mammography screening has shown up as a better rate of breast-cancer survival for Kaiser Permanente’s patients. Outside radiology, Kaiser Permanente also has emphasized colonoscopy screening for its plan members, with good results.

It is now implementing ultrasound screening for abdominal aortic aneurysms, Chang says. “If you have hypertension, there will be an alert for the physician to order an abdominal ultrasound,” he explains. “If the aorta is abnormal, a surgeon is contacted, the patient goes to immediate surgery, or the patient is flagged to be followed in our safety net.”

Incidental Findings

Another regional initiative that SCPMG is wrestling with is how to handle incidental radiological findings, Chang says. This involves not only radiology, but multiple medical specialties in which images are reviewed. The question is what guidelines Kaiser Permanente should implement to address specific findings.

“We pick up a lot of incidental findings. How do we track that? How do we make sure that the patient doesn’t get lost? There’s not that much information out there on how to do that,” Chang notes.

He uses the example of kidney lesions of indeterminate malignancy. Should they be followed up in six months or a year? To whom should the follow-up alert go? Should it be flagged for the urologist when the patient schedules an exam? Should radiology keep the alert on its monitors?

“We need to meet and discuss how to work up this lesion. We want to make sure it’s not forgotten,” Chang says.

Guidelines will differ, depending on the nature of the incidental findings. While many guidelines are in place, “It’s a work in progress,” Chang says.

Imaging Uniformity

Radiation exposure is an obvious value parameter for the patient—and for the institution where the exam is performed. Kaiser Permanente is no different from other institutions in giving radiation dose close scrutiny. While radiation exposure is highlighted, however, it is just one utilization measurement of importance. “We are an integrated service, with all the subspecialties, and we want to make sure utilization is optimized,” Chang says.

SCPMG has implemented a radiology-utilization action team; Chang says, “We have a regional committee, and each local area has a team of radiologists and clinicians based on each of the modalities. We have MRI of the lumbar spine as one initiative. Our goal is to educate the clinician on when to order that exam.”

Another team effort is standardization of the way that specific exams are ordered within each subspecialty. “There was significant variation in how physicians in a practice would order imaging,” Chang says. “We need to share our data with the clinician so they know what to order. We have to come to an agreement on how to work up certain types of pathology. It’s a continuous effort, but we want to promote safety. If the patient had an MRI exam, he or she shouldn’t need a CT exam.”

There have been instances where patients were given CTs too frequently, Chang says. “We pay a lot of attention to CT dose, to make sure there are no outliers,” he reports. “The good news is that we all have almost the same type of equipment. We have a committee to come up with a standard equipment pool for the national program, so you don’t have a surprise when you order something: You know what you are going to get.”

In the big picture, Chang says, Kaiser Permanente radiology measures performance in terms of access, the cost of providing the service, and patient satisfaction. “We survey our patients and our referring physicians on how they like our service. We collect the surveys, and we score and grade them,” Chang says.

“We anticipate more members coming in under the Patient Protection and Affordable Care Act, and we want to eliminate waste in our practice,” he adds. “This is our challenge: to improve efficiency, eliminate waste, and improve access and affordability. I’m sure this will be the challenge, in the next few years, as Medicare continues to decrease reimbursement.”

Chang is right. With downward pressure on health-care spending likely to continue, maximizing value to patients and payors and eliminating unnecessary expenditures are about the only ways that providers—within or outside radiology—can expect to run in the black. Volume was once the focus of imaging delivery; now, it’s value.


George Wiley is a contributing writer for Radiology Business Journal.