How Hospitals Are Rethinking Imaging

Diagnostic imaging remains critically important to the bottom lines of individual hospitals and health systems alike, continuing to subsidize many less-profitable and unprofitable service lines while providing predictable growth. A rapidly changing imaging landscape, however, is spurring institutions to alter models for, and methods of, managing their imaging businesses on the inpatient and outpatient fronts alike. The languishing economy and the capital-intensive nature of this particular service line have placed a tighter-than-ever lid on access to capital. At the same time, reimbursement cuts are putting the squeeze on (as well as creating new opportunities for) hospital-affiliated freestanding outpatient imaging sites. Gary A. Fammartino, MBA, serves as system executive for ambulatory and outpatient services at St Vincent Health in Indianapolis, Indiana. “In light of these elements,” he affirms, “the way we manage imaging now cannot be entirely the same as the way we may have done it even a short time ago.” St Vincent Health is a member of Ascension Health, St Louis, Missouri, the nation’s largest nonprofit Catholic health care system. With 19 facilities serving 45 counties in central Indiana, St Vincent Health is also the state’s largest health-care employer. St Vincent Health provides imaging services at 13 hospitals and six freestanding OICs. Eleven hospitals perform imaging services on an inpatient and outpatient basis, while two hospitals have only inpatient imaging services. Fammartino’s department is charged with expanding the outpatient services offered by the provider throughout the state of Indiana. He characterizes St Vincent Health’s model for imaging management as blended, noting that the provider does not look at “inpatient versus outpatient, but rather, at hospital-based inpatient and outpatient together, versus outpatient alone in the freestanding centers.” Bottom-line responsibility for imaging services at each hospital rests on the shoulders of that institution’s own president, with Fammartino and his department lending support in all endeavors. He also presides over inpatient services at St Vincent Hospital in Indianapolis, the provider’s flagship. Management of the freestanding centers is a system-wide effort; Fammartino heads operations in line with the scope of his department’s function.Clearing the DeckIt’s not surprising that cracks in the imaging landscape have spurred St Vincent Health to refine its imaging-delivery practices as a means of fostering growth. “Our vision for imaging,” Fammartino says, “largely entails moving away from tying up so much of outpatient processing on the hospital side to handle last-minute needs to serve inpatients, especially those who are in an emergency state. The inefficiencies of serving outpatients in the hospital are currently too great.” Moreover, he adds, it is impossible to compete effectively in the outpatient-imaging arena if the majority of patients must go to a hospital for service, as many individuals favor the freestanding-center experience over that of a hospital environment. Toward this end, the system is in the midst of shifting as significant a portion of its hospital-based outpatient services as possible to freestanding centers. This includes all modalities, with a particular emphasis on MRI and CT services. Patients who need more invasive procedures (such as biopsies), or who require multiple tests in addition to imaging, will probably still need to come to the hospital-based imaging department. Zip codes are being scrutinized to determine whether existing outpatient facilities are conveniently near the homes of sizeable existing patient populations, as well as to identify additional key markets for expansion. Fammartino and his colleagues believe that this strategy will help St Vincent Health strike a good balance between decreasing the cost of providing inpatient imaging services and increasing outpatient traffic. “Operating a freestanding imaging center, versus operating the same services associated with a hospital-based location, has significant advantages,” Fammartino says. “One clear advantage is the streamlined approach of less overhead and lower fixed-cost structure associated with the freestanding imaging centers.” In a related effort to enhance operating efficiencies, improve its bottom line, and bolster its radiology business as a whole, St Vincent Health is also evaluating the option of partnering with operators of other freestanding imaging centers that compete with its own. Both parties would manage the facilities together, under the terms of such an arrangement. Fammartino says, “We see this as a symbiotic relationship wherein St Vincent Health would benefit from an extended market reach, as well as from the fact that nonhospital-affiliated centers have carved out a strong niche in which they function quite successfully.” He notes a heightened interest among outpatient imaging facilities in teaming up with health-care providers to mitigate the negative effects of declining reimbursements and similar impediments to profitability.

