Radiology Business Journal - Winter 2008

FOR LEADERS IN MEDICAL IMAGING SERVICES

Winter 2008

FEATURED IN THIS ISSUE

The 50 LargestRadiology Practices | page 30

Building theModel Practice | page 36

A History of M&AActivity in Imaging | page 44

| PAGE 22

www.radbiz journal .com

A Cautionary Tale

Hitachi Medical Systems America

Connect with us to

South Building–Hall A: 2629

800.800.3106 | www.hitachimed.com

A TRUE PATIENT MAGNETquality you need, creates a patient–friendly experience andinspires moments of discovery.

and a comfortable patient experience

Hitachi Medical Systems America

Connect with us to

South Building–Hall A: 2629

800.800.3106 | www.hitachimed.com

A TRUE PATIENT MAGNETquality you need, creates a patient–friendly experience andinspires moments of discovery.

and a comfortable patient experience

4 RADIOLOGY BUSINESS JOURNAL | Winter 2008 | www.radbizjournal.comwww.fujimed.com©2007 FUJIFILM Medical Systems USA, Inc.

If you’re looking for the latest PACS technologies for women’s imaging, Synapse is the undisputed champ. Fujifilmhas significantly streamlined workflows for screening and diagnostic mammography with the most sophisticatedtools attainable. Synapse accommodates multi-modality, multi-vendor breast images and can be configured to fit

your facility, no matter what its size. And Fujifilm has engineered both its own PACSand digital mammography system — providing seamless integration. Put that togetherwith our exceptional managed services, and you get a complete acquisition-to-archive solution from one vendor. It’s no wonder Synapse is such a knockout. Formore information, call 1-866-879-0006 or visit www.fujimed.com.

Synapse® for mammography. Delivering another round of powerful new PACS technologies.

FE ATURES

22 FRA AND FLORIDA HOSPITAL:A CAUTIONARY TALE UNFOLDS

By George WileyAfter 40 years, a 47-physician group ceased to exist, a casualty of current medical economics, internal strife, and failed negotiations.

30 BIG: THE 50 LARGEST RADIOLOGY PRACTICES

By Joseph P. White, CPA, MBA, and Cheryl Proval

36 BUILDING THE MODEL PRACTICE

By Rich SmithCorporate-style governance, subspecialization, and choosing the right administrative staff members all play roles.

40 THE PUSH FOR PRODUCTIVITY

By Jon CopelandIn an era of declining reimbursement for radiology, one practice is testing the limits of IT’s ability to improve productivity.

44 HISTORICAL REVIEW OF MERGERS AND ACQUISITIONS

IN DIAGNOSTIC IMAGING

By Jonathan A. BurklundFrom the go-go years to the present, acquisition strategies in the outpatient diagnostic imaging field have not always worked.

48 MAINTAINING A STEADY AIM AT A MOVING TARGET

By Thomas E. Bartrum, JDAn overview of recent regulatory changes affecting diagnostic imaging.

DEPARTMENTS

8 ADVIEW

The Good Ship RBJBy Cheryl Proval

10 THE BOTTOM LINE

Radiology in an Economic Downturn:Strategies for SuccessBy David M. Yousem, MD, MBA

W I N T E R 2 0 0 8 | VOLUME 1 , NUMBER 4

C O N T E N T S

22

30

36

40

www.fujimed.com©2007 FUJIFILM Medical Systems USA, Inc.

If you’re looking for the latest PACS technologies for women’s imaging, Synapse is the undisputed champ. Fujifilmhas significantly streamlined workflows for screening and diagnostic mammography with the most sophisticatedtools attainable. Synapse accommodates multi-modality, multi-vendor breast images and can be configured to fit

your facility, no matter what its size. And Fujifilm has engineered both its own PACSand digital mammography system — providing seamless integration. Put that togetherwith our exceptional managed services, and you get a complete acquisition-to-archive solution from one vendor. It’s no wonder Synapse is such a knockout. Formore information, call 1-866-879-0006 or visit www.fujimed.com.

Synapse® for mammography. Delivering another round of powerful new PACS technologies.

6 RADIOLOGY BUSINESS JOURNAL | Winter 2008 | www.radbizjournal.com

C O N T E N T SW I N T E R 2 0 0 8 | VOLUME 1 , NUMBER 4

54

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PUBLISHERCurtis Kauffman-Pickelle

[email protected]

EDITORCheryl Proval

[email protected]

ART DIRECTOR Patrick R. Walling

[email protected]

TECHNICAL EDITORKris Kyes

[email protected]

CONTRIBUTING WRITERSThomas E. Bartrum, JDJonathan A. Burklund

Jon CopelandNeil J. Gonter, MD

Rich SmithSteve Smith

Joseph P. White, CPA, MBAGeorge Wiley

David M. Yousem, MD, MBA

ADVERTISING DIRECTORSharon Fitzgerald

[email protected]

PRODUCTION COORDINATORMegan Runyon

[email protected]

CORPORATE OFFICEImaging Center Institute

222 Fashion Lane, Suite 109Tustin, CA 92780(714) 832-6400

www.ImagingCenterInstitute.com

PRESIDENT/CEOCurtis Kauffman-Pickelle

VP, PUBLISHINGCheryl Proval

VP, CLIENT SERVICESSteve Smith

VP, ADMINISTRATIONMary Kauffman

Radiology Business Journal is published quarterly by theImaging Center Institute, 222 Fashion Ln., Suite 109,Tustin, CA 92780. US Postage Paid at Lebanon Junction, KY40150. Winter 2008, Vol 1, No 4 © 2008 Imaging CenterInstitute. All rights reserved. No part of this publicationmay be reproduced in any form without written permissionfrom the publisher. POSTMASTER: Send address changes toImaging Center Institute, 222 Fashion Ln., Suite 109,Tustin, CA 92780. While the publishers have made everyeffort to ensure the accuracy of the materials presented inRadiology Business Journal, they are not responsible for thecorrectness of the information and/or opinions expressed.

56

DEPARTMENTS (continued)

12 PRIORS

12 Health Care Delivery, Undisrupted

14 Understanding—and Adapting to—Managed Care Strategies

16 Busting Myths: Joint Ventures and Tax Exemptions

20 Major Advances in Osteoporosis Assessment:

New NOF Guidelines and the WHO’s FRAX Risk-assessment Tool

54 MARKETPLACE

56 ADVERTISER INDEX

58 FINAL READ

The Ultimate Road TripBy Curtis Kauffman-Pickelle

It’s the beginning ofa whole new world.

The company that discovered seamless imaging workflow management has now redefined it. Discover enhanced imaging solutions from Centricity® – delivering awhole new level of information at the center of care. Healthcare IT Re-Imagined™

Learn more about our PACS, RISand Cardiology-IT solutions at RSNA.

© 2008 Generic Electric Company. All rights reserved. GE, the GE monogramand Centricity are registered trademarks of General Electric Comapany.

It’s the beginning ofa whole new world.

The company that discovered seamless imaging workflow management has now redefined it. Discover enhanced imaging solutions from Centricity® – delivering awhole new level of information at the center of care. Healthcare IT Re-Imagined™

Learn more about our PACS, RISand Cardiology-IT solutions at RSNA.

© 2008 Generic Electric Company. All rights reserved. GE, the GE monogramand Centricity are registered trademarks of General Electric Comapany.


AdView

Reflections on the first year of the journey

What a year—what a breath-less, heart-stopping, devas-tating, and hopeful year thishas been for just about

everyone I know, including all of us here atThe Imaging Center Institute, publisher ofRadiology Business Journal.

The year 2008 is the year that brought,willy-nilly, a thicket of obscure financialterms into the vernacular—toxic assets,stock injections, short selling—and thesteepest one-week stock-market decline onrecord. Suddenly, all of us, individuals andinstitutions, were in the same boat—unless, like the storied firm of LehmanBrothers, we were not in the boat at all.Banks, hospitals, medical equipment man-ufacturers, homeowners, and individualinvestors all suffered sudden and deeppaper losses, as we scratched our headsand wondered where it had gone and if itwould ever return. Collectively, we inhaled,grasping tightly the purse strings. A greatunease spread out over the country, andextended around the world.

Of course, we did not arrive at this placeovernight, nor will we emerge from ourplight in a day, but what is clear is that nomatter how sound the fundamentals of abusiness may appear, if the economics donot support it, if people and insurers areunable or unwilling to pay for our service,and if banks are unwilling to provide thebridge money to sustain operationsthrough the thin times, then we have aproblem.

In these times, what is required is vigi-lance, along with a firm hand on the tillerand the courage to enter uncharted waters.

When we launched Radiology Business

Journal in April of this year, we did sobecause, in times of change, it is imperativeto keep a keen eye on the compass, as wellas on the waters in which you travel. In ourfirst year of publishing this journal, we havebrought you in-depth interviews withthought leaders and forecasts by notedconsulting firms. We have explored man-aged care strategies, hospital contractingstrategies, mergers and acquisitions,opportunities, threats, and strategies tomeet the regulatory demands of a rapidlychanging field.

One other requisite, in tough times, is totake care of one’s customers. For a radiolo-gy practice or department, those cus-tomers are legion: patients, referringphysicians, payors, and hospital adminis-tration. For a journal, the customers areyou, the readers, and the vendors whochoose to support the endeavor. Before wepublished our first issue, not a few peoplewere skeptical. Aren’t there enough maga-zines in the radiology space?

Well, we made it through our first year,with the encouragement of many readersand the support of our affiliates and adver-tisers. To all of you, we extend our sincerestgratitude. In order to acknowledge the sup-port of our advertisers properly, we willbreak with our policy of not naming vendornames in the journal’s pages on just this

one occasion, in order to name thecompanies that agreed to support us inour first year, when all that we had wasa mission and a dream. Here they are,in the order in which they first appearedin our pages.

Hitachi Medical Systems AmericaFUJIFILM Medical SystemsNightHawk Radiology ServicesGE HealthcareMedical Imaging SpecialistsAffiliated Professional Services3DR LaboratoriesAMICASInteleradGE Healthcare/Centricity PACS-IWHologicFranklin & SeidelmannExogenVisage ImagingCovidienVIDAR Systems CorpTeraRecon IncCSI FinancialGE LunarSiemens Medical SolutionsThank you for believing that we had a

good reason to exist. By continuing tomeet the information needs of our read-ers and your customers, we hope toearn your support for many years tocome.

CHERYL PROVAL

EDITOR

[email protected]

On the Good Ship RBJ

By Cheryl Proval


Radiology in an Economic DownturnStrategies for Success

THE BOTTOM LINE

BY DAVID M. YOUSEM, MD, MBA

In the near term, radiology practices mustturn their attention to managing expens-es instead of growth. Physicians in radi-ology who believe that the current eco-

nomic downturn will somehow bypass theirpractices, and who do not gird themselves forthe new reality, may be left on the scrap heapof failed enterprises. Because we are in aservice industry, we are susceptible to thevagaries of available disposable income.Those practices currently exploring strate-gies for adjusting to the ongoing chaos willthrive. Those not engaging—right now—instrategic planning will suffer.

The graphs of increases in imaging servicesprovided to CMS participants are misleading.Not only are the data from 2008 not readilyavailable, they include imaging services pro-vided by nonradiologists, where the largestgrowth is occurring. While it is clear that self-referral and subsequent overutilization arehurting our industry, they hide the fact thatour own growth in the past two years has flat-tened, and that was in bullish times. How dowe survive when utilization falls? It’s coming.

I believe that the decline in health serviceswill result from:

• the existence of fewer employer-sponsored health plans, and an increasein the number of uninsured people;

• the performance of fewer electivesurgeries, such as cosmetic proceduresand vein stripping;

• the choice, by injured patients, of medical therapy of rest and immobiliz-ation instead of orthopedic procedures;

• reductions in screening studies (such asmammography, virtual colonoscopy, and bone densitometry); and

• the lag time before any government-based or tax-credit–based program isinstituted, if any such program is createdat all: I predict that the tax credits will beused for basic household expenses andnot for medical care, particularly whenhealth care premiums exceed tax creditsand the choice becomes one of buyingfood and making credit-card–debt payments versus purchasing health carecoverage.

How do we survive when utilization falls?We must either contract/conserve or com-bine. One key to surviving when utilizationdiminishes is to manage compensationexpenses. Our largest expenses are salariesand benefits, and now is not the time to beoverstaffed. Look carefully at the number ofemployees engaged in an activity. Compareyour situation with industry standards avail-able from peer organizations, such as theRBMA. Consider offering part-time positionsand/or outsourcing a limited part of yourpractice. Is it time to implement voice-recog-nition dictation fully, to cut transcriptioncosts? Prepare your physicians for the possi-bility of salary cuts.

Be circumspect about your benefits pack-ages. If laying off people is anathema to you,explain to your employees that they may belimited to lower-cost health care/disabilityprograms. Converting to an end-of-year IRAprogram (for employees who work the fullyear) may create savings, as opposed to amonthly plan, if you can afford a retirementplan at all. Consider reducing businessallowance accounts. Some people will usemoney unnecessarily if you give it to them;reevaluate what is fair value for practiceexpenses.

