The Dynamics of Reimbursement and High-quality Care

Access to high-quality patient care is a cornerstone of customer-focused service delivery, Michael A. Silver, PhD, says. In turn, that goal is supported by technology that enhances performance and allows the imaging provider to do more with less. Part of making less go further is maximizing reimbursement through better management, he adds, ensuring that the work performed yields as much as it should. Silver, vice president of Sg2 (a health care research, consulting, and education company based in Skokie, Ill), presented The Outpatient Imaging Market: 2008 Market Update at Beyond™, the Third Annual GE Healthcare Outpatient Imaging Center Conference, in Washington, DC, on July 24, 2008.
Michael A. Silver, PhD In the current environment, health care policy decisions are driven less by clinical considerations and more by political and economic factors, especially as the payment system for health care in the United States becomes less workable, Silver observes. Payors, regulators, and some lawmakers are attempting to resolve distinct issues, rather than address underlying causes, and too few politicians understand the issues. With the subprime mortgage crisis negatively affecting access to capital and the cost of credit, it is little wonder, Silver says, that market pressures are being heavily felt by all imaging providers, yet rising consumer expectations demand attention to performance and customer service. What is required, Silver advises, is a keen attention to margin and sophisticated management expertise.

“In the near future, the most important ingredient for profitability and survival will be management skills. Just like any other business has to manage margins, outpatient imaging and even imaging in the hospital is going to have to learn to manage its margins.” —Michael A. Silver, PhD, Sg2, Skokie, Ill

Reimbursement and Regulation With total Medicare Part B payments for imaging doubling between 2000 and 2006, regulators want the growth of imaging to parallel the growth in overall health care costs, Silver notes, and because of that, both regulators and payors are playing multilevel strategies to control imaging growth. Strategies are likely to become more granular and include removing incentives for self-referral, requiring site accreditation, bundling payments for episodes of care, expanding radiology benefit management programs to Medicare, cutting reimbursement for fast-growing applications, and reducing professional payments. For example, the Government Accountability Office has recommended the use of imaging preauthorization and utilization controls by CMS. Although the ACR opposes the recommendation, Silver is not sure that it will prevail. The Medicare Improvements for Patients and Providers Act of 2008 supports the ACR position on accreditation for credentialing for imaging providers, creating enormous administrative challenges for the college and the Intersocietal Commission. It is clear, Silver says, that many payors and regulators simply fail to understand either the technology of imaging or its value. They do not see the impact of new CT applications on patient management, nor do they know that new platforms improve productivity. “There is a huge opportunity for you to work on educating payors on the value of imaging,” Silver advises. “Opportunity also lies in integrating your services with the market needs to drive business and clinical growth. For example if you are in a given market where breast imaging is not being performed terribly well, if you can provide better integrated service you stand a better chance of growing your business. It comes down to having a real strategy for adding value to the market.” Defining Quality Performance will be driven by data transparency, with pricing and quality information soon to be made widely available. Providers who are proactive in defining and measuring quality will be ahead of the curve, Silver says. The core definition of quality throughout health care delivery, in the eyes of both payors and referring physicians, is changing to reflect evidence-based practices as more data accumulate, Silver says. Radiation dose is an important quality indicator, and CMS plans to include dose levels for CT and fluoroscopy in the 2008 Physician Quality Reporting Initiative. “Radiation dose is not just a safety issue or a quality issue; it is going to be a marketing issue, which will translate back into revenue,” Silver says. “It will also become a credentialing issue.” Professional societies have become involved in efforts to enhance quality by promoting performance improvement in radiology. The American Board of Radiology (ABR), Silver says, is pursuing the enhancement of clinical performance, and the ABR and ACR are working together to create high-value radiology throughout the specialty by developing six performance competencies and instituting the Maintenance of Certification program, Remaking the Market The DRA, CMS, and federal and state efforts to slow opportunistic imaging will undoubtedly reshape an outpatient imaging market composed of a diverse cast of players, Silver believes, with hospital-owned imaging centers and ambulatory care centers vying with entrepreneurs and with radiologist-owned, specialist-owned, and mom-and-pop imaging centers. The performance benefits and cost reductions attained through hospital system integration, however, will be uniquely helpful to providers. Silver calls outpatient services the main growth opportunity in health care and imaging the best growth opportunity within outpatient services. Sg2 predicts that outpatient imaging volume will grow 19% between now and 2018. “We are projecting 19% growth largely due to new technology, population growth and aging, disease demographics, and socio-cultural issues, such as smoking and obesity,” Silver says. “More than 90% of the growth will take place in the outpatient setting. The question is: Who is going to provide it?” According to Sg2, the coming 10 years in outpatient radiology will see the greatest expansion driven by oncological and advanced cardiovascular imaging, although neurological and musculoskeletal imaging will still be important foundations. Competition will cease to be local, since teleradiology services are already becoming ubiquitous, and owning the latest imaging technology will not be enough to ensure survival in this environment (because everyone will have it). The growth of teleradiology also has implications for the formation of megaradiology groups. Hospitals are developing system-wide approaches for outpatient imaging, Silver says. “They are talking about having one radiology group serving the system,” he reports. Silver believes that the biggest growth opportunity that radiologists possess is optimizing reports for referring physicians. “One of the issues shaping this is the teleradiology market, because it is overwhelmingly subspecialized,” he says. Business-model Approach In an imaging marketplace where technology is ubiquitous, Silver says that cost reductions and productivity must be essential elements of any business strategy. It is in creating perceived value in meeting customer expectations, though, that a provider has an opportunity to distinguish itself. While business metrics are the key to the first mandate, customer-service strategies are essential to the latter. “Both of those get to reducing margins and finding sweet spots in the market where you have less competition,” he says. Silver says that health care providers have three business strategy options: products and services, productivity, and a business-model approach. By and large, most health care providers have been using a products-and-services approach, to date. “It is much more difficult to compete/duplicate on the basis of the business-model strategy,” Silver advises. In other words, the challenges are greater, but so is the ability to compete. One emerging business model combines radiology, surgery, and pathology for comprehensive disease management; for example, one organization uses rapid tissue processing and telepathology diagnosis, imaging, and on-site oncologists to provide a written laboratory report, and to begin treatment planning, within 3 to 4 hours of a patient’s initial arrival. Emerging business models in radiology include teleradiology, clinical trials, academic partnering, payor alignment, and full-service national radiology providers. Another is some kind of partnering with the hospital, which can be anything from doing outpatient imaging more effectively than the hospital to being employed by them. Whichever business model a radiology provider chooses to employ, its main focus must be on the delivery of value-added service in a businesslike way, Silver concludes.