Sharks in the Case Pool: Teleradiology, the Practice, and the Purveyor
Wilson Wong, MD, was there when teleradiology took off, almost 15 years ago. Back then, there was a radiologist shortage, and Wong saw a way to increase the efficiency of coverage and bring some relief to other radiologists who were laboring (as he was) under the constant burden of on-call night work. In 1997, Wong started a company called Teleradiology Diagnostic Service (TDS), Inc, to serve the Southern California market; soon, he and three or four radiologists were issuing nighttime preliminary reports for hospital and radiology-group clients, mostly for emergency-department work. “I started TDS because I was tired of taking call,” Wong says. “Imagine working all night, and then you have to work the next day—another full-time job.” It was more than a matter of ending night work for clients, though. It was a matter of streamlining after-hours reading, too. “If we could centralize, one radiologist could take more calls,” Wong recalls. Under the old on-call system, a radiologist at one hospital might spend half the night sitting idle. Wong says, “With the interruptions and the ups and downs, there were a lot of dead periods. The radiologist might sit there for 15 or 20 minutes.” With TDS, a few radiologists soon were reading for 80 West Coast hospitals at night. Wong says, “There was no competition; everybody was clamoring to be a customer of ours.” In the beginning, TDS used film digitizers to create electronic images at the hospitals and then transported them by telephone to radiologists at a centralized reading station. TDS fashioned its own software for its RIS to create reports. It followed the technology curve upward until its image-transport and reporting systems were server based. “We became one of the largest (if not the largest) California-based teleradiology companies,” Wong says. He ran TDS for nine years; then, he sold the company to a major, national teleradiology company. He says. “I have done extremely well. People think I was smart to sell. The truth is that I was lucky.” He was lucky because the rosy teleradiology world that Wong helped create has, some critics say, turned sullen and predatory. According to a 2011 article by Levin and Rao,1 more than 50% of US radiology practices are now outsourcing some of their work to teleradiology providers. Fears Come True According to Levin and Rao,¹ this escalating adoption of teleradiology has created many ill effects for the imaging industry. Among them are the commoditization of imaging interpretations, the lowering of fees per interpretation, and the vulnerability of radiology groups’ existing hospital contracts to predation by teleradiology providers. Wong says that it is all true; the worst fears of teleradiology opponents have been realized—but it’s not all bad, he adds. While Levin and Rao¹ warn that teleradiology might lower the quality of image interpretation, Wong argues that the opposite has been the case, at least in the late-night emergency-department venues where most teleradiology takes place. Teleradiologists have become experts in emergency-care imaging—so much so that Wong expects them, one day, to have a subspecialty society of their own. Competition from teleradiologists has caused all radiologists to raise their standards, he argues. “Several sites have done reviews of accuracy and found that teleradiology is as good as the local radiology groups, if not better,” Wong says. “It’s the opposite of what the ACR® has predicted. It’s ironic.” Wong agrees that competition from teleradiologists has been at least one force in cutting the price of interpretations. “When it started, the price was as high as $50 per case,” he says, “and now, the average price is below $30 per case.” Some of that might be due to generally lower reimbursements, Wong says. He adds that the downward pressure on reimbursements isn’t going away. Where once there was a radiologist shortage, today’s young radiology graduates sometimes can’t find jobs. He says, “The demand slows, and the supply comes up; the profit margin is going to be a lot less.” Since selling his teleradiology company, Wong has gone back to being a radiologist. He is now a partner in Arcadia Radiology Medical Group in California. “My subspecialty is body imaging; I do some interventional work,” he says. “I don’t do any teleradiology, but I still read for them once in a while.” He says that there are so many teleradiology providers in the market now that potential customers won’t even open their doors. He explains, “The customers don’t want to talk because they’re inundated with phone calls.” He says that it’s understandable that radiology groups would fear teleradiology companies stealing their hospital contracts. He says, “What people fear is that teleradiology is disruptive because it insinuates itself between the radiology group and the community it serves.” That predation of contracts does happen, Wong says, but he argues that the truly predatory companies will get such bad reputations that they will fail. “The ACR is right in that teleradiology enables administrators of hospitals to bargain much harder with their radiology groups. What we have to learn is that knowing we can be replaced, we