Optimize your IT solutions to reduce costs.Is it finally time to go filmless, or is the upfrontcost too high? Should you provide CDsinstead of film to your patients? Absolutely!Eliminate storage costs by electronic means,even if your physicians want to continue to befilm readers. In so doing, you may also be ableto reduce film-handling personnel.

EMPLOY ECONOMIES OF SCALEAnother key to managing expenses is tak-

ing advantage of economies of scale. Byemploying economies of scale, one can bet-ter negotiate with vendors and managed careorganizations (MCOs). Consider consolidat-ing radiology groups into larger buyinggroups. Being a major player in the marketwill allow the negotiation of more favorablerates with providers and vendors. Considerconsolidating capital-equipment purchaseswith single vendors to obtain greater discounts

by virtue of the size of the purchase. Bundlepurchases and garner savings. The same istrue for service contracts. Using a single-source vendor to service all of your multi-vendor equipment is common at academicinstitutions, and it allows excellent savings(and efficiencies, with one-call servicerequests).

Apply economies of scale to malpracticeinsurance. Ask your carrier what quality-assurance procedures would lead to reduc-tions in your rates: double reading of emer-gency-department cases, computer-aideddetection for mammography, and/or auto-mated physician-notification schemes?Remember that the insurers have also suf-fered economic losses of investment incomein this market. Expect a potential fee hike,but be aggressive about staving this off withinnovative ideas.

Leave no stone unturned as you seekopportunities to manage expenses. Convertto electronic just-in-time payment schemes.Eliminate postage and mailing costs, asmuch as possible, and automate the processto reduce the number of administrativebilling personnel. Employ just-in-time deliv-ery of supplies. Managing inventory appro-priately can reduce storage/maintenancecosts, insurance costs, and expired supplies.

Lobby Congress to prevent further reim-bursement cuts and support legislationagainst self-referral. Make sure your team isfocused and aware of the environment.Engage its members in brainstorming cost-cutting ideas. Be wary of your accountsreceivable in a down market—people are lessapt to make their copayments, and MCOs mayalso delay payments. Stay on top of this.

The playing field has changed. Those whoare prepared will weather the storm andmaintain their profitability. Rather thanexpecting the revenue growth that has drivenour industry in the past, I believe that today’sfocus should be on expense management.

David M. Yousem, MD, MBA, is professorof radiology, director of neuroradiology, andvice chair, program development, for JohnsHopkins Medical Institution, Baltimore.

How to afford health care is notthe question we should be ask-ing in these times of unsustain-able health care cost increases.

The right question to ask is this: How dowe make health care more affordable? Thatis the question tackled by Hwang andChristensen1 in a recent paper published inHealth Affairs: Disruptive Innovation inHealth Care Delivery: A Framework forBusiness-Model Innovation.

The authors begin by defining disrup-tive innovation, a concept popularized byone of the authors, Harvard BusinessSchool professor Clayton Christensen,which in part explains how complicatedand expensive products are turned intosimpler, less expensive products. Sustaininginnovation is the practice used by success-ful incumbent organizations to create betterproducts for a discerning customer base.

Using a simple graph illustrating thetrajectories of sustaining innovations andof disruptive innovations against customerdemand, the authors explain that disrup-tive innovations occur when product inno-vation outpaces customers’ ability to make

use of the new features. Thecustomers willing to pay thehighest price typically do notuse disruptive products, andnew suppliers in a marketusually introduce them.Once a disruptive productgets a foothold in a market,however, it improves overtime, positioning the upstartto become the new marketleader.


PR IO RS{PR IO RS}The authors offer the example of the

PC disrupting the business models thatproduced mainframe computers, notingthat although we spend far more on com-puters today than in the mainframe era,we are better off, most of us would agree.“The widespread belief that increasedspending on health care, particularly onnew technologies, is something that mustbe quelled shows how long we have triedto answer the wrong question,” theauthors continue. “When embedded with-in disruptive business models that capital-ize on increased convenience and afford-ability, new technologies can delivertremendous value.”

WHY HEALTH CARE RESISTSDISRUPTION

The reason health care has resisted dis-ruption, despite the fact that so many newtechnologies have been introduced, is thatthese technologies have been introducedin such a way as to sustain hospitals andphysicians in solving complex problems.To explain why, the authors analyze themakeup of a business model. A successfulbusiness model begins with a value propo-sition, a product or service that makespractical and economic sense, followed bya set of resources deployed by manage-ment to deliver the value proposition, theauthors explain. As employees generatethe product, processes are distilled, andthey become a part of the business model.

It is the authors’ belief that an estab-lished business model, over time, willdetermine the types of business proposi-tions that an organization can and cannot

deliver. The relationship between businesspropositions and processes then com-mences to work in reverse, limiting thetypes of value propositions that an organi-zation can take to market. Although manycompanies have had disruptive technolo-gies within their grasp, the authors offeronly one example of an established organ-ization that was able to take a disruptivetechnology to market: That was IBM,which established a separate businessmodel in Florida to develop the PC andallowed the unit to work autonomously,resulting in the demise of the mainframe.

The authors categorize business modelsinto three types: solutions shops, built todiagnose and solve problems primarily bythe people they hire; value-adding processbusinesses, which leverage resources intooutputs of greater value; and facilitateduser networks, in which business transac-tions occur within a collective.

Most hospital and physician practicescan be characterized as solutions shops;retailing, restaurants, and automobile man-ufacturing are examples of value-adding

Spending another $100,000 on system upgrades won’t solve these 3D post-processing problems!• Limited capital• Spotty clinical quality & protocol consistency• Lack of 24/7 availability• Demanding STAT & ROUTINE turnaround times

• Inefficient workflow & PACS integration• Inability to view and manipulate images via broadband• Inadequate RadTechs training & continuing turnover

RightsourcingSM your 3D post-processing to 3DR Laboratories:• Transforms your capital expenditures into operating expenses• Insures 24/7, high quality 3D protocols customized to your needs• Focuses your RadTechs & Physicians on patient care & revenue generation• Enables access to images & software from anywhere, (via “3DRThin” servers) even using your existing

Internet broadband connections• Leverages the skill of our 100%, on-shore, ASRT SuperTechs

certified in Volumetric Medical Imaging

Call us today or visit us at RSNA 2008 at booth #1206(McCormick Place Lakeside Center) to discover how3DR’s “RightsourcingSM Solutions” are just what you needto eliminate your 3D imaging pain. Call Michael Lillig,Managing Director, at 502-569-1025 x14.

RIGHTSOURCINGSM

PLEASE CALL IF JOB SPECS DON’T MATCH INFO IN HEADER

FILE NAME DR T RBJCLIENT DR LDATEP BLICATION R B JINSERT DATE N

SI ETRIMLI EBLEEDLPI

COIL CO NTS FORD CHENEEAST H RON STE

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DR T RBJ AM

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The widespread beliefthat increased spending onhealth care, particularly onnew technologies, is something that must bequelled shows how longwe have tried to answerthe wrong question.

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Spending another $100,000 on system upgrades won’t solve these 3D post-processing problems!• Limited capital• Spotty clinical quality & protocol consistency• Lack of 24/7 availability• Demanding STAT & ROUTINE turnaround times

• Inefficient workflow & PACS integration• Inability to view and manipulate images via broadband• Inadequate RadTechs training & continuing turnover

RightsourcingSM your 3D post-processing to 3DR Laboratories:• Transforms your capital expenditures into operating expenses• Insures 24/7, high quality 3D protocols customized to your needs• Focuses your RadTechs & Physicians on patient care & revenue generation• Enables access to images & software from anywhere, (via “3DRThin” servers) even using your existing

Internet broadband connections• Leverages the skill of our 100%, on-shore, ASRT SuperTechs

certified in Volumetric Medical Imaging

Call us today or visit us at RSNA 2008 at booth #1206(McCormick Place Lakeside Center) to discover how3DR’s “RightsourcingSM Solutions” are just what you needto eliminate your 3D imaging pain. Call Michael Lillig,Managing Director, at 502-569-1025 x14.

RIGHTSOURCINGSM

PLEASE CALL IF JOB SPECS DON’T MATCH INFO IN HEADER

FILE NAME DR T RBJCLIENT DR LDATEP BLICATION R B JINSERT DATE N

SI ETRIMLI EBLEEDLPI

COIL CO NTS FORD CHENEEAST H RON STE

CHICA O ILFA MC

DR T RBJ AM


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Although solutions shops are theprimary business model in healthcare, the authors suggest that manyactivities have developed in healthcare that would be better delivered ina value-adding processes or user-net-work model. Examples range from anurse using a rules-based diagnostictest to verify group A streptococcalpharyngitis to angioplasty.Institutions such as MinuteClinicand certain focused cardiology hos-pitals can deliver care at a cost that is60% lower than hospitals and physi-cian practices in which value-addingprocesses are conflated, the authorsargue. Facilitated user networks, inshifting the care out of solutionsshops that are ill equipped to dealwith diseases to networks in whichpatients can learn from each other,are the ideal business model for treat-ing many chronic diseases.

“Pairing technological enablerswith disruptive business models iswhat leads to greater affordabilityand accessibility, and this is where

health care entrepreneurs and policy-makers must focus their energy if thesame degree of innovation is to bebrought to health care that hasalready transformed numerous otherindustries,” the authors write.

CHALLENGES TO CHANGEInteroperable health information

is a critical precursor to creatingfocused facilities and user networksout of our current mixed model ofhealth care, the authors maintain.“Health IT systems must serve as theconnective tissue joining the variouspieces of health care delivery into acoherent system that delivers conti-nuity through safe, satisfying rela-tionships,” the authors write.

Disruptive innovation, however,presumes the existence of a market ofconsumers with the incentive toshop for the health care products andservices that best meet their needs.The authors suggest that health sav-ings accounts, combined with high-deductible health plans, are theanswer, but without business-modelinnovation, consumers will resistspending their money on services

perceived as costly and inconvenient.Regulatory barriers, such as cer-

tificate-of-need policies, federalmoratoria on specialty hospitals, andrestrictions on physician ownershipof medical facilities, are characterizedby the authors as attempts to main-tain the status quo, even though fre-quently well intentioned.

Cutting reimbursement in anattempt to force solutions shops tofigure out a way to become more effi-cient does not improve health care,the authors argue. They write, “Withlower reimbursement, hospitals andphysicians struggle even more to ful-fill their value propositions of provid-ing complex, inherently expensivemedical care, and they become evenless inclined to hand off work tovalue-added processes.”

—C. Proval

Reference1. Hwang J, Christensen CM.Disruptive innovation in health caredelivery: a framework for business-model innovation. Health Aff.2008;5:1329-1335.

It is highly probable that many prac-tices will see their current payor mixchange to one in which 80% or moreof net patient revenues will be based

on negotiated payments,” according toChristopher J. Kalkhof, FACHE, directorand national managed care lead,Provider Revenue Cycle Practice,Deloitte Consulting, New YorkCity. That was the opening salvodelivered on October 20, 2008, atthe Medical Group ManagementAssociation meeting in San Diegoduring the session, IntegratingYour Practice’s Growth andManaged Care Strategies, presentedby Kalkhof and Max Ludeke, FACHE,CEO, Doctors Hospital, Houston.

“Whether negotiated managed careorganization (MCO) payment arrange-ments represent a major or a minor por-tion of a practice’s net patient revenues inits current operating environment, prac-

tices should expect significant changebetween 2009 and 2010,” Kalkhofsays. During the session, Kalkhofand Ludeke discussed the favorable

and unfavorable consequences ofparticipating (or not participating) ina specific MCO contract.

Desirable consequences of partici-pation in a favorable contract include:• increased patient volume through

a physician referral management program and retention of existing patients;

Understanding—and Adapting to—Managed Care Strategies

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• the opportunity to negotiate reim-bursements and pay for performanceat rates that are higher than average;

• inclusion in the MCO’s participating-provider lists and Web sites;

• electronic claims payment options,automated eligibility, disease-management programs,and accelerated cash flow;

• MCO group and Medicare benefitplans designed to provide subscriberswith financial incentives to use in-network physicians;

• potentially competitive reimbursement; and

• valuable practice-management tools.The potential risks of participation

include reduced control and independ-ence on pricing strategy and patient treat-ment, unavoidably increased contractcompliance and administrative costs, andchanged referral patterns with physiciansand hospitals. In addition, there may befuture unit-payment reductions whenmarket dynamics change, increased expo-sure to economic risk, a potentially unfa-vorable change in the practiceservice/profitability mix, and pressure toparticipate in all-payor products.Increased price-transparency issues arealso possible, as are increased accounts-receivable challenges, retroactive paymentrecouping, payor audits, and reduced cash

flows; patients may be lost to competitorsas well.

“Most offices have an understandingthat because they’ve signed the contract,they’ll get reimbursed at a discount,because the MCO will send them lots ofpatients,” Ludeke says, “but it doesn’t real-ly work that way.” The scope of the poten-tially unfavorable impact of managed careon your referrals will depend on the levelof managed care penetration in your mar-ket, your practice’s business model, yourmanaged care strategy, and your practice’soverall business strategy.

