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Tips can help centers counter payment cuts


The Deficit Reduction Act of 2005 and the resulting decrease in Medicare's reimbursement schedule could result in as much as a 25% to 45% reduction in revenue for outpatient imaging practices, according to industry sources.1 Faced with such a potentially drastic scenario, many practice owners are reevaluating the very viability of their imaging operations.

The Deficit Reduction Act of 2005 and the resulting decrease in Medicare's reimbursement schedule could result in as much as a 25% to 45% reduction in revenue for outpatient imaging practices, according to industry sources.1 Faced with such a potentially drastic scenario, many practice owners are reevaluating the very viability of their imaging operations. They are also joining the larger medical imaging community to look for ways to minimize the ultimate impact of the DRA on patient care and access to quality imaging services.

There is much today's imaging practice owner can do to combat the financial impact of the DRA and still continue to deliver excellent patient care. Savvy owners can adapt to the new reimbursement landscape by using sound financial planning, innovative operational improvements, and, most important, marketing strategies designed to strengthen their referral base and capitalize on shifting healthcare demographics in the U.S.


It's evident that capital spending by outpatient imaging practices for new imaging technology installations or upgrades is being curtailed due to DRA-mandated cuts. In a recent survey conducted by the medical information division of IMV, close to half of outpatient imaging practice owners confirm that the DRA has been either the primary or the sole reason behind decreased capital imaging budgets in 2007.2

Key financial drivers relied on by imaging practice owners, such as high depreciation write-offs for imaging equipment and expected returns on advanced imaging services, have also been marginalized by the DRA, as payment for outpatient imaging is now derived from the Hospital Outpatient Prospective Payment System (Table 1). HOPPS replaces the Medicare Physician Fee Schedule. As a result, more practices are now concentrating on maintaining cash flow rather than increasing revenue for growth.

Moreover, since many of the DRA reimbursement reductions concentrate on the high-volume imaging procedures accessed by Medicare patients, an unintended consequence of the legislation is a scarcity of advanced imaging services for this group.

Fortunately, there are encouraging signs here. Despite the cumulative impact of the DRA, there is good reason to believe that capital spending on new imaging technology, such as 64-slice CT for cardiac and other new applications, will attract the necessary patient volume and return on investment (ROI) to not only offset the financial effects of the DRA, but also promote better patient care. For this to occur, a practice must apply sound financial strategies in adopting new imaging technology. Implementing such strategies will, in return, generate the incremental revenue needed for a more secure future.


Careful management during an outpatient imaging practice's first years is critical to its long-term success. It is in this period that the practice can justify-or fail to justify-additional investment in new imaging technology, which will be necessary to introduce new applications and attract new patients.

For a new practice, the first order of business is figuring out how to attract and sustain an adequate level of referrals and patient volume from physician groups or noncompeting hospitals. An outpatient imaging practice needs approximately 15 referrals per day-more than double the four to six referrals needed in years past-to justify the cost of adopting a new imaging technology, such as a 64-slice cardiac CT scanner. DRA-mandated cuts will mean an extra eight to nine months to reach that level.

At this level, it becomes clear that the additional investment is justified for the practice: Today's 64-slice CT is capable of more than doubling the imaging referral requirement and bringing in 32 to 40 patients per day. Introducing new applications can further justify the investment and encourage growth.

On the financial management side, a practice's 18-month anniversary typically stands as a defining milestone at which operating costs increase significantly due to service contracts and related costs. At this point the question of financial viability is usually answered one way or the other. For this reason, it is important that new practices negotiate structured payment plans and flexible financial service terms from equipment vendors. Specifically, working with a vendor to develop a flexible financial plan can give practices the breathing room they need to realize a positive ROI.

With these goals in mind, there are proven business strategies for the outpatient imaging practice that can help generate the patient volume and ensure the efficiency needed to stay competitive.


In effect, the DRA means outpatient imaging practices must proactively manage their own futures by becoming better, savvier competitors. By focusing on increasing patient volume and improving operational efficiency, the outpatient imaging practice can capture new market share in the changing demographics of the U.S. healthcare market (Table 2).

Given that large group practices and hospitals are actively marketing to the fast-growing aging population, outpatient practices must likewise take into account these demographic factors, which will directly affect their future.

