Operating an Imaging-center Chain in the Postapocalyptic Era
It began with the DRA, and ever since, CMS and Congress have set upon outpatient imaging like dogs on a bone, culminating in a new round of cuts to the technical component contained in the health-reform law. As a result, operations at many outpatient-imaging organizations came into acute focus in 2005, and they continue to be scrutinized. 
Clete MaddenRadiology Business Journal talked with Clete Madden, COO of Touchstone Medical Imaging (Brentwood, Tennessee), an OIC company with 18 locations, but this was no pity party. Madden is downright upbeat about the future of outpatient imaging.RBJ: After DRA implementation, cuts to the technical component of outpatient imaging resulted in a significant blow to revenue for outpatient-imaging providers. Have you done the math on how the changes to the equipment-utilization rate and multiple-procedure discounts will affect revenue in 2011?Madden: We’ve done certain calculations on that, and the impact depends upon your payor mix, obviously. We’re well under 20% for Medicare in our payor mix, so it’s not as severe for us as it might be for others. We’ve definitely done the math and have a feel for what the impact could be, and we continue to monitor it. It will have a noticeable impact, but it is not something we can’t overcome, just as we did with respect to the DRA.RBJ: If it is like many other imaging-center companies, Touchstone tightened operations considerably after the DRA. As COO, where will you look for cost-cutting opportunities?Madden: Anybody still in the will-look stage has got some scrambling to do. We’ve been looking at this for quite a while now, knowing that something was coming down the road. We’ve looked at every expense line item and prioritized the highest-cost line items first. We looked at payroll, radiology reading-fee contracts, equipment-maintenance arrangements, facility leases, and billing/collections, and we are pretty deeply into several initiatives that involve cost cutting in all of those areas. RBJ: As the COO of an IDTF, you have been in a good position to test the quality and the prices in the teleradiology marketplace. Have you been able to achieve any savings here in cost or turnaround time?Madden: We’ve looked at that, and we’ve had some people approach us. At present, we are not too deeply into teleradiology, with a couple of exceptions. Our focus has been making sure that radiologists are on-site at our centers, for a number of reasons (including covering contrast administration and being available for consultation with referring physicians). A couple of things that we have done in teleradiology have been more payor driven. In one part of the country, we have an initiative where the payor has reduced its network and let in fewer radiology imaging centers. You have to meet certain quality metrics and technology metrics before the payor will let you in, and as part of that, we have a backup teleradiology arrangement in place. If there is not a neuroradiologist with a certificate of added qualification available, the backup is through this teleradiology provider. We have a couple of instances where we have carveouts on the radiologist contracts we have, because a particular referring physician wants a particular national group to read his or her studies. Aside from that, though, we have not done a whole lot with that. RBJ: Are there opportunities to increase volume to offset reimbursement reductions? Where are the short-term referral opportunities?Madden: For us, the first and foremost concerns are continuing to provide high-quality care to patients and timely reports to referring physicians (and not compromising on that), holding hard and fast to our bread and butter. Payors are getting more astute with respect to quality requirements, which is the reason for one of the teleradiology arrangements I mentioned earlier. Showing that we can get into those arrangements is helping our volumes and keeping out competitors that can’t meet those metrics. We’re still talking about our pricing because we are definitely a better option than many hospitals and hospital/IDTF joint ventures, and much more convenient, and the consumers are getting more savvy every day. That’s creating opportunities for us with some of the payors. We have a couple of arrangements in which the referring-physician pool is actually incentivized, through a bonus pool, to steer imaging out of hospitals. We’ve become part of those. We’re also seeing competitors in certain service areas that don’t have the secure financial characteristics and balance sheet that we have, resulting in the closure of their operations. We see some opportunities through technology, especially with potential physician portals (to referring physicians) that would let us become more connected to them. We’ve also been approached by some hospitals to do some joint ventures. We’re looking into those. It sounds good on paper, and there have been some successful arrangements in the past few years that we are aware of, but the payors are starting to get savvy with respect to those as well. We are being very flexible in our hours of operation at the centers. We have extended hours and are open on Saturday, and that has done well for us. We also are somewhat encouraged by the so-called sunshine provision in the health-reform law: If physicians use the in-house ancillary exception to the Stark law for MRI or CT, they are required to tell patients, in writing, that they have a financial interest in that imaging equipment, and to provide a list of alternative sites. It’s baby steps on the self-referral issue, but better than nothing. We’ve seen a