Kalkhof adds that seemingly intangiblefactors will play a role in the favorablenegotiation of a managed care contract.“Do not underestimate the power of favor-able clinical and service quality (the patient-service experience) on the success of yourpractice and your MCO strategy,” he says. Asuperior patient-service protocol can evenbe a valuable argument for getting paidquickly for the services that you provide.

Kalkhof and Ludeke recommend aninternal and external assessment of thepractice’s business model and competi-tive landscape before determiningwhether to participate in a particularcontract. These assessments includedetermining whether the practice’s posi-tion in the marketplace is strong, fair, orweak, which will help to ensure that par-

ticipation is being considered for theright reason.

“You need an economic model thatmakes sense for your practice,” Kalkhofsays. “You really need to read the contractand understand how you are getting paid.If you are considering a cash-based prac-tice, you have to determine whether thereis a sizable uninsured population in themarketplace to support you.”

Ludeke adds, “You need to know whoyou are and what you want. Ask yourselfwhere you are in the marketplace. Analyzeyour denials, because you must knowwhat a contract costs you: you can’t con-tract and stay in business if the contract iscosting you money. Most important, askyourself whether you are driving the pric-ing or whether it is driving you.”

In closing, Ludeke offers two tips forreducing claim denials. First, know yourpatients. Make sure that your staff gets thecorrect registration for both the payor andthe product, each and every time. Second,know your rules. Use system edits, work-flow automation, and continuous trainingto identify issues before any service is ren-dered. This will help ensure that the mostcommon traps and mistakes are avoided.

Steve Smith is vice president, client services, The Imaging Center Institute, Tustin,Calif.


Busting Myths: Joint Ventures and Tax Exemptions BY KRIS KYES

Radiology groups should under-stand the tax implications ofarrangements with hospitalsbefore they begin negotiations,

according to W. Kenneth Davis, Jr, JD. Hepresented Tax-exempt Laws and RadiologyGroups: Myth Versus Reality on October 17,2008, at Managing Legal Exposure inRadiology, a meeting held in Philadelphia by the RBMA. Davis, a partner in KattenMuchin Rosenman, Chicago, explains thatusing the wrong approach to joint venturesand contracts with tax-exempt hospitals canhave highly undesirable consequences for aradiology group. Because there is so muchmisunderstanding of the 501(c)(3) tax

exemption for hospitals, the radiologygroup should protect itself from unpleasantsurprises by knowing the legal requirementsimposed on hospitals and their effects onthe physician groups that work with them.

As federal and state scrutiny of hospi-tals’ tax exemption becomes more intense,the need for caution in designing jointventures and contracts will only increase,Davis says. The tax treatment affordedhospitals has never been questioned asoften, or as closely, as it is today. The attor-neys general of some states are investigat-ing whether tax-exempt hospitals actuallyprovide the community benefits on whichtheir state tax exemptions are based. Davis

adds that, at the federal level, influentiallegislators are trying to determine whethermore uncompensated care should berequired in exchange for hospitals’ federaltax exemptions.

Understandably, these trends have madehospitals highly aware of the need to protecttheir tax-exempt status. If it is threatened,they may lose not only the ability to avoidtaxation of their income, but the chance toobtain charitable contributions; the dona-tions on which many hospitals depend areunlikely to be made if the donors will not begranted any tax deductions for their gifts. Inaddition, hospitals often depend on tax-exempt bonds for access to capital.

that they may be looking for instances ofexcess benefit aggressively, assigning highvalues to them, and calling for their cor-rection by physician groups. This could bevery costly to a radiology practice, so care-ful documentation is vital.

JOINT VENTURESDavis calls joint ventures the legal cate-

gory where radiology groups are mostlikely to benefit from a myth-busting lookat the tax-exemption law. The two areas ofconcern for a tax-exempt hospital thathopes to structure a joint venture with agroup of physicians—without jeopardiz-ing its 501(c)(3) status—are ownershipand control, he says.

A whole-hospital joint venture involvesthe transfer to the new entity of all assetsbelonging to the tax-exempt hospital, alongwith all of its operations. Typically, the orig-inal hospital then ceases to exist apart fromthe joint venture. Until 1998, the IRSapplied a simple two-part test to determinewhether a joint venture of this kind quali-fied for tax exemption. First, an exemptpurpose, such as health promotion, had tobe furthered by the hospital’s participation.Second, the hospital had to act exclusivelyto further that exempt purpose, with anybenefit to the physician group (or other for-profit party to the joint venture) being onlyincidental.

The relative ease of compli-ance with these requirementsended a decade ago, when theIRS issued Revenue Ruling98-15. This requires joint ven-tures to meet three additionalcriteria in order to remain taxexempt. Any profit-maximiza-tion purposes for which theyare operated have to be super-seded by charitable purposes,the community as a wholemust benefit from the entity’sservices, and the furtheranceof charitable purposes by thejoint venture has to beensured by the tax-exemptpartner. Davis reports thatthese three requirements areoften met by structuring thewhole-hospital joint ventureso that the hospital is clearly incontrol of the new entity.

www.radbizjournal.com | Winter 2008 | RADIOLOGY BUSINESS JOURNAL 17

If a hospital’s agreements with a radiol-ogy group have been structured with theproper attention to remaining above suspi-cion, exemption challenges can be avoid-ed. If mistakes have been made in contract-ing, however, the hospital may be placed ina position where it can avoid penalties onlyat the expense of the radiology group—and that expense may be large, if the groupcannot document the fair market value ofits transactions with the hospital.

Davis points out the importance, innegotiations, of distinguishing betweenreal legal issues and those that are actuallybusiness concerns that the tax-exempthospital may present as legal problemsrelated to tax exemption. The 501(c)(3)exemption requires the hospital to beoperated for charitable purposes, to avoidpolitical campaigning or substantial lob-bying, to serve public (not private) inter-ests, and to serve patients who are unableto pay, as well as all of those who are ableto pay, including Medicaid/Medicareenrollees. Charitable purposes can includemedical education, training, and research,in addition to health care. The hospital’sboard must represent the community; itsmedical-staff enrollment must be open;and its profits must be used for patientcare, facility improvements, and equip-ment, not private benefit.

Of course, a hospital would be unable toserve its charitable purpose unless it con-ferred some private benefit on others (itmust, after all, usually work with employ-ees and contracted service providers). Thehospital’s earnings cannot, however, be dis-tributed to individuals or groups or to thoseconsidered insiders (who are in positions toinfluence or control the hospital). Majorcontributors, board members, sharehold-ers, officers, and founders are defined asinsiders, but physicians may or may not be.

RADIOLOGY AND TAX EXEMPTIONFor radiology groups, Davis says, the

hospital’s tax-exempt status may be anissue in negotiating exclusive provideragreements, leases, gain sharing, servicerelationships, and joint ventures. Becauseradiology is associated with large invest-ments in capital equipment, the use of tax-exempt bonds can cause problems. Privatebusiness use of more than 5% of the pro-ceeds of a bond, or the property pur-

chased with it, is forbidden, whether thatuse is direct or indirect. The effective limitmay be as low as 3%, since up to 2% of theprivate-use 5% can be used to pay for thebond-related borrowing process.

A management contract for bond-financed facilitiesmay constituteprivate use,Davis says, andmany bondc o u n s e l o r swould define thee x c l u s i v eprovider agree-ments so oftenseen between

hospitals and radiology groups as manage-ment contracts. The radiology group’s useof bond-financed imaging equipment,therefore, may be private business use.Most hospitals will, as a result, be carefulto ensure that management contracts fallwithin the safe harbors established to per-mit the hospital to acquire services with-out risking its tax exemption.

Transactions between exempt andnonexempt parties that convey excessbenefit to the latter are subject to excisetaxes. Excess benefit, Davis says, is definedas value provided that exceeds considera-tion received; for example, a lease that letsa radiology group use hospital propertyfor less than fair market value could be con-sidered excess benefit. Hospital managersand nonexempt parties are both subject tothe excise tax, but the hospital itself is not.

Because the hospital must report excessbenefits and their correction to the IRSannually, it will attempt to show that thesituation has been corrected. This is doneby having the nonexempt party pay thehospital, in cash or cash equivalents, thevalue of the excess benefit plus interest.The hospital and the nonexempt party areboth subject to per-diem fines until thecorrection amount has been paid.

For this reason, Davis says, radiologygroups must ensure that fair market valueis assigned in all dealings with tax-exempthospitals. Documentation of fair marketvalue must be maintained, with outsideappraisal suggested if high values areinvolved. Hospitals are under pressurefrom both lower reimbursement andgreater regulatory scrutiny, so Davis says

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W. Kenneth Davis, Jr, JDW. Kenneth Davis, Jr, JD

Hospital subsidiary jointventures involve the cre-ation of a new entity for theexpress purpose of operat-ing that entity jointly withan existing for-profit entity,such as a physician group. Alegal precedent has been setin which the court ruledthat the subsidiary of thehospital could not beregarded as tax exemptbecause the joint venturewas being operated for asubstantial nonexempt pur-pose (that is, for the finan-cial benefit of the for-profitentity). Joint ventures of thistype may be on shakyground unless the hospital isdemonstrably in control ofthe venture.

The third kind of joint venture, the hos-pital ancillary joint venture, is an entitythat has one for-profit entity, like the othertwo types; the hospital’s part, however, istaken by a hospital subsidiary or affiliatethat has the joint venture as only one of itsactivities—and not as its primary activity,but as an insubstantial one. The mainactivities of the subsidiary/affiliate must benot only tax exempt, but unrelated to thejoint venture.

Davis describes deciding who controlsthis kind of joint venture as a big unan-swered question. A Private Letter Ruling(number 200206058) was issued by theIRS in 2001 approving a joint venture ofthis kind, but 60% of the entity, in thisinstance, was controlled by a subsidiary ofa tax-exempt hospital, making it compli-ant with the control requirements of the1998 Revenue Ruling. Among theunknown factors affecting the tax status ofthis type of joint venture is the effect thata smaller percentage of hospital controlwould have. In addition, the amount ofthe hospital subsidiary’s activity that thejoint venture represents may be important.

As an example, Davis describes a situa-tion in which the tax-exempt hospital sub-sidiary does not control the joint venture,but the joint venture represents only 5% ofthat subsidiary’s activities, with the other95% of its activities being both tax exemptand unrelated to the joint venture. In sucha case, the joint venture might pose no

threat to the hospital’s tax exemption, butthe profits that the joint venture earns forthe hospital might or might not be treatedas unrelated business taxable income(UBTI). Paying taxes on UBTI might beundesirable, but would jeopardize neitherthe hospital’s tax-exempt status nor its abil-ity to attract tax-deductible donations anduse tax-exempt bonds.

A Private Letter Ruling issued by theIRS in 2004, which may be considered aprecedent for hospital ancillary joint ven-tures, addressed a joint venture (sellingvideo seminars for teacher training)between a tax-exempt university and a for-profit company. The joint venture was setup to divide equally the two partners’investment, governance, ownership,returns, allocation, and distributions. Forthe university, the joint venture represent-ed an insubstantial percentage of totalactivities; for this reason, its tax-exemptstatus was not jeopardized. In addition, theuniversity was not required to pay UBTItaxes on its profits from the joint venturebecause its activities were considered sub-stantially related to the purpose (educa-tion) for which the university had tax-exempt status in the first place.

For most ancillary-services joint ven-tures (for example, imaging joint ventures)undertaken by a hospital and a radiologygroup, the same fundamental principlesmay apply, Davis says: The hospital’s activ-ities will further its tax-exempt purpose(health care) and the joint venture willconstitute an insubstantial portion of itstotal activities. Insubstantial, in such cases,may be defined as involving less than 15%of the hospital’s overall personnel, stafftime, assets, revenue, and expenses; near-ly all ancillary joint ventures with radiolo-gy groups will meet these criteria.

The hospital’s 501(c)(3) tax exemp-tion and incoming charitable donations,therefore, will not be at risk. The real tax-related concern for hospitals is whetherits income from the joint venture will betaxed as UBTI. There is a simple test todetermine this, Davis says. If the servicesprovided by the joint venture are suchthat they would fall within the definitionof the hospital’s charitable purpose if thehospital were to provide those services byitself (in the absence of any joint ven-ture), then the profits are unlikely to betaxed as UBTI.

There could be a problem, however, ifthe joint venture acts in some way that isinconsistent with the hospital’s tax-exemptpurpose, and the hospital is unable to exer-cise any control over that inconsistentaction. The hospital should have whatDavis calls trump rights: the ability to pre-vent joint-venture actions that are incom-patible with its charitable purpose (alongwith the ability to cause actions consistentwith that purpose). For example, the jointventure must not discriminate in treatingpatients, and it should have a charity-careand/or community-benefit policy in place.The hospital should be allowed to modifythat policy as needed to protect its taxexemption.