have to provide the best service to our hospitals so we won’t be replaced,” Wong says. He adds that teleradiology is in a state of flux now, and it’s hard to tell how permutations in the service are going to play out—but teleradiology won’t go away. Emergency-department turnaround times for interpretations are much shorter, industrywide, than they were before teleradiology providers put pressure on everyone to produce results more rapidly, he says. “Even the ACR people who say they don’t like teleradiology use it,” Wong says. He points to medical schools that offer subspecialized teleradiology as part of their services. He says, “The ultimate truth is that teleradiology enables you to get the best service for the price that you paid. It’s disruptive to contracts, but it improves patient care.” Ruining Radiology There are those—besides Levin and Rao¹— who take a far less sanguine view of teleradiology than Wong does. They think that the practice of radiology is being diminished by teleradiology providers who skim the interpretation-fee fat away from the other work that radiology groups must perform. Gregory C. Karnaze, MD, FACR, is a vascular and interventional radiologist with Austin Radiological Association (ARA) in Texas. ARA reads for 15 outpatient centers and 17 hospitals and has about 90 radiologist partners, Karnaze says. “Not only are we not a client of teleradiology providers,” Karnaze says, “but we will never be a client. We are opposed to that whole model of providing partial service. We think it’s destructive to the relationship with providers. We follow the model that our practice takes care of our practice. It’s our work, and we figure out a way to get it done.” Karnaze says that hiring teleradiology providers to do nighttime preliminary reports for an emergency department and leaving the exams to be overread (on final interpretation) the next day makes radiology groups look pampered and unprofessional. “I can tell you the emergency-department physicians are getting one interpretation at night—and having that changed the next day. They feel that’s bad patient care. Preliminary interpretation is a very flawed model and provides inferior care,” Karnaze says. He continues, “Radiologists are just like any other physicians: We have an obligation to patients, the hospital, and our other medical colleagues to provide much more than interpretations. We serve as medical directors, set protocols, consult with physicians, and help with case management. We provide a full service, of which interpretation is a small subset. To extract that small subset and turn it into a commodity, bought and sold based on price, is to offer less than full service. It strips away the husk of rice to a lifeless kernel and sells that as a commodity.” Karnaze makes a big distinction between teleradiology and distributed reading, wherein images are transmitted electronically to available radiologists or subspecialists within a defined network. In that sense, “There’s no difference, whether the image is acquired next door or 10 miles away,” he says. ARA has designated night readers for its hospitals’ emergency departments, but they do final reports, Karnaze says. ARA also markets its professional interpretation services, as well as infrastructure, such as PACS and IT, to nonradiology physician groups that have their own scanners. “We offer a world-class system to small medical practices,” Karnaze says. Strategic Advantage ARA also is a member of what can be called a loosely fashioned national radiology group. Named Strategic Radiology, it is headquartered in St Paul, Minnesota. Strategic Radiology is composed of 15 prominent radiology groups around the United States that have joined forces to augment services and preserve full-service traditional radiology while gaining clout and payor leverage through size. Karnaze says that the vision within Strategic Radiology is eventually to provide distributed reading services among member groups and to outside clients that might choose to join the network. Strategic Radiology’s members are in the process of ending all contracts with outside teleradiology providers and developing an after-hours service among members instead, Karnaze says. “It’s the number-one topic on the Strategic Radiology agenda,” he adds. Strategic Radiology will offer more than emergency-department interpretations and subspecialized interpretations, Karnaze says. It will help members develop best practices and achieve cost efficiencies in purchasing. One thing that it definitely will not do is go after other radiology groups’ hospital contracts. Karnaze says that the radiologists in ARA are working hard with client hospitals to prepare for new forms of health-care delivery, such as accountable-care organizations (ACOs), that might be able to reduce the cost of health care. He says, “We are having discussions with all our hospitals to do everything we can to shorten patient stays. If we get reports to them faster, then patients can be turned over faster and treated at lower cost. We’ve already begun that dialogue.” What ARA (and groups like it) do not want to see is nighttime teleradiology providers morphing into day readers, offering both night preliminary interpretations and daytime final