Hospitals to Emerge as Key Player in Outpatient Imaging

In a wide-ranging, in-depth analysis of the present and future outpatient imaging center market, Michael Silver, PhD, vice president, Sg2, Skokie, Ill, advised attendees at the 2nd Annual GE Healthcare Outpatient Imaging Center Conference in Washington to raise their business acumen to compete in a rapidly evolving marketplace. “It is often said that imaging is experiencing a market correction, and it is probably appropriate to say that it is a very profound market correction that is taking place right now,” Silver noted. “Imaging is moving fairly rapidly from a growth industry to a mature industry, and that mean the business execution skills of your imaging center become far more critical than they were in the past.” New players will help reshape the terrain, with novel, consumer-oriented models and an increased hospital presence, he predicted. “The hospital presence in your market is going to become more of an issue for you than it has been in the past,” Silver said. Acknowledging that government agencies and Congress have targeted outpatient imaging for cuts, Silver also predicted that the government would effect a 10% reduction in overall Medicare payments after three years, which he compared to the 7% reduction achieved by the Balanced Budget Act of 1997. “It won’t necessarily be cuts, it could be a change in the age qualification for Medicare,” Silver noted. “It could be needs testing, it could be a variety of different approaches, but we expect to see some significant changes in the way that Medicare is funded and it will trickle down into other areas than health care.” In order to compete in this new environment, Silver advised attendees to develop superb business strategy, the right mix of products and services, maximum productivity, and the right business model for the strategy in their respective markets. Future Market The outpatient imaging market will amount to 400 million procedures in 2007, and the market will continue to grow during the next ten years, according to Silver’s projections, albeit at a slower rate. When comparing Sg2’s forecast to a population-based forecast, Silver identified the high-end modalities of PET, CT, and MR as the standout growth modalities. Between 2007 and 2017, PET is projected to grow 115%; CT 65%; and MR 42%. SPECT is expected to experience a 10% decline, due largely to cardiac PET. Other Silver predictions: FFDM will continue its torrid growth, the MR market will move up-field and payers will paint a bulls-eye on MR as a quality target the CT market will overwhelmingly become a premium and mid-tier market with 1-, 4-, and 8-slice scanners feeling the pinch cardiac SPECT will take a hit in about three years as evidence mounts for the efficacy of CCTA PET growth will slow, and oncology will pay the bills Moving forward, the strategy surrounding the introduction of technology will be as important as the technology itself, Silver advised. The Sg2 technology adoption scale includes innovators, early adopters, consensus adopters, cautious adopters, and late adopters, but the sweet spot is between the early adopters and the consensus adopters. “What’s really critical to appreciate in bringing new technology to the marketplace is that if you can be on the front-end of that consensus adoption curve, there is a great opportunity for growth for you,” Silver said. “But if you acquire technology as an early adopter, your referring physicians may not know how to manage patients based on that information and that impacts the volume demands for those.” Future Players Hospitals are engaged in serious soul-searching about what their organizational structure will look like in the next 10-20 years, and Silver advised radiology practices and entrepreneurs to consider hospital alignments as a strategic option as the industry matures. “There’s one school of thought that hospitals need to continue along the same path that they have been on, and that is trying to be all things to all people,” Silver explained. “There’s another emerging thought that hospitals are going to be more competitive and more productive, and to have higher quality control in the services they offer, they need to reorganize along service-line or disease-focus strategies. And that is probably going to be the winning scenario for many hospitals in the future. The idea is that, especially across systems with multiple hospitals, you will see vice presidents at those hospitals organizing for neurological care, cancer care, or women’s care and designing their strategies across multiple facilities that they will integrate across that entire service.” Consequently, hospitals are increasingly forming structured relationships with specialists because they will need physician partners to restructure along service lines, Silver said. “If they can have some type of a structured relationship, whether it is a medical directorship, employment, joint ventures, or some type of activity, that gets those physicians and the hospital on the same side of the equation when you start talking about performance, quality, and productivity,” Silver said. “And that has some implications for the relationships you may have with referring physicians as well.” Hospitals are beginning to think about what kind of facilities they are going to have in the marketplace, Silver said. “More and more, they are going to be thinking about having spine centers or cancer centers or women’s health centers, GI centers, endoscopy centers, and that includes expansion of their imaging presence in the marketplace as well,” Silver said. “In addition to changing the competitive landscape, it may also mean that you start to think not only about who is your competition, but who may be your partner in some way in the future as well.” Quality will become a competitive strategy in the marketplace for imaging centers, Silver stated. Metrics will include clear, concise, credible, and timely reports, certification programs, and well maintained equipment. As reading becomes more decentralized, communications will also be key. “It’s important to realize that the face-time you have with physicians decreases,” Silver noted. “At that point in time, you have to have strategies that improve the added value that your imaging services have to those referring physicians.” Referring physicians will increasingly measure radiology practices on their subspecialty reading services, which may be a particular challenge considering that only 54% of federally funded fellowship positions were filled in radiology in 2006, Silver reported. And radiation safety will become a hot marketing and quality issue for radiologist-owned sites to differentiate themselves from self-referring competitors. “The more aggressively you adopt that, you will see some benefits from that, and there will be some economic impacts of this over the next few years,” Silver predicted. Another important player in the future imaging center market is the consumer, and consumer-directed health care will create opportunities, Silver advised. Milwaukee’s Smart Choice MRI offers a flat-fee examination for $600. “The day of the $100 co-pay is gone, and for patients with a high co-pay, this can be a very appealing kind of service that is offered,” Silver said. “You don’t know the quality of your service, but if you are shopping for dollars and it is coming out of your pocketbook, this could become a very compelling issue.” In concluding this segment of his talk, Silver quoted a favorite adage of colleague Henry Soch: Fat dogs don’t hunt. “You have to have leaders,” Silver advised. “You have to have physicians who are proactive, because the market is going to go through some profound changes, and you have to be ready to deal with that and be leaders in your market.”