The important message here, Davissays, is that the joint venture does notneed to give any other rights to the hospi-tal in the name of preserving the hospital’stax exemption, so long as the hospital’sparticipation is insubstantial. If trumprights are provided, the hospital and theradiology group can own and control thejoint venture equally. Davis adds that a50–50 governance calls for the existenceof a mechanism for resolving disputes,since neither party will be in sole control.

Under a management services agree-ment, the hospital can choose to delegatemuch of the administrative responsibilityfor the joint venture to the radiologygroup (again, with the hospital’s trumprights preserved). It is also wise to antici-pate future unfavorable regulatorychanges by including, in the joint venture’sdesign, the ability to dissolve it equitably,should this become necessary. A mecha-nism through which the radiology groupcan obtain fair market value for any disad-vantages created by the hospital’s exerciseof its trump rights can also be part of thejoint venture’s structure.

As pressures favoring increased consol-idation of radiology continue to grow,more hospitals and radiology groups arelikely to evaluate their options not just inmergers and acquisitions, but in designingbetter hospital contracts and joint ven-tures. If both parties understand what theycan expect to gain, as well as how to avoidunnecessary risks, these pursuits can cre-ate mutual benefit.

Kris Kyes is technical editor of RadiologyBusiness Journal.


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Major Advances in Osteoporosis Assessment:New NOF Guidelines and the WHO’s FRAX Risk-assessment Tool BY NEIL J. GONTER, MD

Osteoporosis is a major public-health problem, with an esti-mated 44 million US residentsat risk for fracture.1 Much-

needed direction can be provided by newguidelines from the National OsteoporosisFoundation (NOF) and the new FRAX®

tool from the World Health Organization(WHO). Since there often are no warningsigns before a fracture, improving theassessment of risk will prevent potentiallydebilitating consequences.

Older guidelines did not assess theeffects of age, sex, history, genetic factors,and ethnicity on osteoporosis-related risk,but the updated NOF guidelines provideclearer direction. In addition, WHO’s FRAXtool uses an algorithm that determines thelikelihood of fracture in the next 10 years.One of the most important factors is bone-mineral density (BMD), usually expressedas a T-score and determined using dual-energy x-ray absorptiometry. BMD alone,however, does not capture the full risk,since increased fracture risk may be presentwell before an osteoporotic T-score.2

NEW GUIDELINES AND FRAXThe new NOF guidelines are the most

clear and specific issued to date (Table 1).They include groups at high risk, such asolder men; anyone with a possible osteo-porosis-related fracture; and individualswith specific risk factors, such as age andhistory of fracture. They also includemultiple ethnicities; previous guidelinesaddressed only white females.

The WHO’s new FRAX tool predictsthe 10-year risk of both hip fracture andother major osteoporotic fractures (includ-ing spine and forearm fractures) in menand women. The tool is currently availableonline at www.shef.ac.uk/FRAX/. In addi-tion to being available on the Web, FRAXis available as a convenient softwareoption on some bone densitometers.

FRAX predicts 10-year fracture riskbased on a patient’s BMD and risk factors(Table 2). The data are individualized based

on sex; ethnicity (white, black, Asian, andHispanic); and country of origin (theUnited Kingdom, France, Italy, Japan,Spain, Sweden, China, and Turkey). FRAXcan make predictions based on clinical riskfactors alone or in combination with BMD,but the combination will produce a betterresult than either would alone.

The FRAX tool makes its predictionsusing the largest collection of osteoporosisdata ever assembled. WHO analyzed ninelarge prospective studies of more than60,000 subjects worldwide; they had5,563 fractures, including 978 involvingthe hip. The FRAX algorithm uses theidentified risk factors in these populationsto target the fracture risk for individualswith various characteristics.

Osteoporosis treatment is cost effectivewhen the 10-year probability of hip frac-ture reaches 3% or more, or when the 10-year probability of a major osteoporosis-related fracture is greater than 20%. Thiseconomic analysis3 is based on a drug costof $600 per year plus associated costs, aswell as on estimates (specific to the UnitedStates) for fracture incidence, morbidity,mortality, cost of fracture treatment, andquality of life. Although knowing the frac-

ture risk and recommended treatmentfacilitates decision making, physiciansmust evaluate each patient individuallyand decide, with their patients, whethertreatment is appropriate.

CONCLUSIONWith the use of the NOF guidelines and

the new FRAX tool (either online or on thebone densitometer), the ability to evaluateand treat men and women of different eth-nicities has been greatly enhanced. These

advances should be used,in addition to clinicaljudgment, to make deci-sions regarding the prop-er treatment for individ-ual patients. Knowingthe new NOF guidelinesand incorporating theFRAX tool into daily

practice will improve the ability to detect(and begin treatment for) this widespreaddisease.

Neil J. Gonter, MD, is an internist andrheumatologist with Rheumatology Associatesof North Jersey, Teaneck, NJ, who interpretsbone-densitometry studies for HackensackUniversity Medical Center, Hackensack, NJ.He is an osteoporosis consultant forOsteoporosisConnections.com and an assistantprofessor of clinical medicine at ColumbiaUniversity, New York City.

References1. National Osteoporosis Foundation.Clinician’s guide to prevention and treat-ment of osteoporosis. Available at:http:/ /www.nof.org/professionals/cliniciansguide_form.asp. AccessedOctober 28, 2008.2. Licatam A, Johnston C. Identifyingpostmenopausal women at risk for frac-ture. Female Patient. 2007;32:18-25.3. Dawson-Hughes B, Tosteson ANA,Melton LJ 3rd, et al. Implications ofabsolute fracture risk assessment for osteo-porosis practice guidelines in the USA.Osteoporos Int. 2008;19:449-458.

Postmenopausal women and men 50 and olderwho present with the following should be treated:

• Hip or vertebral fracture (symptomatic or on studies)• Other fractures and T-score of –1 to –2.5 at the hip or spine• T-score ≤ –2.5 at the hip or spine and secondarycauses such as steroid use or immobility• T-score of –1 to –2.5 at the hip or spine and10-year probability of hip fracture ≥3% or 10-year probability of any major osteoporosis-related fracture ≥20%, based on FRAX®

Table 1. New NOF Guidelines

Age

Femoral-neck bone-mineral density(T- or Z-score)

Body-mass index

History of fracture

History of rheumatoid arthritis

Secondary causes of osteoporosis

Parental history of hip fracture

History of steroid use (≥3 months)

High alcohol use (≥3 units/day)

Smoking

Table 2. Clinical Factors Evaluated by FRAX

FRA and Florida Hospital:A Cautionary Tale Unfolds

STRATEGIC RELATIONSHIPS | A Cautionary Tale

By George Wiley The first inkling that the public hadthat anything was amiss betweenFlorida Hospital and its radiologygroup occurred in March 2008,

when a story appeared in the OrlandoSentinel revealing that Florida RadiologyAssociates (FRA), which had been inter-preting for the hospital since 1968, wasending the 40-year relationship.

At the core of the failed negotiations,the story says, was FRA’s demand thatFlorida Hospital offset a significant com-pensation gap resulting from unrecom-pensed or poorly recompensed Medicaidand indigent billings for emergency-department and other services that FRAprovided. The story adds that the hospital,instead of compensating the independentradiology group, had offered to take overFRA’s billing, an offer the radiology groupdeclined.

FRA sources were quoted as saying thata full 40% of the group’s work was nowoccurring on nights and weekends—peaktimes for uninsured patients to appear inthe emergency department. FRA wasdoing its own night and weekend reading,per its contract. No outside teleradiologycoverage was being provided by eitherFRA or the hospital, according to sourcesin the radiology group.

On March 3, when FRA gave noticethat it would terminate its contract, adeadline was set: June 3, the term of thecontract. After that, FRA would no longer


After 40 years, a 47-physician group ceased to exist,a casualty of current medical economics,

internal strife, and failed negotiations


be interpreting for the hospital.Negotiators had that long to find at leasta temporary solution, or the hospital hadthat long to find an alternative solutionon its own.

According to FRA radiologistsinvolved, the decision to terminate thecontract was an effort to inject a moreurgent tone into further negotiations, withthe endpoint being a more suitable con-tract with the hospital. One FRA sourcereports that the radiologists indicated thatthey would have been willing to workwithout a contract during negotiations.

Instead, negotiations came to a stop.The hospital formed its own in-houseradiology group, Radiology Specialists ofFlorida (RSF). It then hired away 32 ofthe 47 FRA radiologists to join the hospi-tal’s in-house group. FRA, as an inde-pendent practice, collapsed. The formerFRA radiologists who chose RSF werenow hospital employees.

FRA administrators made a brief face-saving effort to keep the group going withits skeleton crew of radiologists, but thatturned out to be for naught. By late May,FRA had laid off the bulk of its 64 billing-support personnel. By late September, ithad disposed of its headquarters build-ing. A highly specialized, independentradiology practice that had providedinterpretations to Florida Hospital for 40years was no more. FRA’s doctors whohad joined RSF had, in the words of one

used. The hospital issued a one-para-graph statement on its position. Later, ahospital administrator agreed to aninterview.

FRA’s NarrativeNegotiations between FRA and the

hospital, according to more than onesource, had been ongoing for five or sixyears, at least. Essentially, one issue was atthe heart of things: the radiology groupwas losing income because it couldn’t col-lect from patients coming to the emer-gency department. This lost income leftFRA holding the bag on recruitment. Itcould not recruit radiologists because itcould not pay them enough to commit.All of this was putting more and morepressure on the FRA doctors, who werereading high volumes for what theybelieved was diminished pay.

According to its Web site, FloridaHospital, a not-for-profit acute care net-work, is composed of seven Orlando hos-pitals, including an 880-bed hospital inthe city center. Florida Hospital has atotal of 3,025 beds and operates 15 walk-in urgent care centers. With more than amillion patients per year, the hospitalranks itself as the busiest in the UnitedStates. It also claims the highest number

former FRA doctor, been transformedinto radiology hospitalists.

While negotiations were collapsingand the hospital was forming its owngroup, online radiology forums werebuzzing, with much of the commentcoming from those who were obviouslyclose to the Florida Hospital scene.Cowards, scabs, and worse terms wereused to describe the doctors who chose toleave FRA to join RSF. Ironically, though,those who did join RSF may haveachieved much of what FRA had beenaiming for all along. The hospital hired ateleradiology service to provide finalreadings for the emergency department atnight. It also reportedly offered attractivesalaries to the former FRA doctors, effec-tively giving them a big pay increase.

The vituperative forum posts and wordof mouth made the demise of FRA a sort ofcause célèbre in the radiology world. If ahospital could shift unilaterally to anemployee model with a big group likeFRA, were other independent practicesthat read for hospitals at risk? One forumcomment states that the demise of FRA hastaken on the stamp of an urban legend.

Some FRA doctors who are no longerwith the hospital agreed to explain thatlegend, as long as their names were not

The vituperative forum posts and word of mouthmade the demise of FRA a sort of cause célèbre in the radiology world. If a hospital could shift unilaterally to an employee model with a big grouplike FRA, were other independent practices that readfor hospitals at risk?


of Medicare patients of any hospital in thecountry. It calls itself central Florida’sthird-largest employer, with an estimated18,000 employees. The in-house radiolo-gy group, RSF, employs 47 radiologists,the same number that FRA had. The hos-pital’s radiology department conducts anestimated 1 million imaging proceduresannually, according to its billing agent.

A 2007 report in Medical News Todayindicates that Florida, with a population ofmore than 18 million, has about 3.8 mil-lion people without health insurance. One

fourth of those under 65 have no healthcoverage. In the past eight years, the num-ber of Florida uninsured has increased by38%. All these figures support FRA’sreported increase in emergency-depart-ment workload and subsequent uncollect-ed billings. According to former FRAphysicians, the emergency-departmentworkload also evolved from one of basical-ly interpreting radiographs into one ofreading high numbers of CT scans.

The First CoupThe Medical Group Management

Association (MGMA) collects data that letspecialists see how they rank, comparedwith their peers elsewhere. One formerFRA radiologist notes that the group wasalways trying to compare itself with themarket. According to MGMA data, it wasworking in the 90th percentile and gettingpaid in the 25th percentile. The groupneeded to correct that.

The disparity between work and paywas a killer when it came to recruiting, thesource adds. Potential recruits would lookat the offer and see that they could go to a

number of places and start for what FRAradiologists were getting as partners. If thehospital continued to expand, FRA could-n’t continue to expand to share that vol-ume increase because it couldn’t recruit.The hospital had, in 2004, announced justsuch an expansion plan, according to itsWeb site’s news archive.

The recruitment problem was sosevere, another former FRA physiciansays, that unless the economics wereresolved, attrition would eventually killthe group. FRA had to do something or it

would not exist after a while. The sourcesays that the group was headed for failurebecause of working conditions. There wasan inability to attract and keep high-qual-ity radiologists to do the intense work atthe level of skill required. It was a hardjob, the source says, that outstripped thecomplexity of any academic position interms of what was seen and done on adaily basis, as well as in volume.

