The Rewards of Risk: Radiology Takes The Leap

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 - Reach for the Reward

In the billing office of a radiology practice, an employee reviews a remittance just received from a payor. Noticing that something looks different, she questions her colleague, who informs her that instead of collecting fees for individual imaging services rendered, the practice is now operating under a per-member, per-month capitated arrangement with that payor.

The leader of a hospital-based practice discusses with a payor representative the option of negotiating a withhold to be paid upon meeting utilization thresholds. The agreement absolves the practice and its referring physicians from having to jump through radiology benefits management (RBM) hoops.

Such scenarios have become reality as private radiology practices and hospital radiology departments alike gravitate slowly away from the traditional fee-for-service model and toward one in which they assume risk. Although radiology is admittedly in the early days of risk assumption, a picture of what it may look like within the specialty is beginning to emerge.

Crazy for capitation

Capitation, reportedly more prevalent in California than in other states, is beginning to take hold as a practical form of risk assumption. Los Angeles, California-based RadNet Inc., the largest provider of fixed-site imaging services in the U.S. through a network of 250 owned or operated outpatient imaging centers in several states, is a pioneer in radiology capitation. For the past 20 years, RadNet has been very active in risk assumption through capitation and delivers capitated imaging services to approximately 25 large medical groups, encompassing an estimated 800,000 covered HMO enrollees.

Capitated payments currently account for 10 percent of RadNet’s overall annual revenues and for “north of 20 percent” of annual revenues generated by facilities in California, according to Mark Stolper, chief financial officer. The majority of RadNet’s capitation contracts have been in force for more than 10 years.

Stolper says RadNet is uniquely positioned to handle risk because of its size and scale; in addition to the large number of centers, the provider has more than 400 radiologists, many of them subspecialist practitioners, whose services are exclusive to its facilities. However, successfully delivering on its risk-based contracts also has entailed the creation and administration of a comprehensive utilization management program.

At the core of the program is RadNet’s Radiology Utilization Management System (RUMS). The provider’s medical group clients utilize the system to digitally order exams and send to RadNet any additional medical indicators for more advanced imaging. Cases are reviewed for medical necessity and appropriateness according to accepted guidelines, among them nationally recognized evidence-based guidelines from multiple sources, medical literature, and consultation with subspecialty trained radiologists.

Additionally, RadNet’s utilization management department processes more than 100,000 referrals annually and leverages a staff of board-certified and state-specific licensed radiologists, physicians, registered nurses, and licensed vocational nurses. Physicians are profiled against their peers according to delivery model or specialty.

“Whether through sharing of an extensive library of articles from top medical journals or other methods, we emphasize educating referring physicians about medical necessity and appropriateness,” Stolper says. “Our focus is on offering diagnopstic tests based upon accepted criteria and guidelines.”

Meanwhile, Desert Radiologists, a large practice of 50 radiologists based in Las Vegas, maintains risk-based contracts with three payors. Capitated payments account for 25 percent of its total revenues, states Patricia A. Harms, MBA, CPA, FACMPE, the practice’s chief financial officer.

“We have not approached payors to work on a capitated basis, but we are not afraid to take on risk in this way,” asserts William P. Moore II, MBA, CRA, chief executive officer. “We anticipate that, in general, there will be a push to a risk-based model with the [advent of] ACOs and similar payment models, and our long-range goal is to be ready for that.”

Moore and Harms contend that the ease with which Desert Radiologists has transitioned into risk-based contracts through capitation has much to do with a framework that calls for payor/provider collaboration. At the outset of each contract, Desert Radiologists’ executive team meets with payor representatives once each