handful of physicians who have provided the list, and some who have stopped taking Medicare patients (who then are sent to us), but it’s not a significant number yet.RBJ: What do you expect from health-care reform and its 32 million new covered lives? What are your projections for impact on volume, and how are you preparing for this eventuality?Madden: In general, we hope that it has a positive impact, but we are still studying it. The 32 million won’t come onto the market until 2014, but we certainly hope that there will be an uptick in our markets; how much, I don’t know. The area of the country you are located in is a factor. I would expect it will have a greater impact along our southern borders. We’re trying to look at growth areas that are contiguous to our existing markets: We are in Dallas/Fort Worth, Texas; Denver, Colorado; and a handful of others where there is a lot of projected growth, so we are trying to focus on those areas. Obviously, it is not rocket-science strategy. We think that if we can overlay our model on less-robust centers in some of these growth areas and apply our processes, we should do pretty well. We are going to be selective, but (we hope) also opportunistic.RBJ: The health-reform law appears to be stacked in favor of integrated delivery systems, bundled payments, and medical homes. Where do you see the IDTF fitting into the new order?Madden: I’ll try not to sound cynical here. Integrated delivery systems have been around since 1990. Even back then, there were a lot of consultants making a lot of money telling hospitals’ administrators they had to be a part of integrated delivery systems and helping them set up those systems; a few years later, those hospitals wrote off a lot of physician-practice acquisition goodwill. I was engaged with an integrated delivery system in the past few months, helping a close family member through a health-care issue, and they took this person’s medical history four times, took blood and vital signs three times, filled out a forest’s worth of forms, and billed the person incorrectly a few times. I was thinking, “Is this integrated delivery system really working?” Having said that, we’ve had numerous discussions with hospitals about joint ventures and fitting into an integrated delivery system, and even with some large physician groups and independent practice associations. If the physicians are willing and able, they (as opposed to just the hospitals) can really drive this thing. We are still exploring it. I guess I am naive, in some respects, to think that if you continue to provide high-quality service, with high-quality equipment, at an affordable price, in a setting that is accessible and convenient for the patient, you might end up doing OK.RBJ: To paraphrase Samuel Clemens, then, are the reports of the demise of the IDTF industry premature?Madden: I think so. Look at the big boys: RadNet and Alliance Imaging. They are raising more money to buy underperforming centers, and I think there is an opportunity there for us to do the same. —Staff
Clete MaddenRadiology Business Journal talked with Clete Madden, COO of Touchstone Medical Imaging (Brentwood, Tennessee), an OIC company with 18 locations, but this was no pity party. Madden is downright upbeat about the future of outpatient imaging.RBJ: After DRA implementation, cuts to the technical component of outpatient imaging resulted in a significant blow to revenue for outpatient-imaging providers. Have you done the math on how the changes to the equipment-utilization rate and multiple-procedure discounts will affect revenue in 2011?Madden: We’ve done certain calculations on that, and the impact depends upon your payor mix, obviously. We’re well under 20% for Medicare in our payor mix, so it’s not as severe for us as it might be for others. We’ve definitely done the math and have a feel for what the impact could be, and we continue to monitor it. It will have a noticeable impact, but it is not something we can’t overcome, just as we did with respect to the DRA.RBJ: If it is like many other imaging-center companies, Touchstone tightened operations considerably after the DRA. As COO, where will you look for cost-cutting opportunities?Madden: Anybody still in the will-look stage has got some scrambling to do. We’ve been looking at this for quite a while now, knowing that something was coming down the road. We’ve looked at every expense line item and prioritized the highest-cost line items first. We looked at payroll, radiology reading-fee contracts, equipment-maintenance arrangements, facility leases, and billing/collections, and we are pretty deeply into several initiatives that involve cost cutting in all of those areas. RBJ: As the COO of an IDTF, you have been in a good position to test the quality and the prices in the teleradiology marketplace. Have you been able to achieve any savings here in cost or turnaround time?Madden: We’ve looked at that, and we’ve had some people approach us. At present, we are not too deeply into teleradiology, with a couple of exceptions. Our focus has been making sure that radiologists are on-site at our centers, for a number of reasons (including covering contrast administration and being available for consultation with referring physicians). A couple of things that we have done in teleradiology have been more payor driven. In one part of the country, we have an initiative where the payor has reduced its network and let in fewer radiology imaging centers. You have to meet certain quality metrics and technology metrics before the payor will let you in, and as part of that, we have a backup teleradiology arrangement in place. If there is not a neuroradiologist with a