The radiology business model, basedon professional billings, came up againstthe hospital model, based on technicalfees, the source adds. As long as the FRAradiologists kept reading under the reim-bursement arrangement defined by the


group’s contract, the hospital was happy tolet demand push up the numbers on theimaging-volume side, the source says. Thehospital’s only incremental cost for addi-tional patients is contrast media, since thetechnologists are already paid to be there,the source explains, adding that FloridaHospital may have earned $150 millionfrom imaging in 2007.

FRA wanted the hospital to share thoseearnings from technical-component pay-ments by subsidizing the hours that radi-ologists spent on night and weekendemergency-department cases for which nopayment was collected. According to onesource, FRA had added five partners justto deal with the emergency departmentand Medicaid workload, while incomefrom the effort would not have supportedeven one partner.

As negotiations crawled along, a factionof the more aggressive FRA radiologistsgrew increasingly frustrated. FRA’s negoti-ating team (its executive committee) wastoo much in league with the hospital, theycharged. In 2006, or perhaps in late 2005,the more aggressive FRA radiologists cir-culated a petition to dissolve the executivecommittee and form a new one. Accordingto more than one source, about 80% of theFRA doctors signed the petition.

At a rancorous meeting, the executivecommittee was informed of the petitionand its results. It was legal, since FRA wasa professional association with corporatebylaws, but the executive committee wasreportedly outraged. While its memberscould have run for re-election, theyresigned on the spot instead. Several ofthem left the group and took other posi-tions at outlying centers or hospitals underthe Florida Hospital aegis, as more thanone source notes.

While the new executive committeenow had a mandate to negotiate moreassertively with the hospital, a price hadbeen paid. One could argue that the over-throw of the original executive committeecame back to haunt FRA. The palace coupcreated fissures that never closed. Theabrupt and forceful changing of the guardleft lingering damage. As the new execu-tive committee would learn when its ownturn on the hot seat came, FRA had plant-ed the seeds of its own destruction.

As negotiations crawled along, a faction of the more aggressive FRA radiologists grew increasinglyfrustrated. FRA’s negotiating team (its executive committee) was too much in league with the hospital,they charged. The more aggressive FRA radiologists circulated a petition to dissolve the executive committee and form a new one. About 80% of the FRA doctors signed the petition.



Instead of going straight to a more pro-ductive outcome, the negotiationsbetween FRA and the hospital, under thenew executive committee, appeared tohead sideways. One source says that thehospital would never put anything in writ-ing. It apparently did make an offer, butnot one FRA could accept.

One radiologist explains that there weremany complex conditions in that offer,which incorporated many changes made tothe old contract. The first year looked goodbecause there was a bonus pool applied tosalary, but that bonus pool was not guaran-teed after the first year. The pension andhealth care plans offered were less favorablethan the previous ones. The hospital report-edly offered radiologists something in theneighborhood of $500,000 per year plusthe bonus pool, in addition to paying themalpractice tail. In retrospect, this sounds,at least on the compensation level, muchlike the offer that was reportedly accepted,according to more than one source, by theRSF doctors who signed individual con-tracts to join the hospital as employees.

Instead of focusing on new contractterms initially, hospital administratorsapparently argued that FRA’s bookkeepingwas flawed and that FRA was missing outon collections that it could have obtained,had it been billing correctly. This may havebeen the reason that the hospital offered totake over FRA’s billing.

According to one radiologist, the hospi-tal suggested that FRA was missing out onas much as $7 million in collectibles. Thereal amount, the source adds, turned out tobe only a few hundred thousand dollars,but that result came only after long andtime-consuming audits. To clarify the situ-ation, FRA agreed to let the hospital’s audi-tors study its books, but in return, FRAwanted the auditors to take a look at thehospital’s radiology books. One source saysthat the radiologists believed that half thebilling information from the hospital waserroneous, based on bad data. The longaudit process may have been clarifying onsome fronts, but it apparently didn’t solveanything, and it may have allowed time fornegotiations to harden.

TerminationDuring the negotiations, one source

says, the hospital had been paying FRA apremium for three-month contract exten-sions. Two extensions had been usedwhen the hospital asked for a third, butthis time, refused to pay for it, a sourcesays. FRA declined the third extension, thesource adds.

One radiologist describes this as wheneverything hit the fan, with the declinedextension being completely unacceptable

to some level of hospital administration.The hospital walked away from negotia-tions, this physician adds. At that point,according to radiologists involved in thenegotiations, FRA, groping for leverage,announced that it was terminating its con-tract as of the June 3 deadline.

There is no question that FRA’s contracttermination notice put Florida Hospitalbetween a rock and a hard place. Withoutradiologists, how was it going to meet theimaging needs of its patients? According toFRA sources, the hospital called an emer-gency meeting of its medical staff, at whichdetails from the FRA negotiations weredisclosed, including proposed pay levels.An FRA representative was invited butchose not to attend, the sources say.

Some physicians who were there told

one FRA doctor that the group was calledlazy, inconsiderate, and uncaring. The talkabout pay, this doctor adds, was a move toincite the medical staff against FRA bymentioning numbers. Radiologists don’tcontrol what different specialists are paid,but telling primary care physicians andpediatricians that radiologists refuse towork is a bad idea when these other doc-tors are not making half as much.

According to a survey of salaries from2003 to the present by Allied Physicians,Inc, radiologists are among the most high-ly paid physicians. A beginning radiologistin this survey earned $201,000 per year;this rose to $354, 000 after three years ofemployment, with a maximum of$911,000 for the most experienced. Incontrast, at the same levels of experience,pediatricians earned $135,000, $175,000,and $271,000; internists earned$154,000, $176,000, and $238,000; andemergency physicians earned $192,000,$216,000, and $295,000.

Whether it was schadenfreude or otherfactors that accounted for the lack of back-ing for FRA from the medical staff, theredid not appear to be much support. As theFRA story approached its denouementthere was, apparently, silence from clini-cians. As one online forum post notes,there were failures at multiple levels, andoutrage from the medical staff was absent.

Almost immediately following thebreakdown of negotiations, FloridaHospital began advertising for radiolo-gists. According to a forum post thatclaims to include a copy of an advertise-ment, the hospital was looking for radiol-ogists of all types and was offering an

According to FRA sources, the hospital called an emergency meeting of its medical staff, at which details from the FRA negotiations were disclosed, including proposed pay levels.


extremely competitive base salary, occur-rence-based malpractice insurance, vaca-tion time, health insurance for the physi-cian and family, relocation, retirement,and a signing bonus.

Besides signing on new physicians, thehospital was also, according to FRA doc-tors, prepared to use teleradiology servic-es to provide both night and day coverageuntil it could build RSF. As analysts laternoted, teleradiology has changed thenegotiating landscape for hospitals andradiology groups. As it turned out, how-ever, the hospital never had to resort toteleradiology beyond what it is now pro-viding in night coverage.

Coup TwoThe hospital had another big card to

play. It offered jobs to FRA radiologistswilling to quit FRA and join the new in-house group, RSF. At some point in thenegotiation process, FRA had employedits own consultant. According to morethan one FRA doctor, that consultantnow urged FRA to stick to its guns andretain its last remaining bit of leverage, anoncompetition clause that preventedFRA physicians from working for thehospital for a specified time.

At some point, the hospital, accordingto FRA sources, warned FRA radiologiststhat they might not be hired by RSF ifthey didn’t quickly rescind the noncom-petition clause. All the RSF jobs might begone, and it would be too late for them toget work.

Other stratagems were reportedlyused by both sides to enhance leverage inwhat turned out to be the last days forFRA. The Orlando Sentinel carried a storythat FRA had sent a letter warning hospi-tal physicians that outsiders—teleradiolo-gy services—could soon be interpretingtheir patients’ scans. Did they really wantfaraway strangers providing diagnosticreadings for patients in Orlando?

According to FRA sources, the hospi-tal sent its own letters. One set wasallegedly sent via registered mail andtherefore delivered during the day, whenmany of the radiologists were at work,but many of their spouses were likely tobe at home. The doctors were about tolose their jobs, the letter warned. This

was done just to upset the spouses and topressure the radiologists, one FRA doctorbelieves.

As June 3 edged onto the visible hori-zon—and as the housing market inFlorida continued its downward slide,making selling a home a tough task—some FRA radiologists were reportedlytrying to convince their colleagues to takeup the hospital’s offer to join RSF.According to sources, two days after anFRA vote to support the negotiating teamand continue the holdout, another(reportedly secret) ballot was distributedto FRA doctors. This time, they capitulat-ed. A majority voted to rescind the non-competition clause.

In short order, a domino line of FRAradiologists fell the hospital’s way. Twothirds of the FRA physicians signed onwith RSF. The long journey was over, andFRA had lost. Some describe the capitula-tion as having been led by the old hands,some of whom were still bitter about theoverthrow of the first executive commit-tee two years earlier.

While the rescindment of the non-competition clause wasn’t a changing ofthe guard vote like the first coup, it mightas well have been. When a core group ofFRA negotiators went back to the hospi-tal to interview for new jobs with RSF,they were not hired. One of them insiststhat this was not for professional reasons,but because the actions of those on theexecutive committee during negotiationswere not seen as being in the hospital’sbest interests.

The Hospital’s SideInitially, Florida Hospital’s media-rela-

tions team issued a one-paragraph sum-mation of the FRA/RSF story as its onlycomment. It reads, “Effective June 3,2008, Florida Radiology Associates termi-nated their contract with FloridaHospital. In the interest of a seamlesstransition of patient care, Florida Hospitalentered into an agreement with RadiologySpecialists of Florida to provide exclusiveradiology services to the seven-hospitalsystem, effective June 4, 2008. 32 of the47 members of Florida RadiologyAssociates chose to join RadiologySpecialists of Florida and to continue to

provide high quality services to FloridaHospital’s patients. This relationship hasbeen a success for our patients, FloridaHospital, and the radiologists.”

The hospital’s senior vice president,Terry Owen, later agreed to comment.“There were very fine quality radiologistsin Florida Radiology Associates,” he says.“We had a long relationship with them,and after an extended period of negotia-tions on their agreement—negotiationsthat they initiated—they provided a letterof termination of the contract. At somepoint, we just decided it was time tomove forward. It was very clear.”

Asked whether the hospital had want-ed, all along, to bring the FRA doctorsinto an in-house, employee-model radiol-ogy practice, as some radiologists charge,Owen says no.

“I don’t know where those allegationscame from. It was never the hospital’sintent. It was never the first choice or the second choice in our discussions,” he says.

Owen declines to discuss specifics ofthe negotiations. “I’m not sure it’s appro-priate for Florida Hospital to talk aboutwhat happened in negotiations with agroup of physicians on its medical staff. Idon’t think that’s productive, nor particu-larly helpful,” he says. Asked what thehospital’s position had been on FRA com-pensation, he says, “We believe there wasa peer-fair transaction for the independ-ent group.”

Asked to respond to FRA’s contentionthat it was being inadequately compen-sated because of uncollected billings,Owen notes, “I think what you just saidwas that they felt they had an ineffectivebusiness model. Their model wasn’tworking.” Asked why the negotiationshad broken down, he says, “Lack ofprogress—that’s generally why negotia-tions break down.” Did it become per-sonal? “Never—on either side.”

He declines to discuss what account-ants may or may not have found in study-ing the books on both sides. He does notwant to talk about any letters that thehospital may have sent. He does not wantto speculate on how the negotiationsmight have ended differently. “We havehigh regard for the long relationship with



FRA. We had a very long, mutually bene-ficial relationship. We want to honor thatlegacy,” he says.

Asked what the hospital’s strategy hadbeen to make sure it had coverage onceFRA had terminated its contract, Owensays, “In any organization, when negotia-tions break down and you have animpending point in time where you won’thave coverage, you have to take appropri-ate action to ensure continuity of care andpatient safety. Being good stewards, wetook appropriate action.”

Owen says that Florida Hospital thenprovided night teleradiology coverage forRSF. He notes that the teleradiologists areall licensed in Florida and working fromthe United States. “I don’t know the vol-umes,” he says. “We’re getting qualitywork, which we had before with FRA.”

He won’t say what salary offers weremade to the RSF radiologists or discuss theeconomics of teleradiology or the depart-ment. Asked if efficiency has changedsince RSF assumed responsibility, he says,“I think every hospital is looking at—andevery radiology department is lookingat—efficiency throughputs. We are look-ing at that. I couldn’t give you any metricson how it’s changed. Clearly, that’s an issuein today’s radiology world.”

Employee ModelsOwen talks at greater length about

whether the employee-based model isbecoming increasingly popular with hos-pitals, not only for radiology, but for otherdepartments as well. “Around the coun-try,” he says, “you’re seeing a lot of hospi-tals doing employment options. It reallydepends on a site-by-site and issue-by-issue situation. It’s not necessarily the first

strategy. It’s one of the tools you have tomake sure you provide quality patient careto fulfill the mission of your organization.”

He continues, “We have not, in theframing of taking over, brought in otherindependent practices. For services weneed to provide to the community, if a(medical) group says, ‘We can no longerfunction this way; what other options areavailable to us?’ that is one of the tools inour arsenal that’s available to us that wecan use to continue to provide quality careto our community. It’s not that we havelooked to that for our own sake.”