The national health expenditure for physician and clinical services will continue to escalate, reaching $819.9 billion-nearly double the amount spent in 2005-by 2016,3 primarily due to the aging baby boomer population. An estimated 40 million baby boomers will shape healthcare demand for the next 35 years, as chronic conditions such as diabetes, cardiovascular disease, and cancer are expected to grow rapidly within this group.

The outpatient imaging practice must focus on business strategies that will better position it to meet the healthcare and patient care needs of this population, and, in turn, strengthen the practice's operation so it not only survives but thrives, despite the DRA:

  • Select the best equipment and negotiate the best financial terms. New equipment purchases should allow for the highest patient volumes and throughput possible. Chosen equipment should be upgradable and capable of expanding to include new imaging applications. Practice owners should seek value by taking into account future equipment-related costs against reimbursements and exploring new options for financial flexibility, especially during the first years of the practice.

  • Increase overall marketing. Marketing should reach out to existing and new referral groups. Staying competitive requires expanding patient volume and clinical capabilities by offering new applications. It is also crucial to research and concentrate on markets with sufficient new patient volume to keep imaging equipment operating at full capacity.

  • Improve operational efficiency. Improving efficiency is an opportunity to increase patient throughput and enhance patient care. This enables the practice to operate at capacity by ensuring a steady stream of referrals and patients with convenient scheduling, fast turnaround, and easy access to a reading radiologist for a positive patient experience. Practices must also look to implement new IT systems that lower costs and manage higher patient volumes.


Among the outlined business strategies, the expansion of marketing efforts to existing and new referral groups could prove most valuable for both new and established outpatient imaging practices. The recent IMV survey of the consequences of the DRA indicates that such a marketing realignment ranks among the top two marketing actions initiated by diagnostic imaging facilities.2

The outpatient imaging practice should fuse education and patient care elements with its marketing efforts to ensure its referral base is on the same page regarding new applications that the practice may offer.

Marketing efforts targeting the referral community should focus on changing traditional thinking and old habits. At times, imaging centers may face patients, referred by family-practice physicians or internists, who are not ideal candidates for a particular imaging procedure, like a cardiac CT exam, and must be turned away. This typically signals a need for the practice to increase its educational efforts to ensure greater understanding of the specific clinical values of advanced imaging modalities for better outcomes.

Equipment vendors are commissioning research studies in an effort to provide support for the outpatient imaging practices. Toshiba America Medical Systems is sponsoring one such study, called CorE 64 (coronary evaluation on 64).

This 400-patient seven-country comparative study is investigating the use of 64-slice cardiac CT versus cardiac catheterization as the primary diagnostic tool for detecting cardiovascular disease. With results of the study expected this year, it is hoped that the findings will further validate the clinical use of 64-slice cardiac CT. It may also change the current DRA-affected reimbursement landscape in favor of cardiac CT as a resource and cost saver and, more important, become a catalyst for improving patient care.


If more outpatient imaging practices can successfully adapt to the DRA, entrepreneurial growth should continue. This in turn should foster more widespread adoption of new clinical advancements, which will improve patient care and access to advanced imaging procedures for many Medicare patients who are affected by the DRA.

While the DRA has indeed overshadowed future business prospects for some outpatient imaging practices, practice owners must also recognize the situation as a new opportunity for growth. By critically evaluating existing business strategies and focusing on new approaches for harnessing future opportunities in the healthcare market, the outpatient imaging practice can stay competitive-and even grow-in today's DRA-affected reimbursement environment.


  • Kaiser CP. Trouble by the numbers. Diagnostic Imaging 2006;28(8):22-28, 71.

  • IMV Medical Information Division. 2007 Outlook for U.S. diagnostic imaging centers: strategies for competing in the post-DRA era. 2007

  • U.S. Department of Health and Human Services. National health expenditure amounts, and annual percentage change by type of expenditure: calendar years 2001-2016, 2006. http://www.cms.hhs.gov/NationalHealthExpendData/downloads/proj2006.pdf.

Mr. Renard is president and COO of Synergy Diagnostic in Roseville, CA. Dr. Moelleken is medical director and part owner of San Francisco Advanced Medical Imaging.

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