Q&A: Maximizing Profits in Hospital-Based Radiology Practices, Part 3

September 27, 2011

In this third of a four-part series, Medical Management Professionals Inc.'s Randal Roat and David Myrice discuss how practices can prepare for changes in the industry.

Increased regulations and higher fixed costs have many private radiology clinics across the U.S. choosing to affiliate with local hospitals or healthcare systems. Doing so, however, has raised new questions on the revenue side. Does it become easier or more difficult for a radiology practice to maximize its financial efficiency once it joins a larger healthcare system? What are the pitfalls - and the opportunities?

In this four-part series, representatives from Medical Management Professionals Inc., an Atlanta-based company that partners with ZirMed to provide billing services and revenue cycle management and practice management solutions to hospital-based doctors and practices, discuss operations, HIPAA 5010 and ICD-10 implementation, industry changes, and selection of an RCM partner.

Here, MMP’s Randal Roat and David Myrice talk about the industry.

Are there business advantages for hospital-based radiology practices compared with those in private practice? And what kinds of unique problems do they face compared to private practice radiologists?

Hospital-based radiology practices have a number of business advantages over independent imaging centers and/or clinics. Contracting with a large organization drives a lot of business for the radiology group, and typically the hospital will staff the radiology department, thereby relieving radiologists from direct management responsibilities and additional costs. In many cases equipment and other clinical resources are available from the hospital.

On the payment side there may be payer contracting advantages, depending on the size of the hospital, since the hospital serves a greater market share than a typical single radiology clinic might. Furthermore, current Medicare payment policies seem to be directing patients towards a hospital-based setting versus an independent practice setting.

As for challenges, the cultural integration of a radiology practice within the culture of the hospital is typically the biggest challenge. This is due to additional expectations of the radiology practice from a departmental chair or from management perspective. Sometimes the size of the hospital or the structure within the hospital’s decision-making can be less nimble and responsive than what can be achieved in a privately-owned clinic. Decisions such as equipment purchase, staffing, scheduling, budgeting, etc. are often achieved faster and with less.

Oftentimes there pressure to preserve hospital contracts - especially when certain contracts, such as teleradiology, are threatened. There is sometimes a disadvantage to how the hospital will dictate the various services the radiology practice will provide. The hospital may negotiate the ability or have the need to divvy out radiology services to other specialties in the hospital, or contract certain modalities of service. Compared to an independent clinic, the market would dictate those same services. This is a challenge faced by hospital-based radiology groups because the type of work they do affects staffing and other group elements.

Finally, a hospital-based group often has less control over its payer contracts than it would want. If the hospital requires it to participate in all contracts the hospital has, it reduces the group’s negotiating power.

What are the most common strategic mistakes that radiology clinics make when they align with a hospital or healthcare system?

Radiology practices often forget to identify the allegiances of their referral base. Some referral partners will stop referring, if they are not affiliated or do not like the proposed hospital or health system. Similarly, independent groups often don’t consider the implications of their independence on decision-making going forward; for example, in their marketing of the center, expansion or reduction of services or hours, and so on.

Other than 5010 and ICD-10, what kinds of challenges are coming in the next 12 to 18 months from a revenue standpoint? And how should radiology practices be preparing for them?

The first issue of concern is the Sustainable Growth Rate. As of January 1, 2012, there will be a projected 29.5 percent cut across the board for all medical services, including radiology. So, given the current economic backdrop and cost-cutting, it is recommended that radiology groups project this potential rate drop into their forecasted budget.

Another issue of concern is the extension of multiple-procedure payment reductions, which has the potential to be very problematic. Even more concerning is the fact this reduction is now being proposed on the professional reimbursement too. Radiology groups should “run the numbers” to see how these reductions might impact their practice.

Of greatest importance to how Washington policy rolls out to the commercial sector is radiologists’ ability to affect change. Every radiologist and radiology employee can and should be sending a message to legislators asking that they re-analyze the Medicare Physician Fee Schedule. Radiologists can vocalize opinions and predictions on what these types of financial and payment policies will do to the practice of radiology and how that will affect Medicare beneficiaries.

Randal Roat, CHBME is vice president of radiology services with Medical Management Professionals, Inc. (MMP). Mr. Roat is a graduate of Western Michigan University with a degree in Information Systems and Business Administration, with additional post-graduate education from University of Michigan and the Wharton School of Business. His industry involvements include Immediate past president of the HBMA, the past president of the Radiology Business Managers of Michigan, RBMA, HBMA government relations past chair, and national relationships including involvement on the government relations committee, payer relations committee and data committee.

David Myrice, CPA, MBA is a senior finance manager with Medical Management Professionals, Inc. (MMP) in its Great Lakes region. He holds a master’s in business administration from the University of Toledo and graduated from Bowling Green State University with a bachelor degree in Accounting. He possesses four years of public accounting experience, 10 years of long-term care healthcare experience and two years of physician practice management experience prior to joining MMP.

Click here for Part 1 of this Q&A series on practice operations.

Click here for Part 2 of this Q&A series on HIPAA 5010 and ICD-10.