Asked if the advent of teleradiology haschanged the dynamics of negotiating withindependent radiology groups or changedthe way the hospital could provide cover-age, Owen agrees to discuss the situation,but only industry-wide, not for the hospi-tal specifically. “On the industry-widelevel, the DRA made a lot of challengesoccur instantly; a lot of fetters, which cre-ated another dynamic,” he says. “We’vegot rapidly growing demand for radiology,in terms of the number of exams, aroundthe country, and it’s difficult.”

He adds that technology has had aheavier impact on radiology than on anyother area of medicine with which he’sfamiliar. He says, “It creates a lot of

changes in the marketplace that we didn’teven know were available a few years ago.”Teleradiology services change technology,for example, and, “In the PACS world,now, there is remote reading even inside asystem. Where the medical staff is used tohaving a radiologist there, to some degree,you don’t even need that there. It’s just adifferent dynamic. A part of the medicalcommunity is going through great change.That’s water that everybody is in,” he adds.

Asked what the mood was like on theRSF staff and whether attrition wasexpected because of lingering bitternessover the FRA negotiations, Owen says,“We think it is very important for deliver-ing a quality product that we have goodteamwork in the department. I believewe’re achieving that. I would hope that theradiologists are very pleased and enjoyingthe practice of radiology and enjoying thework,” he adds. “We’re very pleased withRSF and the people we’re dealing with; it’sgone very well. We hope everybody worksas long as they want, as long as they’reable, as long as they’re productive, and aslong as it’s a win-win.” Owen concludes,“We had great respect for the radiologistsin FRA. We’re disappointed the negotia-tions broke down—and now it’s time tomove forward.”

It may be time to move forward forsome, as Owen says, but it has been hardto move forward for all. For those radiolo-gists who lost their jobs in the final trans-fer of power between FRA and RSF, thereis lingering disbelief, a feeling of betrayal,and even sorrow. A former FRA negotiatorwho now works for several clinics whilelooking for a steadier job (with the securi-ty of a regular paycheck) says that no onefrom the old group has been in contact.

Another FRA negotiator reports havingan excellent job, but still feels tossedunder the bus by the vote to rescind thenoncompetition agreement. This doctoradds that the group was toppled too easi-ly, and that this does not bode well for thefuture of large hospital groups.

The View From 30,000 FeetWhether FRA’s experience bodes ill for

other hospital radiology groups may bethe key question in its aftermath. Shouldwhat happened at Florida Hospital put

In any organization, when negotiations break down and you have an impending point in time where you won’t have coverage, you have to takeappropriate action to ensure continuity of care and patient safety.

—Terry Owen, senior vice president

Florida Hospital, Orlando


other groups on alert? Did FRA badlyoverplay its hand? Was there another sce-nario in which the hospital, as someargue, bit off too big a chunk with itsemployee model, taking a step that couldleave its radiology operation running inthe red?

To Alan Kaye, MD, a Connecticut radi-ologist who follows the industry, hospitalsare putting increasing pressure on radiol-ogy groups to handle higher volumes andreduce turnaround times. The FRA story,he says, “may be a signal that this is onepotential ramification of increased servicedemands placed on radiologists.”

He adds, though, that the answer isn’tyet known. “The 30,000-foot view is thatthis is a signal that the relationshipsbetween radiologists and hospitals are ina state of flux. I’m reluctant to say this isbad for radiologists, but this is a flashingyellow.”

Kaye points out that for the radiolo-gists now with the hospital’s in-housegroup, RSF, the outcome may have beengood. “Maybe this was a win for the radi-ologists. For all we know, it may be whatthe radiologists wanted. Some physiciansmight view this as a plus by not having tobe distracted from medicine. We don’tknow what the long-term ramificationswill be for the hospital or the group,”Kaye says.

Kaye sees something else that is worri-some in the story—the threat that telera-diology can become when a hospital usesit as leverage in negotiations.“Teleradiology has created a two-edgedsword,” he says. “On one hand, it allowsradiologists to comply with some of thedemands on them and still maintain alifestyle. On the other hand, teleradiologyhas created a wedge a hospital can use byoutsourcing—by creating a perception it’seasy to replace radiologists. To the extenta hospital thinks it’s easy to replace radi-ologists, they have more leverage in a dis-cussion. That’s important to understand.”

In Kaye’s view, Florida Hospital waslucky that most of the FRA physicianschose to join RSF. “If we start down theroad of teleradiology as a solution, youoversimplify a very important part ofpatient care and make radiology theequivalent of a lab test. That’s not to the

benefit of the patient. When the referrerknows who’s reading, and the nuances ofan interpretation, that is very importantto patient care,” he says.

Kaye says that radiologists need, mostof all, to make sure that they satisfy thedemands of the medical staff. “That’s theultimate security, the medical staff,” hesays. “For all we know, the support of themedical staff may have been the leverthat got the radiologists who stayed on agood deal.”

Jeopardizing CareFor Howard B. Kessler, MD, who was

first to call the FRA experience a caution-ary tale, the mistake that FRA made innegotiations was to draw a line in thesand that threatened to disrupt patientcare. Kessler, who operates aPhiladelphia-based consultancy as well aspracticing radiology, says that one of hisstrongest messages to radiology groups is

that patient care should never be used asa negotiating chip.

“Once you play the card of, ‘We’releaving unless you give us this,’ the likeli-hood of an amicable solution drops pre-cipitously. Groups need to figure outwhat’s important to them, where theyneed to move forward, and what they’regoing to live with,” he says. “A hospitalshould not be put in the position whereit’s held at gunpoint by radiology groups.The hospital has no choice but to providepatient care. The cautionary tale for radi-ology groups is that to lose sight of that isa bad negotiating tactic, and it sets thestage for lost trust.”

Radiology groups need to understand

that hospital administrators know how tonegotiate far better than they do, Kessleremphasizes. Administrators negotiate allthe time. Radiology groups, conversely,usually have to learn on the job.“Administrators understand the game;they know what the pressure points are,and they know how the radiology groupoperates. If this group in question votedto dissolve restrictive covenants, then thatis what other groups should really lookat,” he says.

Kessler does advocate restrictivecovenants, so that if a group dissolves,the hospital still cannot steal the radiol-ogists, but his overarching message isthat radiology groups need to head intonegotiations with a well-consideredmessage. “It’s incumbent on a group tocreate a compelling, logical story.Groups need to do their homework.They should recommend how theymight propose to cut costs, and create a

story where if we make less, it costs you(the hospital), and we can neither per-form nor recruit,” he says.

Hospitals also have to be careful, hewarns. In taking a group in-house, “Youare basically rolling the dice,” he says.“What you’re getting can’t be measuredfor years.” Kessler says that groups thatare prepared to negotiate will do well. Ofgroups that come in aggressively, with theassumption that they’re not replaceable,he says, “The naked city is littered withgroups that couldn’t be replaced.” FRA isone of them now.

George Wiley is a contributing writer forRadiology Business Journal.

A hospital should not be put in the position where it’s held at gunpoint by radiology groups. The hospital has no choice but to provide patientcare. The cautionary tale for radiology groups is thatto lose sight of that is a bad negotiating tactic, and it sets the stage for lost trust.

—Howard B. Kessler, MD

Philadelphia

RADIOLOGY | 50 Largest Practices

By Joseph P. White, CPA, MBA

Why compile a list of the 50largest radiology practices?We acknowledge that the listis far from complete, and

that there may be some inconsistencies inthe way that respondents answered thequestions. Some radiology groups chosenot to respond, and some may not havebeen aware that the survey was being done,so they are not included in the list. We dobelieve, however, that this is a pretty goodstart. We expect greater accuracy next yearand more respondents every year.

The benefits of such a survey are wellunderstood in other fields. In the account-ing world, each year, we wait for a coupleof organizations to publish their annuallist of the largest accounting firms in thecountry. I see three main benefits of thisdistinction.

• It can be a source of organizationaland employee pride to be able to saythat you are one of the largest groups in the country.• It can be used as a recruiting tool fornew radiologists; some will see biggeras better.• It can possibly be of benefit in contracting.My interest in such a survey goes

beyond mere curiosity. I have been askingthe following question for a few years. Ifthere are national and internationalaccounting and law firms consisting ofmore than 2,000 owners and 20,000

employees, why are there not nationalradiology groups? In the past five years,we have seen the number of larger groupsgrow, but we really could not say, for sure,how much or how quickly. Now, we willhave some method of trying to track theebb and flow of practice size (even if it isan imperfect beginning).

Both LarsonAllen and RadiologyBusiness Journal are very aware of the sen-sitive nature of the revenue portion of thesurvey, and we will respect and guard thatinformation closely.

Thank you for participating.

Joseph P White, CPA, MBA, is principal,health care, for LarsonAllen, Minneapolis, the18th largest CPA firm in the United States.

The 50 Largest RadiologyPractices Defy SimpleCategorization

By Cheryl Proval

When it comes to productivity,the results of the first annualsurvey to identify the coun-try’s 50 largest radiology

groups indicate that average revenue perFTE radiologist, in general, does bear apositive relationship with the size of thegroup. On the other hand, administrativechallenges probably do the same, with themedian number of FTE employees climb-ing from 57 in the groups with fewer than35 FTE radiologists to 675 in those groups

with more than 65 FTE radiologists.Overall, the results of this survey sug-

gest a wide variety of medical businessmodels with as many anomalies as thereare commonalities, revealing a rich andmultifarious practice environment. Themedian number of FTE radiologists for the50 largest radiology practices is 42.5, andthe median number of employees is 161.The median number of imaging centersowned matches the median number ofhospital contracts: seven.

Jointly sponsored by Radiology BusinessJournal and LarsonAllen, Minneapolis, oursurvey went out to the ImagingBiz.commailing list. Subsequent telephone callswere made to known groups of size toencourage their participation. Very fewresponses were added from these groups,however, with many citing the require-ment to submit revenue data (total rev-enue and net operating revenue) as a causefor concern.

We gave respondents the choice ofgranting us permission to publish the rev-enue data or keep them private, and mostelected privacy. Ultimately, we elected tokeep all revenue data private. This affect-ed our criteria for ranking, which we ini-tially expected to include both the num-ber of FTE radiologists and net operatingrevenue. This ranking is based purely onthe number of FTE radiologists, whichputs the Boston academic site Brigham &Women’s Hospital at the top of the list,although its academic mission probablyhelps place its revenue per FTE morenearly in line with the median revenue for


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RADIOLOGY | 50 Largest Practices


the groups having fewer than 35 FTEradiologists.

Clearly, factors other than size appearto affect revenue per FTE; these include anacademic setting, imaging center owner-ship, and the absence of hospital con-tracts. A practice that ranks near the bot-tom of the list that had no hospital con-tracts has the second-highest revenue perFTE radiologist.

DiscussionFor purposes of analysis, we have

grouped the practices into four categories:those having fewer than 35 FTE radiolo-gists, 35 to 50 FTE radiologists, 51 to 65FTE radiologists, and more than 65 FTEradiologists. As mentioned above, theaverage revenue per FTE radiologistincreases with each step up in group size.Looking at the median revenue per FTEby group size, however, the 36-to-50cohort takes a slight dip below the less-than-35 group, suggesting that trueeconomies of scale kick in for groups ofmore than 50 radiologists. Because wehave chosen not to share the revenue data,you will have to trust us on that.

Not surprisingly, the median number ofimaging centers, the number of hospitalsserved, and the number of procedures per-formed all rise along with group size, withone exception: Groups with more than 65radiologists own fewer imaging centersthan the groups of 51 to 65 radiologists.Groups with fewer than 35 FTE radiologistsperform a median of 406,207 procedures,have a median of 62 employees, maintain amedian of three hospital contracts, andown a median of 4.5 imaging centers.

Groups with 36 to 50 FTE radiologistsperform a median of 750,000 procedures,have a median of 134 FTE employees,maintain a median of six hospital contracts,and own a median of six imaging centers.Groups with 51 to 65 FTE radiologists per-form a median of 800,000 procedures,have a median of 300 employees, maintaina median of 10 hospital contracts, and owna median of nine imaging centers. Thelargest groups, with more than 65 FTE radi-ologists, perform a median of 1 million pro-cedures, have a median of 550 FTEemployees, maintain a median of 13 hospi-tal contracts, and own a median of sevenimaging centers (see Figures 1 through 4).

There is, however, an inverse relation-ship between median revenue per FTEemployee and the size category, with thesmaller groups earning higher revenueper FTE employee than each successivelylarger group.

The largest of the groups (with morethan 65 radiologists) employ small armies ofstaff members, ranging from as many as 846at American Radiology Services, Baltimore,to as few as 18 at Advanced RadiologyServices in Grand Rapids, Mich, which wasthe third largest group by FTE radiologists,but also the group that employed the fewestFTE employees. Next year, we will be muchmore specific in our questions to verify that,for instance, all 450 FTE employees report-ed by Brigham and Women’s are employedby the radiology practice and not the hospi-tal’s radiology department. We also willspecify that academic departments reportonly their clinical FTE radiologists and notinclude research FTEs.