“The inefficiencies of serving outpatients in the hospital are currently too great.”

—Gary A. Fammartino, MBA, system executive,
ambulatory and outpatient services,
St Vincent Health, Indianapolis, IN

“With this strategic alignment, it will then be possible to steer many of the outpatient procedures being performed at hospital facilities to conveniently located outpatient centers,” Fammartino explains. “In addition, having more facilities, to offer patients a choice of locations coordinated through a centralized scheduling system, will help support this outpatient steerage. Partnering with the freestanding centers brings into the St Vincent Health system additional imaging volume currently being handled by these facilities.” Fammartino believes that this strategy will enable St Vincent Health to adopt a more competitive pricing structure in the outpatient arena without negatively affecting profitability. “With this significant increase in volume being added to the bottom line, St Vincent Health will be able to reduce its outpatient pricing without an impact on its bottom line,” he says. “Reducing volume on a percentage basis in relationship to increasing volume and holding net revenue neutral will enable St Vincent Health to position itself as the price leader among its hospital competitors.” A Joint EffortSaint Thomas Health Services (STHS), another member of Ascension Health, is striking out in a similar direction with respect to a more global view and management of imaging resources. Headquartered in Nashville, Tennessee, STHS operates three acute-care hospitals, one critical-access hospital, and three freestanding imaging sites. The three OICs are joint ventures with local imaging providers in their areas; STHS holds a 49% share in one center, a 60% interest in another, and an 80% interest in the third. Sheila Sferrella, MAS, RT(R), CRA, FAHRA, arrived in Nashville in 2006, when she assumed the newly created position of vice president of ambulatory services. She reports to the president of Saint Thomas Affiliates, who reports directly to the system’s CEO. In 2009, Sferrella recruited Luann Culbreth, MEd, MBA, RT(R)(MR)(QM), CRA, FSMRT, executive director of medical imaging; the two have a matrix relationship. Each freestanding imaging site has its own manager and a separate board of directors; these report through STHS Ventures, and Sferrella has a seat on each board. Soon after arriving, Culbreth launched the formation of a medical-imaging council (with representation from all imaging stakeholders) to form consensus on shared interests, such as best practices, stewardship of resources, standardization/flexibility, and patient advocacy. The council identified five initial priorities and has been checking them off the list ever since. The first was systemwide implementation of voice recognition, an initiative that had stalled due to restrictions on leases imposed, in part, by the 2005 base used by bond-rating agents such as Moody’s and Standard & Poor’s. By working with the supply-chain vice president, Sferrella managed to upgrade an existing lease to cover all hospitals.

“Staff used to be a fixed cost. It’s now a variable cost, and as a manager, you are supposed to flex up and down to meet your volume fluctuations.”

—Sheila Sferrella, MAS, RT(R), CRA, FAHRA,
vice president, ambulatory services,
Saint Thomas Health Services, Nashville, TN