certificate of added qualification available, the backup is through this teleradiology provider. We have a couple of instances where we have carveouts on the radiologist contracts we have, because a particular referring physician wants a particular national group to read his or her studies. Aside from that, though, we have not done a whole lot with that. RBJ: Are there opportunities to increase volume to offset reimbursement reductions? Where are the short-term referral opportunities?Madden: For us, the first and foremost concerns are continuing to provide high-quality care to patients and timely reports to referring physicians (and not compromising on that), holding hard and fast to our bread and butter. Payors are getting more astute with respect to quality requirements, which is the reason for one of the teleradiology arrangements I mentioned earlier. Showing that we can get into those arrangements is helping our volumes and keeping out competitors that can’t meet those metrics. We’re still talking about our pricing because we are definitely a better option than many hospitals and hospital/IDTF joint ventures, and much more convenient, and the consumers are getting more savvy every day. That’s creating opportunities for us with some of the payors. We have a couple of arrangements in which the referring-physician pool is actually incentivized, through a bonus pool, to steer imaging out of hospitals. We’ve become part of those. We’re also seeing competitors in certain service areas that don’t have the secure financial characteristics and balance sheet that we have, resulting in the closure of their operations. We see some opportunities through technology, especially with potential physician portals (to referring physicians) that would let us become more connected to them. We’ve also been approached by some hospitals to do some joint ventures. We’re looking into those. It sounds good on paper, and there have been some successful arrangements in the past few years that we are aware of, but the payors are starting to get savvy with respect to those as well. We are being very flexible in our hours of operation at the centers. We have extended hours and are open on Saturday, and that has done well for us. We also are somewhat encouraged by the so-called sunshine provision in the health-reform law: If physicians use the in-house ancillary exception to the Stark law for MRI or CT, they are required to tell patients, in writing, that they have a financial interest in that imaging equipment, and to provide a list of alternative sites. It’s baby steps on the self-referral issue, but better than nothing. We’ve seen a handful of physicians who have provided the list, and some who have stopped taking Medicare patients (who then are sent to us), but it’s not a significant number yet.RBJ: What do you expect from health-care reform and its 32 million new covered lives? What are your projections for impact on volume, and how are you preparing for this eventuality?Madden: In general, we hope that it has a positive impact, but we are still studying it. The 32 million won’t come onto the market until 2014, but we certainly hope that there will be an uptick in our markets; how much, I don’t know. The area of the country you are located in is a factor. I would expect it will have a greater impact along our southern borders. We’re trying to look at growth areas that are contiguous to our existing markets: We are in Dallas/Fort Worth, Texas; Denver, Colorado; and a handful of others where there is a lot of projected growth, so we are trying to focus on those areas. Obviously, it is not rocket-science strategy. We think that if we can overlay our model on less-robust centers in some of these growth areas and apply our processes, we should do pretty well. We are going to be selective, but (we hope) also opportunistic.RBJ: The health-reform law appears to be stacked in favor of integrated delivery systems, bundled payments, and medical homes. Where do you see the IDTF fitting into the new order?Madden: I’ll try not to sound cynical here. Integrated delivery systems have been around since 1990. Even back then, there were a lot of consultants making a lot of money telling hospitals’ administrators they had to be a part of integrated delivery systems and helping them set up those systems; a few years later, those hospitals wrote off a lot of physician-practice acquisition goodwill. I was engaged with an integrated delivery system in the past few months, helping a close family member through a health-care issue, and they took this person’s medical history four times, took blood and vital signs three times, filled out a forest’s worth of forms, and billed the person incorrectly a few times. I was thinking, “Is this integrated delivery system really working?” Having said that, we’ve had numerous discussions with hospitals about joint ventures and fitting into an integrated delivery system, and even with some large physician groups and independent practice associations. If the physicians are willing and able, they (as opposed to just the hospitals) can really drive this thing. We are still exploring it. I guess I am naive, in some respects, to think that if you continue to provide high-quality service, with high-quality equipment, at an affordable price, in a setting that is accessible and convenient for the patient, you might end up doing OK.RBJ: To paraphrase Samuel Clemens, then, are the reports of the demise of the IDTF industry premature?Madden: I think so. Look at the big boys: RadNet and Alliance Imaging. They are raising more money to buy underperforming centers, and I think there is an opportunity there for us to do the same. —Staff