We asked respondents to include datafor the years 2007 and 2008, andalthough we only shared the data from2008, a clear trend of the big getting big-ger emerges. We can report that four of the86 practices that responded have lostmembers, a dozen have stayed the samesize, and the rest have added FTE radiolo-gists. Of the total respondents, includingthe practices that did not make the 50largest practices ranking, 46 practices pro-vided income data. Of those, seven prac-tices report flat revenue for 2008 over2007 and six practices report declines inrevenue, but the remainder report growth.

A total of 86 practices responded to oursurvey, and we regret that we were unable toinclude 36 practices. One midsized teleradi-ology company entered, which leads us toquestion what it is that distinguishes a prac-tice from a teleradiology company. Severalpractices in the list of the largest 50 have sig-nificant teleradiology components to theirbusinesses, but they also cover local hospi-tals or own imaging centers. We decided notto include teleradiology-only companies.

We plan to expand this list next year toinclude the 100 largest radiology practices,and we welcome your thoughts on how toimprove and build on this survey.

Cheryl Proval is editor of RadiologyBusiness Journal; [email protected].

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Figure 1. Median number of imaging centers.

Figure 2. Median number of procedures performed.

Figure 3. Median numberof employees.

Figure 4. Median number of hospital contracts.

406,

207

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800

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4.5 6 9 7

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Key:<35 FTE radiologists36 to 50 FTE radiologists51 to 65 FTE radiologists>65 FTE radiologists

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The 50 Largest Radiology Practices2008 Group Lead Lead FTE FTE Imaging HospitalRank Name Location CEO Physician Nonphysician Radiologists Employees Centers Contracts Procedures

1 Brigham and Women’s Hospital Department of Radiology Boston MA Gary Gottlieb, MD, MBA Steven Seltzer, MD, FACR Brian Chiango, RT, MBA 95 450 8 6 1,000,000

2 Advanced Radiology Services PC Grand Rapids MI Marilyn R. Savidge Konstantin Loewig, MD — 89.2 18 3 13 772,536

3 Austin Radiological Association Austin TX Doyle Rabe Greg Karnaze, MD, FACR — 84 700 15 15 1,300,000

4 St. Paul Radiology St. Paul MN — Joseph Tashjian, MD — 83 — 7 10 —

5 American Radiology Services Baltimore MD Bob Carfagno Susan Wyatt, MD — 80 846 18 11 —

6 Massachusetts General Hospital Radiology Boston MA David Torchiana, MD James Thrall, MD — 78.8 181 2 28 770,000

7 Radiological Associates of Sacramento Medical Group, Inc Sacramento CA Mark Leibenhaut, MD Mark Leibenhaut, MD Fred Gaschen 77.8 826.6 29 5 1,037,047

8 Inland Imaging Spokane WA Steve Duvoisin William Keyes, MD Kathleen Wilson 76 650 7 13 660,000

9 Radia Inc, PS Everett WA Ben Harmon, MD, MBA Jack Little, MD — 72 191 4 26 1,100,000

10 Consulting Radiologists, Ltd Minneapolis MN Timothy F. Signorelli Richard M. Levey, MD — 65 134.1 3 35 963,000

11 Southwest Diagnostic Imaging Phoenix AZ Lisa Mead Rod Owen, MD; Christian Dewald, MD Lisa Mead 65 625 21 5 1,250,000

12 Suburban Radiologic Consultants Minneapolis MN Jim Tierney Kevin Gustafson — 65 300 7 11 750,000

13 Charlotte Radiology, PA Charlotte NC Arl Van Moore, Jr, MD Arl Van Moore, Jr, MD Mark Jensen 61.3 285 23 10 923,014

14 Center for Diagnostic Imaging, Inc Minneapolis MN Robert Baumgartner Kurt P. Schellhas, MD — 60 750 50 2 400,000

15 Riverside Radiology Associates Columbus OH Marcia Flaherty Mark Alfonso, MD Ron Hosenfeld 60 83 1 11 800,000

16 Radiology Associates of Tarrant County Fort Worth TX Lynn Elliott Richard Jensen, MD — 59 350 11 10 1,200,000

17 Rhode Island Medical Imaging East Providence RI Elizabeth A. Simas Richard B. Noto, MD — 51.2 161 9 3 625,000

18 Eastern Radiologists, Inc Greenville NC Michael McLaughlin, MD Michael McLaughlin, MD Walter Lindstrand 51 206 5 10 650,000

19 Wake Radiology Raleigh NC Robert E. Schaaf, MD Robert E. Schaaf, MD William H. Johnson 50 350 9 7 675,000

20 UC Davis — Department of Radiology Sacramento CA Claire Pomeroy, MD Raymond Dougherty, MD Marjorie Gorthy 47 34.5 1 1 392,275

21 Florida Radiology Imaging Maitland FL Paul M. Duck Gary Felsberg, MD Shannon Stewartson 46 91 5 6 118,000

22 Jefferson Radiology East Hartford CT Mark Grossman William Glucksman, MD Mark Grossman 45 289 7 4 —

23 Radiology Associates, PA Little Rock AR John Meadors, MD John Meadors, MD Taunia Stadter 45 160 4 16 775,000

24 Clinical Radiologists, SC Springfield IL Thomas C. Dickerson Charles E. Neal, MD Thomas C. Dickerson 44 21 24 19 750,000

25 Northwest Radiology Network Indianapolis IN Homer F. Beltz, MD Homer F. Beltz, MD Linda Wilgus 41 108 10 13 750,000

26 Desert Radiologists Las Vegas NV William P. Moore, II Robert Poliner, MD — 39 235 5 6 1,000,000

27 Imaging Healthcare Specialists Medical Group, Inc San Diego CA Murray Reicher, MD Jon M. Robins, MD Thomas Cleary 38 280 15 2 240,000

28 Radiology Associates of Hollywood Pembroke Pines FL — Mark Schwimmer Dan Strub 34.3 51.1 0 6 800,000

29 Cedars-Sinai Imaging Medical Group Los Angeles CA Barry D. Pressman, MD Barry D. Pressman, MD Lynne Roy 34 34 3 1 450,000

30 Atlantic Medical Imaging, LLC Galloway NJ Robert M. Glassberg, MD Robert M. Glassberg, MD Michael J. Jenoriki 31 278 7 3 510,922

31 West County Radiological Group Inc St. Louis MO — Jeffrey Thomasson, MD, FACR Carol Hamilton, MBA 31 34 5 2 477,508

32 Mid-South Imaging & Therapeutics, PA Memphis TN Dexter Witte, MD; Worth Saunders, MHA Dexter Witte, MD Worth Saunders, MHA 30 13 20 10 630,000

33 Advanced Medical Imaging Consultants, PC Fort Collins CO S. H. Podolski, III, CPA, CIA, CHBME John Bodenhamer, MD — 28 59 3 11 385,000

34 Nassau Radiologic Group, PC Garden City NY Annette Marinaccio Jay Bosworth, MD; Paul Cayea, MD; Paul Lang, MD — 28 375 11 0 300,000

35 Radiology LPN Milwaukee WI Asamot Bagatov Ilya Petrescu, MD Georghe Hagi 28 55 6 8 500,000

36 Radiology and Nuclear Medicine Topeka KS Johannes Heyns, MBChB Johannes Heyns, MBChB David Smith, FACMPE 26 55 1 12 406,247

37 ProScan Imaging Cincinnati OH Stephen J. Pomeranz, MD Stephen J. Pomeranz, MD Mike O’Brien 25 325 23 — 249,600

38 Red Rock Radiology Las Vegas NV Lorne Caughlin Richard Schwartz, MD Lorne Caughlin 25 35 2 3 400,000

39 St. Joseph’s Imaging Liverpool NY Alan B. Foster, MD Alan B. Foster, MD Olga M. Stanton 23 110 5 3 —

40 Radiology Consultants of Iowa Cedar Rapids IA — William R. Neff, MD Kathryn M. Epley 22.5 67 1 13 467,449

41 FWRadiology Fort Wayne IN Joe Wolfcale Tim Grissom, MD Deb Overcash 22 48 5 9 540,000

42 Radiology Associates of San Antonio, PA San Antonio TX Wendy Lomers, CPA, MBA Kenneth Sandoval, MD Wendy Lomers, CPA, MBA 21 260 9 6 506,000

43 Seattle Radiologists Seattle WA Sandra Benson Michael J. Peters, MD Tricia West 21 101 2 1 200,000

44 Foundation Radiology Group Pittsburgh PA Brandon W. Chan, MD Brandon W. Chan, MD Timothy J. Pisula 20 30 7 15 475,000

45 Utah Valley Radiology Associates, PLLC Orem UT Jim Jenson Carl Black, MD Jim Jensen 19.8 65 1 7 375,000

46 Steinberg Diagnostic Las Vegas NV David Steinberg, MD David Steinberg, MD Marc Williams 19 337 5 0 260,000

47 UIC Physician Group Chicago IL Kunal Vora William Nicholas — 18 2 2 2 150,000

48 North State Radiology Chico CA Laverna Hubbard Laverna Hubbard Gary Stromberg, MD 17 86 4 3 222,687

49 Southtowns Radiology Associates Hamburg NY John Bellomo — Mary Turkiewicz 16 75 3 2 300,000

50 Windsong Radiology Williamsville NY John J. Sung, CPA, MBA Janet Sung, MD Deanna L. Schiller, MBA 15 172 5 — 335,919

Cosponsored by Radiology Business Journal and LarsonAllen. Ranked by FTE Radiologists

Lead Lead FTE FTE Imaging HospitalPhysician Nonphysician Radiologists Employees Centers Contracts Procedures

Steven Seltzer, MD, FACR Brian Chiango, RT, MBA 95 450 8 6 1,000,000

Konstantin Loewig, MD — 89.2 18 3 13 772,536

Greg Karnaze, MD, FACR — 84 700 15 15 1,300,000

Joseph Tashjian, MD — 83 — 7 10 —

Susan Wyatt, MD — 80 846 18 11 —

James Thrall, MD — 78.8 181 2 28 770,000

Mark Leibenhaut, MD Fred Gaschen 77.8 826.6 29 5 1,037,047

William Keyes, MD Kathleen Wilson 76 650 7 13 660,000

Jack Little, MD — 72 191 4 26 1,100,000

Richard M. Levey, MD — 65 134.1 3 35 963,000

Rod Owen, MD; Christian Dewald, MD Lisa Mead 65 625 21 5 1,250,000

Kevin Gustafson — 65 300 7 11 750,000

Arl Van Moore, Jr, MD Mark Jensen 61.3 285 23 10 923,014

Kurt P. Schellhas, MD — 60 750 50 2 400,000

Mark Alfonso, MD Ron Hosenfeld 60 83 1 11 800,000

Richard Jensen, MD — 59 350 11 10 1,200,000

Richard B. Noto, MD — 51.2 161 9 3 625,000

Michael McLaughlin, MD Walter Lindstrand 51 206 5 10 650,000

Robert E. Schaaf, MD William H. Johnson 50 350 9 7 675,000

Raymond Dougherty, MD Marjorie Gorthy 47 34.5 1 1 392,275

Gary Felsberg, MD Shannon Stewartson 46 91 5 6 118,000

William Glucksman, MD Mark Grossman 45 289 7 4 —

John Meadors, MD Taunia Stadter 45 160 4 16 775,000

Charles E. Neal, MD Thomas C. Dickerson 44 21 24 19 750,000

Homer F. Beltz, MD Linda Wilgus 41 108 10 13 750,000

Robert Poliner, MD — 39 235 5 6 1,000,000

Jon M. Robins, MD Thomas Cleary 38 280 15 2 240,000

Mark Schwimmer Dan Strub 34.3 51.1 0 6 800,000

Barry D. Pressman, MD Lynne Roy 34 34 3 1 450,000

Robert M. Glassberg, MD Michael J. Jenoriki 31 278 7 3 510,922

Jeffrey Thomasson, MD, FACR Carol Hamilton, MBA 31 34 5 2 477,508

Dexter Witte, MD Worth Saunders, MHA 30 13 20 10 630,000

John Bodenhamer, MD — 28 59 3 11 385,000

Jay Bosworth, MD; Paul Cayea, MD; Paul Lang, MD — 28 375 11 0 300,000

Ilya Petrescu, MD Georghe Hagi 28 55 6 8 500,000

Johannes Heyns, MBChB David Smith, FACMPE 26 55 1 12 406,247

Stephen J. Pomeranz, MD Mike O’Brien 25 325 23 — 249,600

Richard Schwartz, MD Lorne Caughlin 25 35 2 3 400,000

Alan B. Foster, MD Olga M. Stanton 23 110 5 3 —

William R. Neff, MD Kathryn M. Epley 22.5 67 1 13 467,449

Tim Grissom, MD Deb Overcash 22 48 5 9 540,000

Kenneth Sandoval, MD Wendy Lomers, CPA, MBA 21 260 9 6 506,000

Michael J. Peters, MD Tricia West 21 101 2 1 200,000

Brandon W. Chan, MD Timothy J. Pisula 20 30 7 15 475,000

Carl Black, MD Jim Jensen 19.8 65 1 7 375,000

David Steinberg, MD Marc Williams 19 337 5 0 260,000

William Nicholas — 18 2 2 2 150,000

Laverna Hubbard Gary Stromberg, MD 17 86 4 3 222,687

— Mary Turkiewicz 16 75 3 2 300,000

Janet Sung, MD Deanna L. Schiller, MBA 15 172 5 — 335,919

Buildingthe ModelPractice

SUCCESS | The Model Practice

By Rich Smith

What does the ideal radiology practicelook like?

