Imagine (or recall) a time when CT technology was a nascent science, MR units were at best shared between hospitals and often when performed the images were physically shipped to national experts for overnight reading.  The time was the mid-‘90s, and, along with the growing applicability of sonography and interventional radiology, the discipline of diagnostic imaging again set the standard for technological advances in diagnosis, far ahead of the specialties it served. 

Concurrently, concerns about healthcare cost and quality had reached the threshold of public perception and that concern remains unresolved if not amplified twenty years later.  With respect to diagnostic imaging, it was this clash between promising scientific advancement and concerns about its attendant cost that led to the development and rapid growth of a movement now known as radiology benefit management (RBM).

This, and the topic-specific articles that will be published at RadiologyBusiness.com over the next several months, are not meant to be a history of the RBM  movement nor a justification of their value and or necessity, but rather to share what we have learned after two decades of experience.

This first installment is a short discussion of the role of “Financial Risk as a Management Strategy.” Watch the weekly RadiologyBusiness.com newsletters for the following installments:

• The role of “big data” in healthcare and specifically diagnostic imaging management, with examples.
• The value of records-based clinical decision support as an imaging management strategy.
• A hard look at the reality of self-referral as a cost and quality challenge, including a request for a re-definition of the term.
• An insider view of the CMS Outpatient Efficiency Measures, to include contrast usage in abdominal CT, the rate of indeterminate mammograms and others that didn’t quite make the cut.
• A back-to-the-future discussion of the rapid and seemingly unending change in the infrastructure of diagnostic imaging delivery as the result of mergers and acquisitions. 
• “What’s next?”

Financial Risk

Let’s postulate that the all-inclusive, average cost of healthcare for each member of a commercial health plan is $400 per member per month (PMPM).  A simple review of claims submitted for payment will reveal multiple discrete categories of spending, such as hospital charges, lab cost, social-psychiatric care, outpatient surgery and more, one of which is diagnostic imaging at about $35 per member per month. 

In this case the health plan is approached by an organized group of managers or providers who believe that they have a method to drop the imaging cost to $30 PMPM. The health plan calls their bluff and agrees to give them a capitation contract of $30 PMPM to deliver all of their diagnostic imaging needs. 

Sadly, the company/network/independent practice association (IPA) was a bit too confident in their management methods, which in this example was primarily based on confinement of members to receive services through a restrictive network of providers. Real experience revealed considerable leakage from the prescribed imaging network, and actual cost was closer to $40 PMPM. 

Implicit in the negotiation of the agreed upon capitation was the belief that there will be a powerful financial incentive inherent in this transfer of “financial risk” to lower price, utilization or both. In this case, the managers were not capable of meeting and decreasing the actual cost of care, either due to lack of will, lack of data necessary for realtime management or a host of other unanticipated costs.

In fact, scenarios similar to the one described shattered a large number of HMOs, PHOs, IPAs and other risk-accepting entities in the early ’90s, resulting in a deep aversion to accept risk by providers and serious doubts by insurers that physicians and physician groups were capable of managing their selves and their colleagues.

In an upcoming discussion we will call “Back to the Future”, financial risk once again becomes a very important consideration in the radiologist’s relationship(s) with the (not so new) accountable care organizations (ACOs).

Lesson No. 1: Any radiology group approached by an organization (ACO or otherwise) to accept a capitated payment for population-based radiology services must include a reinsurance benefit to cover unanticipated losses.

Question: Won’t that mitigate the financial incentive to manage?   

Answer: Yes.

Editor’s Note: Subscribe to the RadiologyBusiness.com newsletters to receive  the next installment: A discussion of the use of “Big Data” to evaluate cost and quality, using real examples.

Thomas G. Dehn, MD, FACR, is the first chair of the ACR Managed Care Task Force, a founder of radiology benefits management company National Imaging Associates (NIA) and the former medical director of Magellan/NIA.