interpretations to hospitals that might be struggling with provision of 24/7 imaging services. That’s exactly what’s happening, Karnaze says. Night services are now beginning to challenge existing providers for lucrative hospital radiology contracts. “The teleradiology market is saturated, and many teleradiology providers have turned predatory on their customers and are beginning to pursue those hospital contracts,” Karnaze says. Boots on the Ground Christopher G. Ullrich, MD, FACR, is a neuroradiologist with Charlotte Radiology PA in North Carolina, an 80-radiologist practice that is also a member of Strategic Radiology. Ullrich says that the big teleradiology companies face a grow-or-die cash-flow dilemma. If all they get from serving a small-to-medium hospital is a dozen or so night cases, the revenue isn’t sufficient to support the technological and administrative outlay that they must put in place for that client. “They have to have enough IT infrastructure to go in and out with minimal human intervention—or the overhead goes up, and the error rate goes up—and they’ve got to get people credentialed who are outside the state,” Ullrich says. The bottom line is that night-coverage teleradiology “is not a very attractive book of business, unless they also have the daytime work,” he adds. To stay solvent, the big providers must become predatory. They have to go after radiology contracts at the hospitals that they serve, Ullrich says, but doing so puts them in another bind, which has nothing to do with the ethics of displacing an existing radiology group. To get the daytime contracts, the teleradiology companies have to put at least a skeleton crew of live radiologists at the site. There has to be a face or two that referring physicians can see, somebody to do interventional radiology one or two days a week, and somebody to handle a face-to-face consultation. Ullrich says that this is not easy. “The struggle to find the boots on the ground: That’s the Achilles heel of the national integrated practice,” he says. “There are lots of people who want to work nights so they can do something else during the day, but it’s hard to find a radiologist to go to a smaller community, take that practice, and run it while working for a national company. It’s hard to assemble even a medium-sized team if you’re going to take a lot of work out of the practice.” The endgame for those who strictly supply teleradiology might be to compete for sites where reading volumes are high enough to yield a profit without displacing radiology groups. “There are books of work that don’t need boots on the ground,” Ullrich says. For the rest of radiology, Ullrich sees continued consolidation, whether through a model like Strategic Radiology or through mergers of smaller groups into larger ones. Charlotte Radiology has already gone through one of those. “We merged with another group to address our system with one voice,” Ullrich says. “That added 17 radiologists to our group. That’s a trend that’s going to continue, where it makes sense. Getting big is not the goal; it’s operational efficiency. Teleradiology has caused no groups to think they can’t be replaced, and if you’re small, you’re really replaceable.” That’s a lesson that’s being learned all the time. Ullrich mentions locations in Virginia, Florida, and California where radiology groups have lost hospital contracts to replacement entities that are composed, at least partially, of teleradiologists. A lot of this activity has to do with what hospitals see as the changing health-care landscape, Ullrich says. “Hospitals believe in the ACO world; they can only function if they own the network,” Ullrich says. A New Service Line If any radiology group might have been viewed as unassailable in a contract-takeover bid, it would have been Radiological Associates of Sacramento (RAS) Medical Group, Inc, in California, an 80-radiologist practice that is nearly a century old. RAS had a long history of providing interpretations for a string of central California hospitals operated by Sutter Health (Sacramento). The Sutter Health contract was foundational to RAS, but the radiology group also ran a network of more than a dozen outpatient imaging centers, a handful of PET and nuclear-medicine centers, and about half a dozen centers providing radiation-oncology services. RAS seemed to have it all. It was a force to be reckoned with in the region; like ARA and Charlotte Radiology, it was a founding member of Strategic Radiology. Then, early in 2010, RAS lost its Sutter Health contract. Sutter Health decided to take its radiology operation in-house, under hospital ownership, and at least part of its staffing solution was reliance on teleradiology providers. RAS has held its group together, but it has lost partners and has had to maximize its other ventures. Now, it has launched its own teleradiology service to make further use of its group, illustrating the statement of Mohandas Ghandi (1869–1948) that you become what you hate. As Fred Gaschen, MBA, RAS executive vice president, explains, “I’ve got a lot of mouths to feed.” Gaschen says that the service primarily has concentrated, so far, on offering teleradiology services to the group’s own centers and a few other centers owned