Touchstone Medical Imaging: Putting People First

Touchstone Medical Imaging is a privately held provider of diagnostic imaging services headquartered in Brentwood, Tenn. Founded with two partners in 1991 by Christian C. “Pat” Rice, Jr, partner and CEO, Touchstone operates 17 imaging centers in seven states: Texas, Colorado, Tennessee, Maryland, Arkansas, Illinois, and Nebraska. Prior to founding Touchstone, Rice was a partner with Deloitte & Touche Management Consulting in Stamford, Conn. He has served in various development and management positions in the health care industry, including that of CFO of the Medical College of Virginia. Rice agreed to share his management philosophy and thoughts on the outpatient imaging marketplace with the readers of ImagingBiz.com. ImagingBiz.com: To what do you attribute Touchstone’s continuing success in the outpatient arena, especially in light of the tough reimbursementmarketplace after the Deficit Reduction Act (DRA)? Rice: We showed a little bit of foresight in trying to get in front of DRA, rather than waiting for it to happen. Kevin Cross (a partner and COO) and I decided to operate as if DRA were going to take place in October of 2006. We had meetings with our corporate and regional people and got the whole team involved. It looked like DRA was coming, and if it didn’t, it would be a bit of a bonus, so we went to all of our vendors and renegotiated contracts and made operational and personnel changes. We thought we covered 75% of the shortfall of the DRA through expense reductions, reallocation of resources, and other tactics. We are fortunate in that we are not in some of the higher Medicare utilization states, such as Florida and the Northeast, so our Medicare load is proportionate; it’s not the majority of our business. The other thing we did was continue with all of our growth plans: We added second magnets at a couple of our centers, and we expanded our offerings with additional modalities, so it was a two-pronged attack. We drove revenue at the same time that we reduced expenses. Fortunately, we have a very good team that was able to make these things happen.

“We say, ‘Operations drive finance, finance doesn’t drive operations.’ Then, we say, ‘People drive operations.’ We have a good team of people who make it happen.” —Christian C. “Pat” Rice, CEO Touchstone Medical Imaging

ImagingBiz.com: Can you tell us a little bit about your management team and the style with which you lead the organization? Are your center managers empowered to run their respective operations? Rice: Philosophically, we try to look at the center managers as if they were the general managers of the business. We try to empower them, and we work very closely with them: I think they all feel free to call any of the senior management team to say, “Hey, I’ve got a problem with something,” or, “I need help with something,” or “I need to talk about something.” We try to keep the lines of communication open. Yes, we try to empower the managers so that they look at a center almost as if it were their business. ImagingBiz.com: You have historically invested in building a professional sales/marketing team to represent your centers. Has this made a significant difference in Touchstone’s growth in a competitive environment? Rice: Yes, it has, and the whole key is the professional sales team. Our definition of a professional salesperson is not just someone who knows the markets and the doctors, but also knows the operations of the centers, knows what insurances you take, knows what the requirements are for referrals, knows how your scheduling works, and knows all the considerations internally, so the salesperson can be the expediter, if you will, between the office and the center to make sure everything works well. When they go out to the field, they have something to offer, rather than just asking for something. They are problem solvers. ImagingBiz.com: How would you describe your corporate culture, and how did you build it? Rice: When we have our annual meetings, we go through the objectives of the company for the year, and among the objectives that we always include are providing a work environment that encourages communications, teamwork, optimism, and advancement for overachievers. Those are our objectives, and we share those. We also try to give them an idea of where the company is going and how we look at things. We talk about creating an operationally and financially strong company focused on quality, staying the course, and playing by the rules. We absolutely try to stay out of any gray area in terms of regulations. We try always to have a quality product, and we require that all of our centers achieve certification and stay focused on customer service. I think people respond to that: They say, “Hey, I can feel good about what we are doing and how we are doing it.” ImagingBiz.com: What is your view of the future of outpatient diagnostic imaging? Where are we headed as a profession? Rice: Obviously, there is going to be some shakeout in the industry, and I think we are seeing that already. Already, we’ve seen some competitors close, so that is going to happen. As to where it really leads, it’s hard to tell. The only things we, as operators, can do are stay the course, continue to provide a quality product that really has value, not overreach, and make our organizations as strong and healthy as they can be, so that whatever the challenges are, we are ready to face them. I think that there is going to be a consolidation; everyone understands that. A lot of the smaller players are going to have difficulty. The evolution will be toward fewer and stronger players. The barriers to entry are higher than they used to be, and financing is much tougher to obtain in terms of getting centers done. Contracting is also more difficult, and smaller operations may not have the resources to handle these challenges. I don’t think you’re going to have as many underfunded, opportunistic operations in the marketplace. I think there is a good future for financially and operationally stronger players in the outpatient imaging business. Like any business, it will have its challenges, but outpatient imaging is a good service, and I think people prefer the outpatient setting to a traditional health care provider. ImagingBiz.com: What is Touchstone’s strategy for growth in this market: same-store sales, acquisitions, or de novo builds? Rice: We are always looking for opportunities to grow, and the first opportunity is looking at your own center and seeing what you can do to improve and expand the services you have at each center. We are also looking at acquisitions, however, because right now, we think the market is ripe for consolidation. We are looking for ways to expand our service offerings. We haven’t reached any conclusions yet, but we are looking at opportunities. We are looking at geographic concentrations, expansions into women’s centers, and other related diagnostic lines of business. ImagingBiz.com: Since Touchstone has a significant footprint, are there ways that you use your size and strength to affect either payors or legislators? I noticed that one of the members of your senior management team is responsible for managed care contracting. Rice: We try to develop payor relationships in the national and local markets. All contracting is done at the corporate level, but with the input and involvement of the center manager and the people at the local level as well. We also try to develop relationships with the major payors, so they know who we are. We meet with them occasionally and try to update them on our approach to the business (such as the facts that we do not get involved in the gray areas of the business and that our focus is on quality). I think they react to those kinds of things, sometimes, and sometimes they are more worried about cost. That’s a tougher hill to climb, but we try to develop those relationships and help them to understand how we are going about the business. ImagingBiz.com: How can freestanding outpatient imaging centers best differentiate themselves from aggressive hospitals vying for the lucrative outpatient business? Rice: The only way you can differentiate yourself is through service to your referring physicians and the way you treat your patients. If you have a 1.5T magnet and the hospital has a 1.5T magnet, when patients come to your place for an 8 AM appointment, they should be seen at 8 AM rather than 9 AM. When they get that test, the results should be provided in a timely manner and communicated back to the referring physician. It’s all of those quality-related things, and I think they make a difference. At one of our managers’ meetings (and we have them every year, with all of the center managers and marketing people together), the whole subject for discussion for two days was how to improve the quality of our service. I think that’s the only way you compete in that marketplace.