CA imaging network surfs cutting edge in service

March 10, 1993

With the winds of health-care reform blowing in the directionof regional service networks and managed care, independent imagingcenters can be forgiven for feeling lost and alone. But perk up.There is help in the air for the geographically challenged.

With the winds of health-care reform blowing in the directionof regional service networks and managed care, independent imagingcenters can be forgiven for feeling lost and alone. But perk up.There is help in the air for the geographically challenged.

Changes are underway in California, birthplace of the HMO,that could provide independent centers a path to approach bulkpurchasers of imaging services short of selling out to a largecenter chain. Ironically, medical service innovation within theGolden State is partially a reaction to innovative fraud and abuse.

Some California physicians--including radiologists--have hatchedschemes to defraud the state workers' compensation insurance system(SCAN 2/24/93). But, like a pendulum swinging back into balance,California has also seen the development of pioneering techniquesto counter workers' comp fraud.

One of these techniques links imaging centers to networks runby managed service organizations. MSOs act as intermediaries,providing administrative services for insurers and helping imagingindependents handle patients covered by managed care and othercapitated health-care plans.

Within the workers' comp system, MSOs can provide insurerswith the quality assurance and utilization review services neededto combat fraud and abuse. MSOs dovetail nicely with the nationaltrend toward managed health care and, as a result, have the potentialto spread beyond California.

One of the first imaging center MSOs was Future Diagnostics(FDI) of Los Angeles. Formed in 1989, FDI now links some 150 independentlyowned MRI centers throughout the state. FDI owns no centers itselfand has no physician investors.

FDI contracts with employers and workers' comp insurance companies.Insurers need access to high-quality, unbiased scans because ofthe large number of fraudulent and unnecessary claims within theworkers' comp system. FDI estimates that at least 50% of Californiaworkers' comp MRI scans are unnecessary.

To ensure such access, FDI has developed rigorous quality assurancestandards that must be followed by all member centers. The standardsinclude:

  • Centers must have high-field magnets. FDI will contractwith low-field centers, however, in areas where no high-fieldmagnets are available and for obese and claustrophobic patients.

  • Scans must be performed using standardized sequences.

  • Scans must be read by a board-certified radiologistwith fellowship training in the area of concern. Images from centerswithout specialty-trained radiologists are sent to FDI's consultingradiologists for review and interpretation.

  • Scans must receive precertification from a computerprogram developed by FDI to screen out unnecessary testing. Theprecertification service is optional for FDI clients.

  • Scan results are fed into a utilization review databaseused to identify quality problems or patterns of excess utilization.Access to the database is also optional for FDI clients.

"The mechanism is such that it not only prevents abusesbut works against them," said Dr. Michael Brant-Zawadzkiof Newport Imaging Center in Newport Beach, CA. Brant-Zawadzkiis one of FDI's medical directors.

IN EXCHANGE FOR COMPLYING with FDI's standards, centers gain accessto the MSO's pool of workers' comp referrals, a valuable edgein the overbuilt California imaging center market. FDI also handlesbilling, collection and scheduling for member centers.

FDI is able to secure significant price discounts from imagingcenters in exchange for referrals. The company estimates it cansave insurance clients 30% to 50% on MRI charges for workers'comp claims.

Fremont Insurance Company of Glendale, CA, saves $500 per scanthrough FDI's network, according to Anna King, a claims managerfor Fremont.

"Their charges are far below average," King said."They can charge less because of the amount of business theyget, but we (contract with them) because of the quality standards."

Those standards, however, have earned FDI the enmity of someradiologists, particularly those who don't have high-field magnetsor specialty training.

"It's a real dilemma because there are radiologists whocan interpret images extremely well who don't have recent formaltraining in MRI," said Dr. John Crues, a radiologist at CottageCommunity Magnetic Resonance Center in Santa Barbara, CA. Cruesis also an FDI medical director.

"But on the other hand, much of the fraud and abuse documentedin Southern California involves radiologists who are board-certifiedbut don't have training and aren't capable of reading MRI images,"he said. "Therefore, in a system like this you have to havequality control standards, and those standards, to be fair, reallyhave to be based on training."

THE DEVELOPMENT OF IMAGING CENTER MSOs in California got a shotin the arm last year after the state's largest workers' comp insurer,State Compensation Insurance Fund, proposed the creation of animaging center preferred provider organization for its cases.The company solicited bids from imaging center networks and isreviewing the proposals, according to a company spokesperson.

A number of imaging center MSOs were formed for the purposeof vying for the lucrative contract. But some of the new networkslack the quality assurance and utilization review standards necessaryto prevent fraud and abuse.

FDI has also seen itself tarred with the same brush used tocriticize fraudulent practices in the workers' comp system, suchas scan brokering. Scan brokers are companies that act as middlemenbetween insurance companies and imaging centers. Brokers oftenreceive hefty mark-ups on cases but provide little or no services.

FDI's proponents note that the company provides legitimateservices that add value to scans, unlike scan brokers. That hasnot stopped FDI from being threatened by proposals in the CaliforniaLegislature that would ban scan brokering, however.

Such legislation would be misguided because FDI's servicesare no different than those offered by preferred provider organizations,according to an FDI executive.

"If what we do is made illegal, then all the PPOs in Californiawill be illegal," the executive said.

If radiology MSOs outlast efforts to ban scan brokering, thequestion remains: Will the imaging center MSO concept fly outsidean environment as arcane and specialized as the California workers'comp system?

FDI is banking on it. The company has signed on several indemnityinsurers in California and is starting operations in Nevada, Arizona,Colorado and Texas. FDI is also expanding its concept to includeimaging modalities besides MRI.

Some industry observers maintain that imaging center MSOs willonly be successful in areas like Southern California, where anoversupply of centers exists. Overcapacity causes the cutthroatcompetition for referrals that enables MSOs to wrest price discountsfrom centers.

Others, however, see MSOs as an idea whose time has come, accordingto FDI consultant Nathan Kaufman, president of the Kaufman Groupin San Diego.

"MSOs are the hottest thing in health care right now,"Kaufman said. "They're growing at an explosive rate in thegeneral hospital arena. FDI is one of the few successful effortsfocusing on imaging."