The second priority was implementation of a centralized scheduling system across all hospitals, achieved through an arrangement with an application service provider that made the cost an operating expense. The third was a new, centralized RIS for all four hospitals, implemented with the help of Ascension Health’s IT department. The fourth priority was finding a compliance coordinator for imaging, and the fifth (not yet completed) is hiring a systemwide radiation-safety officer. The council supports the management of the in-house imaging departments under the auspices of individual directors and is headed by Culbreth. Sferrella states that STHS has come to recognize patients’ distaste for navigating hospital corridors and waiting for services while emergency-department patients are seen. “The whole concept,” Sferrella insists, “has to change. We cannot grow if we continue to depend on hospital-based services to drive outpatient-imaging growth.” New partnerships, in tandem with which the system might be able to operate additional freestanding OICs, are now being sought. Also under investigation is the idea of achieving economies of scale by structuring all three existing freestanding sites under a single operating umbrella, and possibly running any new OICs using the same common structure. Moreover, during the past 18 months to two years, Sferrella has put into place a performance-improvement dataset for each of the freestanding centers. Quality is monitored against these measures (including appointment availability and the matching of orders with completed tests) and results are reported to the system’s vice president of quality, as well as to the board of directors. Inpatient utilization rates are now tracked by modality to facilitate decisions that would result in cost and/or other savings. For example, it was recently determined that utilization rates at one of the provider’s hospitals did not warrant maintaining two aging interventional-radiology rooms, which had become increasingly costly to maintain due to the difficulty of getting parts for them. The two older rooms were replaced by one state-of-the-art room. “We not only saved the capital expense of the second room, which was around $900,000, but we also saved operating costs: The service contract would have been about $100,000 per year,” Sferrella notes. As a nonprofit Catholic hospital system with a core mission of meeting the needs of the poor and underserved, STHS has a keen interest in monitoring the amount of charitable care that it provides. “We track charity care at our joint ventures, as well as at our hospitals,” Sferrella reports.Global EfficienciesEarlier this year, STHS began to implement a standardized electronic scheduling system across its hospitals and two of its freestanding sites, enabling the medical-imaging council to achieve further efficiencies by reviewing and standardizing exams’ time slots. Previously, all studies were scheduled for 60-, 45-, or 30-minute time blocks, but the executive director asked the modality managers to standardize examination times, where possible. “If you can do a head MRI in a 15-minute slot instead of 45 minutes, then you are not wasting two appointments,” Sferrella notes. Physicians can bypass the telephone system, sign into the scheduling application, and schedule patients electronically. When fully implemented, the scheduling system also will allow patients to schedule such routine screening procedures as mammograms, and it will let them indicate whether they would like appointment reminders to be delivered 24 hours in advance via email or telephone. Managing labor costs is another key focal area, and refinements of staff schedules and allocations continue. Breast imaging’s utilization levels recently dictated that a coder of breast-imaging procedures should be hired. A certain number of hours of the individual’s time were allocated across three hospitals, but each facility was required to relinquish part of an FTE to compensate for the expense. “Staff used to be a fixed cost,” Sferrella notes. “It’s now a variable cost, and as a manager, you are supposed to flex up and down to meet your volume fluctuations. If you want to increase your volume, you have to have exceptional service, because it is all about service. In a freestanding world, it’s all about volume: The more volume you do, the more you cover your fixed costs. On the inpatient side, it’s about productivity, but the bottom line, in both settings, is service, service, service.” In a related vein, St Vincent Health is in its first year of a lean-processing endeavor aimed at improving patient satisfaction while minimizing or eradicating redundancies and extraneous expenditures. Encompassing all departments within the hospitals and the freestanding centers, the initiative calls for assessing all individual processes and practices. Within imaging, this will range from finding ways to expedite preparation time for given procedures to alterations in staff scheduling. Although St Vincent Health has barely scratched the surface in making changes related to lean processing (additional part-time staff hours were recently incorporated into the schedule, as a start on the manpower front), managers are confident that this represents a step in the right direction. Other health-care systems have gained efficiencies and achieved financial savings by migrating to a lean-processing model, and the same is true of myriad corporations in other industries, Fammartino observes. Technology AcquisitionEquipment procurement is being refined by hospitals and health systems in response to external pressures. In