by others in the region—but it is branching out, he adds. “We did a survey in California,” he says, “and the feedback to us was that there is still a need for night reading and a lot of groups need daytime subspecialized interpretation, so we said we’ve got to do the night to get the day.” The teleradiology service will operate as a separate profit center, Gaschen says, and one of the early decisions regarding it was to limit the number of radiologists doing interpretations (to simplify obtaining state licensure and hospital credentials). For the RAS service, the number of dedicated teleradiologists is 11. As Gaschen points out, these radiologists don’t just do teleradiology; they also perform daytime duties, when scheduled. They are full members of the RAS team, no different in standing than any other radiologists in the group. This is an important distinction, Gaschen says, because part of the RAS marketing strategy is to emphasize that all the quality-control programs used at RAS will extend to the teleradiology service as well. A teleradiology client will be hiring an integral group with solid accumulated expertise. “Part of the issue with teleradiology,” Gaschen says, “is determining whether you are hiring a commodity or contracting with an existing group that is also providing night interpretations and is there to help you be successful. That’s the approach that we take. We will do whatever the client wants. Right now, that’s all final interpretations, but some clients don’t want those. It depends on the group. You have to give the group what it wants.” Infrastructure and IT Hurdles Teleradiology tends to be viewed as a business with a low cost of entry: All radiologists need is an Internet connection for their home workstations, and off they can go. This turns out to be a misperception. Craig Roy is CIO at RAS, and he says that one of the limiting factors in implementing the RAS teleradiology service has simply been the amount of IT that he and his team can implement in a given time. Right now, Roy says, he’s putting together the technology to serve one major out-of-state teleradiology client. “We have four outside clients,” he adds, “but there are a bunch more just waiting on me.” Over its long years with Sutter Health, RAS learned the landscape of putting together a community shared-image service so that prior exams and patient data could be accessed from any point in the RAS network. That legacy knowledge has been leveraged to incorporate the local imaging centers that the practice serves in a WAN, accessed via VPN. This allows patients in the client system to be integrated into the teleradiology billing array, and it lets those cases appear on the teleradiologist’s worklist. Roy also employs a voice-recognition server with a workflow engine to integrate reports with the worklist. Finished reports can be delivered electronically or by fax. File-transfer methods are secure; electronic reports are ready for integration into the electronic health record at the client facility. Roy recently finished implementation of a more difficult IT installation that will transfer both the exam images and the teleradiology report to an out-of-state client as a single package. Even though the images originated with the client, sending them back in concert with the report allows the client to access the images without having to devote staff time to matching images and reports. “Once our physician’s dictation is finished, that will go, via HL7 interface, to our PACS; it will become a DICOM object associated with the patient study, so both the images and the results can be sent to our client,” Roy says. Automating Processes It’s this sort of timesaving service, Roy says, that will give RAS an edge in the teleradiology market—but it doesn’t come easily. “What if we receive the same medical-record numbers from two different out-of-state clients in different states? Our PACS can’t process that, since it uses the medical-record number,” Roy says. He explains that if the teleradiology service distinguishes between such records simply by attaching a prefix or suffix, when the case is sent back to the client, that client’s software won’t recognize its own patient’s file. “That’s the nut I’m trying to crack. We may have to build, through an interface engine, a new system that will recognize a prefix and then strip it off before it’s sent back,” Roy says. It’s also important to RAS for files on its end to be populated automatically, so that it doesn’t have to add information manually. “That eliminates three minutes to scan and retype that into our order system,” Roy explains. Getting software programs to do this requires working with equipment vendors, which raises more difficulties. Roy doesn’t want his staff rewriting vendors’ code because then warranties can become void and contract violations can come into play. The vendors have to be brought into the effort. It’s hurdles like these that make teleradiology less than easy to implement these days, Roy says. He estimates it costs at least $1 million to obtain the necessary software and equipment—and far more to pull together the support of technologists, radiologists, and support staff. “I don’t know if there’s enough business out there,” he says. “I