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• Practical solutions begin with forming a strategic plan

I periodically receive calls from other radiology administrators requesting assistance with some problem in their practice. As I delve into the details, it often becomes obvious that the group's ability to find a practical solution is hampered by its inability to apply good organizational and structural thinking to the situation.

For example, one of the problems many radiology groups face is that of declining accounts receivable collection. When I start asking about an organization's overarching strategy, however, I sometimes discover that none exists. Practical solutions for operational problems for any radiology group begin with the development of a strategic plan. This plan should establish the framework for a group's direction by focusing on such mundane but important issues as:

--Who are we and where are we going?

--What actions of our competitors are likely to affect our ability to be successful?

--What trends or changes in reimbursement might have an impact on us?

--What are our service area demographics and how are they shifting?

--What is happening to the local players (hospitals, HMOs, IPAs, medical groups)?

--What changes in federal and state regulations might affect us?

I liken the radiology group without a strategic plan to folks who are planning to drive from Boston to San Diego without a road map. They may eventually make it, but not without a lot of wasted effort.

Using my group as an example, we gazed into our crystal ball in the early '90s and developed a strategic plan in response to what we thought would happen in the Sacramento market. That plan predicted an increase in managed care (Sacramento is considered the managed care capital of the world); substantial increases in the use of capitation as a payment method for radiology services (we service 280,000 capitated lives); a decline in the number of HMO providers (the nine to 11 major HMOs in our market have been reduced to five); an eventual decline in the number of medical groups and IPAs (everyone has become familiar with the FPA debacle); and a steadily growing population.

With these assumptions, the group took appropriate action to position itself for what we felt was inevitable. Those steps included developing multiple action plans, such as one that we called the "80 corridor" strategy. This strategy predicted major population growth along Interstate 80 of a socioeconomic mix that our group wanted to serve. In this one example, our strategy resulted in two mergers and one practice acquisition over a period of five years. Approximately 10 years after our first strategic plan, the group has grown to 60 physicians, 700 employees, 17 imaging centers, six hospital contracts, and six radiation oncology centers. More important, we have positioned the group to capitalize on our strengths and improve on our weaknesses to such an extent that most players in the area are willing to work and contract with us. We believe our commitment to strategic planning in the '90s positioned us to thrive in the new century.

After you've developed a plan detailing where you want to go, the successful radiology practice must commit to investing in the development of a strong infrastructure. That means finding and keeping the right people with the right tools.

Our example of the radiology group that continues to see its AR collections decline and doesn't know why can offer insight. Most of the reasons for such a situation could have been resolved through the establishment of a strong infrastructure. Is the cause of the decline a matter of poor contracting (lack of qualified people, poor information, or dearth of market power) or insufficient billing and follow-up (lack of qualified people, poor training of staff, or an inadequate billing system)? The AR problem could also have begun with the organization's inability to establish a market presenceor position of strength, again because of lack of planning.

Many practice management problems such as this example can trace the root to something other than the symptoms. For example, to maximize revenue, the organization has to have negotiated favorable contracts. Contract negotiations, meanwhile, are very difficult without market strength and adequate data, while data require an IT infrastructure that includes a comprehensive data warehouse. The question of where to start can become confusing and paralyzing without analysis and planning.

The adage "knowledge is power" is borne out repeatedly in contract negotiations. Our group enters a negotiation able to pinpoint numbers and types of referrals, procedure utilization by location, referring physician, patient demographics, and payer type including how this payer reimburses us, as well as service and location costs-all to the chagrin of the people sitting on the other side of the table. Data, coupled with market power, allow us to avoid onerous contract terms for the most part, while increasing the amount we are paid for our services.

Investment in an organization's infrastructure doesn't stop here. The radiology leadership of the group must be willing to champion the benefits over the costs of investing in the group's future by hiring top-quality management. They must also acquire the right tools to support that management team, and invest in labor-saving tools for the operational staff, such as electronic tracking of medical records, electronic scheduling of patients, autofaxing of reports to referring physicians, and so on. The secret to continued success is simple: The group must be willing to reinvest some of its profits into the organization for that golden egg-laying goose to continue to do her thing.

MR. GASCHEN is executive vice president of Radiological Associates of Sacramento.

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