recent years, St Vincent Health has adopted a strategy under which 80% of the purchasing of capital imaging equipment (all of which occurs under the aegis of Fammartino’s department) is executed through one vendor. The potential for access to better (volume) pricing, which St Vincent Health now consistently enjoys, was just one reason for migrating to this approach. St Vincent Health also saw great value in offering inpatient and outpatient services alike using a single manufacturer’s equipment. Specifically, Fammartino says, “We wanted to give our rural hospitals access to a talented pool of imaging professionals, so we took it upon ourselves to create an education-and-training program.” Because the program needs to cover only one manufacturer’s equipment, staff members can rotate among radiology departments at St Vincent Health’s hospitals without being retrained (or negatively affecting the imaging process). “You might think, for example, that a 64-slice CT machine is a 64-slice CT machine is a 64-slice CT machine,” Fammartino says, “but there are subtle differences between what comes from one manufacturer and what comes from another. Having one common platform eliminates complications.” Detailed roadmaps for each hospital and freestanding center play a significant role in determining the outcomes of requests for capital-equipment purchases and replacements. Among other elements, the roadmaps specify the optimal allocation of equipment and funds for the given facility, based on such factors as its size, its breadth of services, and the specific market that it serves. Any changes within the facility in question are taken into account when its roadmap is used as an acquisition-assessment tool. Solid evidence that a change warrants purchasing the requested equipment must be presented in order for a director to alter the roadmap and move forward with an acquisition. Using a hypothetical example, Fammartino says, “We would not approve a 3T MRI purchase for one of our 25-bed hospitals without real documentation that something (demand or another factor) is different now.” Total cost of ownership also comes under the microscope. Fammartino and his team look at the expected volume and return on investment (ROI) to be yielded by the proposed acquisition. The issue of whether the equipment will help St Vincent Health and the individual facility attract new business, or do a more effective job of maintaining existing business, merits close examination; so do the recommendations of St Vincent Health’s vendor partner. STHS weighs inpatient equipment-procurement decisions against a template created by Ascension Health. For outpatient equipment, a business case for moving ahead with each proposed purchase must be formulated. Revenue-projection studies are conducted and five-year ROI projections are prepared; potential net revenue and the cost of operation are assessed. If operating expenses are found likely to increase as a result of acquiring the equipment in question, it cannot pass muster unless it melds with the values inherent in the STHS mission. Sferrella and Culbreth make equipment-acquisition recommendations, with involvement in the approval process extending upward to the hospitals’ CEOs.Bolstered by CommunicationFammartino and Sferrella agree that given current economic, operational, and logistical challenges, as well as emerging opportunities in the freestanding OIC sector, entities such as St Vincent Health and STHS cannot effectively execute imaging management without a solid communication structure. Accordingly, Fammartino holds quarterly meetings with the medical-imaging directors of all outpatient facilities. Meetings involve the sharing of best practices. New technologies and protocols are often discussed, with individual teams assigned to prepare reports on them. Reviews are carried out on the degree to which the centers’ contracted radiologists are meeting key performance standards and targets set by St Vincent Health (and to what degree they will be compensated as a result). Information pertaining to equipment is frequently disseminated at the meetings by St Vincent Health’s vendor partner. “These meetings are extremely valuable from many standpoints,” Fammartino says, “but maybe most important, they keep the director relationships on a good, positive keel and prevent misunderstandings. For instance, sometimes a director will try to requisition a piece of equipment, not knowing why it isn’t a good fit for that particular center. When we communicate that, and maybe suggest alternatives, it works a lot better.” At the hospital level, a systems executive council meets monthly to discuss performance, technology strategies, and the like. Best practices frequently come up as well. Physicians are kept in the loop, and this step makes for more cohesive provision of services. STHS uses the medical-imaging council as a platform for the sharing of best practices; the group meets once each month to hash out issues and set priorities for undertaking initiatives, including those centered on equipment. “There is a lot of talk about what we need to do to compete,” Sferrella says. Fammartino describes a similar dynamic. He adds that the manner in which hospitals and health systems handle their imaging business will never be static; outside factors will always affect (and dictate refinements of) its execution. “Hospitals need to remain open to change. This, in itself,” he concludes, “is the mark of good management.”
Table. Imaging Performance Indicators for Middle Tennessee ImagingJulie Ritzer Ross is a contributing writer for Radiology Business Journal.