think the landscape is getting more and more competitive.” The Size Factor Nobody seems to know quite how many teleradiology providers are out there. Levin and Rao1 cite 2008 advertising that shows at least 33 teleradiology vendors. The Joint Commission accredits more than 30 teleradiology companies, according to Michael Kulczycki, executive director of the Ambulatory Care Accreditation Program. RadNet, Inc, Los Angeles, California, which operates a multistate network of 200 outpatient imaging centers, estimates that there are more—with as many as 200 teleradiology vendors in the market today. RadNet recently purchased, intact, a national teleradiology service, and it is marketing the service through its network, effectively creating a new outpatient imaging delivery model. Its 40 teleradiologists are already reading for 100 hospitals, and the service will eventually be integrated into the RadNet electronic backbone, turning RadNet into a giant multiservice provider where images and text data can be exchanged. The question is whether it and some of the other national teleradiology vendors will turn out to be unwieldy because of their size. Wong says that one of the most perplexing questions about teleradiology vendors is their optimal size. “When I first looked into teleradiology, I thought the big company seemed to be better,” he says. “I thought the small company might not survive. Now, the small company seems to have a unique advantage—in the long run, all of medicine and radiology is local.” What’s happening now, other than the big national teleradiology companies trying to build and hold onto turf, is that a lot of prominent regional radiology practices (such as ARA and RAS) are organizing teleradiology ventures aimed at bringing efficiency and expertise into the market without infringing on existing radiology practices. The RRIA Model Another large regional practice that has grown through the use of its internal teleradiology services is Riverside Radiology and Interventional Associates (RRIA), Inc, Columbus, Ohio. Marcia Flaherty is RRIA’s CEO, and Mark Alfonso, MD, a body imager, is president of the physician-owned group. RRIA has 70 radiologists in its practice. It reads for about 15 regional hospitals, including the 1,000-bed Riverside Methodist Hospital in Columbus, Flaherty says. It also interprets for imaging centers and for medical practices that have their own imaging equipment. Like ARA and RAS, RRIA is a founding member of Strategic Radiology. “We only provide telemedicine as it pertains to our practice,” Flaherty says, adding that the practice provides only final (not preliminary) interpretations. Alfonso adds, “We started doing after-hours interpretations, at the request of Riverside Methodist Hospital, 14 years ago. We started in-house because it was a tremendous service to patients and referrers to provide final interpretations contemporaneously with the study.” RRIA has invested more than $1 million, Alfonso says, in the development of a software solution to link all the sites it handles to a single database that is organized around the radiologists’ workflow solution. “Anyplace that we provide radiology coverage, our IT solution will integrate those databases, and a patient will be automatically picked up,” Alfonso says. “Our PACS will query the patient by descriptors (such as date of birth and name); it almost never pulls up the wrong patient. If the patient was in another facility, we can see if he or she had exams. Patients do move around, to our surprise.” Flaherty says, “The system shows the radiologist where the patient may have been. That automatically appears on the worklist, and the radiologist can access any prior studies. This also allows the radiologists to organize their workflow for greater efficiency.” RRIA’s teleradiology solution is a hybrid of proprietary technology and custom software developed in-house. “We couldn’t find it on the market, so we built it,” Flaherty says. RRIA can provide a PACS solution or integrate its systems with a client’s existing PACS, Alfonso says. Clients receive the final report on their systems. RRIA uses voice-recognition technology, but a transcriptionist edits and corrects the dictation. Alfonso adds, “They’re two or three minutes behind us; it doesn’t add much to the time, but it adds to the quality of the report.” Flaherty says, “Quality is an important part of our practice and of pending health-care initiatives, such as ACOs. We have a robust quality-assurance (QA) function, including a medical director dedicated to QA across our sites. We want to be ahead of the curve when reimbursement changes require demonstration of the quality of services. With the creation of our IT infrastructure, we believe we’ve made our radiologists much more productive. We feel we can make the transition to bundled care and new reimbursement models.” RRIA expects that as a member of Strategic Radiology, it will eventually become part of a larger delivery network. “The whole purpose is not to compete with other radiology groups, but to benefit radiology practices,” Flaherty says. “We feel Strategic Radiology is a longer-lasting solution than an investor-owned teleradiology company.” Alfonso expects the consolidation of health-care entities to accelerate as the push continues for economies of scale. He says, “There will be fewer players in the market and significantly bigger—much larger—networks. The days of the two- or three-, or even 10-person radiology group are becoming history.” RRIA wants enough size to reside on the right side of history, but it’s also mindful of the dictum that all health care is local. “We have a sphere of influence in Ohio. We’re not trying to be a national radiology corporation,” Flaherty says. “We focus on our corner of the world—and that’s critical.” Finding the Right Solution With national teleradiology companies expanding turf and regional players carving out market segments, what does the small radiology practice do to fill its after-hours interpretation needs? Nancy Holland, MBA, MHA, is practice administrator at High Point Radiological Services, PA, in North Carolina. The group has eight radiologists, and it reads for two hospitals and a joint-venture imaging center. It interprets approximately 185,000 studies per year. Faced with finding a nighttime service to do preliminary interpretations, Holland says, she did phone interviews with about 10 teleradiology providers and invited three to undergo on-site interviews. High Point Radiological Services chose a national provider that uses only US-based teleradiologists (a requirement of one of its hospitals). Holland says that a key determinant of the choice was making sure that the teleradiology company would not try to take over the practice. “That was a real concern; a lot are now doing daytime work,” she says. “We included a noncompete clause. That threat is still out there.” Holland says that the relationship has worked well and that the hospitals have been satisfied. The teleradiology vendor installed the necessary equipment in the hospitals, and its discrepancy rate has been within reason, she adds. Finding the right teleradiology vendor was critical. She says, “It saves us two FTE radiologist positions.” She adds that High Point Radiological Services was careful to work closely with the hospitals throughout the process. “If there’s a contentious relationship with your hospital, you’re always in danger of losing that contract. Communication is the key to keeping it,” she says. Full Circle Alicia Vasquez, CRA, FRMBA, is administrator at Arcadia Radiology Medical Group, the same nine-physician California practice where Wong is now a radiologist partner. She also serves as president of the RBMA. Vasquez says that Arcadia Radiology Medical Group continues to use the same national teleradiology vendor to which Wong sold his smaller teleradiology company—not out of loyalty, but because it is a good provider. Vasquez says that she audits her teleradiology vendor and compares it to others on the market, even if she’s satisfied with the service. “Every other year, we put out a request for proposals, talk to the other vendors, and weigh the pros and cons of switching,” she says. “We want the ability to look at apples-to-apples comparisons.” She advises caution in switching vendors, however. “If you were to change your teleradiology provider and that new provider put the relationship you have with your hospital in jeopardy, it wouldn’t be worth the change,” she says. Key factors in choosing a nighttime teleradiology provider are turnaround times for reports on emergency-department cases and flexibility in working with the radiologists in your group, Vasquez explains. Turnaround time is critical because keeping patients flowing through the emergency department is a major concern of hospitals, she says. Flexibility is important because some radiologists want extra work to supplement their incomes. At Arcadia Radiology Medical Group, some of the younger physicians take on night work to earn additional income, and Vasquez says that the teleradiology vendor has to understand that. On the other hand, if there’s an event or an illness that reduces radiologist availability, the teleradiology vendor has to be willing to step in with extra help. Vasquez says that her vendor is good about that. “There are a lot of radiologists out there available and wanting to work,” Vasquez says. “They will go where they find jobs. That being said, I haven’t seen a major proliferation of teleradiology vendors. I think the market is already saturated.” There is no doubt that teleradiology predators—the sharks in the case pool—are out there. Daytime final-interpretation volumes are the engine projected to provide growth for many of the large teleradiology providers. Some of those companies are not averse to poaching contracts from entrenched radiology practices (a consequence of a competitive market). It is also clear that radiology, as it is practiced today, would be seriously disrupted if teleradiology providers suddenly disappeared. In filling staffing and subspecialty gaps, teleradiology providers are ensured a market among hospitals and radiology practices. This opportunity is not lost on large, technically savvy practices that have the resources needed to enter the fray. As health care moves into an uncertain future, will all teleradiology practices find enough food to stay afloat? George Wiley is a contributing writer for Radiology Business Journal.