It is likely to include subspecialization,according to Lawrence R. Muroff, MD,FACR, president and CEO of ImagingConsultants Inc in Tampa, Fla. He believesthat subspecialization strengthens thehand that a practice holds. “If, for exam-ple, you are a superb women’s imager, youmay be seen as indispensable to your hos-pital’s breast surgeons, which makes yourpractice just that much less vulnerable tothe institution’s administrative whims,” hesays. “Subspecialization also serves as adefensive wall against encroachment byother medical specialties: Cardiologistsand others tend to be less successful atcapturing your turf if you can providesomething they cannot.”

Subspecialization was a strategy thatRiverside Radiology Associates, Columbus,Ohio, arrived at over time, the 70-radiolo-gist group’s president, Mark Alfonso, MD,recalls. “Our doctors are fellowship trainedin all of the radiology subspecialties,including musculoskeletal, neuroradiology,mammography, body imaging, nuclearmedicine, and interventional radiology,”Alfonso says. “We did not start out thisway; we evolved into subspecializationafter realizing it’s not enough merely todescribe findings. One must also speak the

language of the referring physicians, whichhelps them tremendously with patientmanagement. As a result, we have becomewell known as a center of excellence forradiology within Central Ohio, branchingout statewide.”

The Corporate Governance Model

A highly efficient governance structurealso is characteristic of exemplary radiolo-gy practice models. Without that, a groupwill find itself at a distinct competitive dis-advantage, according to Muroff, a respect-ed, nationally known practice advisor. “Anefficient governance structure enables thegroup to act decisively, appropriatelyand—in the best of circumstances—

proactively,” he says. “It also permits gooddecisions to be made speedily. Speed isimportant because you need it to help youget out in front of the competition. Forexample, if you’re going to introduce anew service, it’s better to be the first in themarket to do so rather than the seventh,since the first one up with the new serviceis the one with the best chance of domi-nating the market.” You are less likely tobe first if your decision-making apparatusis creakily encumbered, he explains.

Muroff believes that the optimal gover-nance structure for radiology groups is theone embraced by companies outside ofhealth care. “Call it the standard corporatemodel,” he says. “Radiology practices canbenefit from adopting this model because


Corporate-style governance,subspecialization, and choosing the rightadministrative staff members all play roles


they, themselves, are corporate-type busi-nesses. They may see themselves as small,neighborhood businesses, but given thatthey typically bring in $5 million to wellover $100 million a year, they hardlyqualify as such. Neither can they be runlike a neighborhood business.”

Some radiologists blanch at the sug-gestion of patterning their practices afterthe likes of Microsoft or Federal Express.They see medicine and business as mutu-ally exclusive. Muroff contends that it iswrongheaded to view things that way.“There is nothing to say that good busi-ness and good medicine cannot coexist,”he says. “In fact, a compelling argumentcan be made that, if you practice goodbusiness, you will be able to practice farbetter medicine, since you’ll have moreresources at your disposal.”

Two features of the corporate model ofgovernance are a mission statement and abusiness plan. “Many organizations turntheir mission statements into warm andfuzzy public-relations tools, but that isnot their purpose,” Muroff insists. “A mis-sion statement spells out the goals of theorganization in a way that provides guid-ance to the leaders and to the rank andfile of the organization. A business planprovides even more specific guidance inthe form of timelines for accomplishmentand structures for assigning tasks andsecuring accountability.”

Governance InfrastructureThe corporate model places the ulti-

mate responsibility for carrying out themission statement and business plan inthe hands of a CEO, but a mistake thatmany radiology groups make after hiringone is failing to maintain frequent interac-tion with that leader. “I’ve seen radiolo-gists, after finding and bringing aboard anexcellent nonphysician business execu-tive, think that they’re now free to be cli-nicians and just read images all day,”Muroff says. “It can’t work that way. Thereneeds to be ongoing dialogue between thebusiness leadership and the radiologists.”

That dialogue is most productivewhen it flows through an executive com-mittee made up of a demographicallyrepresentative sample of the practice. “Ifthe executive committee reflects the com-position of the group, decisions it makes

way of supporting documentation. Ouradministrative staff consisted, by andlarge, of high-school graduates: We didn’tneed people with an advanced educationbecause the nature of the administrativework being handled in-house was notparticularly sophisticated or specialized.”

Smith continues, “Now, we have asalaried practice administrator holding amaster’s degree, and we’ve replaced thebookkeeper with an accountant whosejob description grew into that of a con-

troller. The quality of personnel we’reemploying in our business office has alsoincreased dramatically, with many ofthem being college educated. We still out-source, but only those few functionsinvolving complicated financial or legalissues.”

An important goal for Casper MedicalImaging is to make sure that its adminis-trative team does not fall into counterpro-ductive habits. It achieves this with thehelp of a personnel manual created 15years ago and updated a number of timessince then. “The manual is a half-inch–thick package detailing everythingan employee of ours needs to know inorder to be an effective, contributingmember of our staff,” Smith says. “It’sturned out to be foundational in our cul-tivation and management of a sizablenumber of employees in an increasinglycomplex business environment.”

Casper Medical Imaging also has amechanism in place for preventing frictionamong employees and promoting cohe-siveness. Smith says, “We have a liaisoncommittee made up of one radiologictechnologist and one front-office staffer.

will probably be appropriate to more ofthe diverse interests composing thegroup,” Muroff says.

In addition to the executive commit-tee, Muroff recommends at least threeother committees: finance, marketing/business development, and operations.The last is particularly importantbecause, in order to be efficient, the cor-porate model of governance must enjoythe support of an effective businessinfrastructure.

The need for practice building andgood governance is not confined to largepractices. Casper Medical Imaging inCasper, Wyo, is a group of six radiologists(some of whom are fellowship-trainedsubspecialists). It staffs a hospital and anoutpatient imaging center, and it lever-aged a solid administrative team to fuelpractice growth.

Geoffrey Smith, MD, FACR, grouppresident, also serves on the ACR Boardof Chancellors as a representative forsmall and rural practices. He says, “We’vegone from being a small outpatient officeof just a few radiologists to a full-fledgedset of businesses that include joint ven-tures with our hospital, a billing opera-tion that handles 120,000 CPT® codesannually, and another half a millionclaims and payment transactions. Over adecade ago, we outsourced all of ourbusiness management and financials to acompany located in another state,” Smithsays. “Internally, we handled collectionsand some bookkeeping. We had a book-keeper who assembled checks and hand-ed them to someone to be signed—anddid so without providing much in the

We’ve gone from being a small

outpatient office of just a few radiologists

to a full-fledged set of businesses that

include joint ventures with our hospital,

a billing operation that handles 120,000

CPT® codes annually, and another half a million claims

and payment transactions.—Geoffrey Smith, MD, FACR, president

Casper Medical Imaging, Casper, Wyo

SUCCESS | The Model Practice


They spend a fair amount of time planningthe annual Christmas party and othersocial functions, but they also addresssmall problems involving our internalcommunications or day-to-day process-es—problems not big enough to maketheir way to the middle-managementlevel, but still consequential enough tocause discord or disruption, especially ifnot dealt with and allowed to fester.”

The Technology PieceBeyond subspecialization, good gover-

nance, and a solid business infrastructure,a radiology group, in order to be consid-ered ideal, requires the support of cutting-edge technology. “Without the technologypiece, you can’t really claim to have anideal practice model,” Marcia Flaherty,CEO of Riverside Radiology, explains.

Riverside Radiology has done well withthat particular element, judging by theequipment that it owns. “We have a PACS,which we acquired in 2003,” Alfonso says.

“Having this system in place is whatallowed us to take our subspecialty modeland then spread it, bringing images to thesubspecialist versus sending bodies to var-ious locations to read. In support of PACS,we developed, from the ground up, an ITinfrastructure that made it possible to cre-ate a company, so that we could outsourceour PACS capabilities to practices and hos-pitals that cannot afford the PACS struc-ture we have developed.”

Alfonso voices the view that any tech-nology acquired by a group—whether in

IT or modalities—must be state ofthe art. “Otherwise, it’s like

owning a sports car withfour flat tires. Your tech-

nological capabilitiesall have to be the bestpossible, so that youcan provide thelevel of servicenecessary to putyour practice inthe strongest com-petitive position,”Alfonso says.

To illustrate thepoint, Flaherty

mentions severalrecent technology ini-

tiatives undertaken bythe practice. “We’re work-

ing on the development of3D reconstruction across our

infrastructure, which will sup-port the work of our radiologists ina more effective fashion and, byextension, increase our customer-service focus,” she says. “This fitsright in with our subspecialty modelbecause the 3D reconstruction capa-

bility allows us to provide more specific

information and remarkable images tothe referring physicians.”

She adds, “We also have a number ofintegrated systems we rely on not onlyto provide interpretations, but also tomanage the functions of our practice.These include systems for billing, elec-tronic medical records, dictation, email,texting, and other communicationtools. This infrastructure is allowing usto increase the support for our radiolo-gists at the hospitals we cover by devel-oping our own 24/7 transcription serv-ice. The reality is that it’s hard for thesehospitals to have transcriptionists avail-able on a 24/7 basis, but without 24/7transcriptionist support, it poses a chal-lenge for us with regard to turnaroundtime. What we’re doing, in response, isusing our technological capabilities tosupport a pool of transcriptionists whocan, from one location, provide around-the-clock service to all of these differentfacilities.”

Clearly, the ideal radiology practicemodel consists of many elements thatrequire much planning and no smallinvestment of resources. Some groups mayconclude that the investment is too costlyand that the rewards are too few. Muroffbelieves that would be a mistake. “Movingtoward the ideal is not just a worthwhilegoal, but an imperative for any group thatwants to survive in the years ahead,” hesays. “The next 10 years are going to be farmore difficult for radiology than the 10years now past. Groups will need to be thebest they can be, and striving for the idealought to be at the top of their list of thingsto do.”

Rich Smith is a contributing writer forRadiology Business Journal.

Your technological capabilities all

have to be the best possible, so that

you can provide the level of service

necessary to put your practice in the

strongest competitive position.—Mark Alfonso, MD, president

Riverside Radiology Associates, Columbus, Ohio


Radiology group practices can takethe following seven steps to trans-form their practice models into

something much closer to the ideal.First, change before change becomes a

necessity. Lawrence R. Muroff, MD, FACR,president and CEO of Imaging ConsultantsInc in Tampa, Fla, says, “Strive to antici-pate opportunities and then structure yourgroup appropriately to take advantage ofthose. The same is true of problems:Anticipate them and structure yourselfappropriately to deal with them.”

Second, enlarge. “Try to have the great-est possible geographic reach so as tooffer the widest access to patients,”Muroff says. “This will give you more cloutwith third-party payors. Radiology groupsprosper when the reimbursement per pro-cedure is better. If you’re geographicallybig enough, you have a better chance ofreceiving appropriate payment.”

Third, diversify income sources. “Donot rely on just the revenues you receivefrom your hospital contracts,” Muroff says.“We’re in the midst of a near epidemic ofhospital contract terminations. If that hap-pens to you and there are not alternativeincome streams, your group cannot exist.Ways to diversify include having contractswith other hospitals; opening one or moreimaging centers; using your technologyassets to provide night-call coverage forsmaller practices, specialty reads, and vir-tual locum tenens services; and givingexpert testimony in courtrooms.”

Fourth, make clerical staff membersfeel that they have a stake in the successof the practice. Geoffrey Smith, MD, FACR,president of Casper Medical Imaging inCasper, Wyo, says that this is critical toensuring that administrative employeescollectively pull the oars with as muchstrength as possible, and also that theypull in the same direction at the same time.Inculcating the staff with a stakeholdermentality can be accomplished by, amongother things, rewarding them with bonuspay for hitting productivity targets and byconducting team-development exercises.

Fifth, choose wisely. Smith says that it iseasier to build a cohesive team of employ-ees if one starts by hiring only top-quality

THE EXCELLENCE FORMULApeople who, from the start, share manage-ment’s vision. “We look for individuals whoare intelligent and conscientious,” he notes.“From an attitudinal perspective, we try torecruit those who are self-starters—those whoare motivated to succeed and don’t needmuch coaxing.”

Sixth, say hello. Muroff believes that apractice’s growth or survival prospectsimprove when its radiologists make a habit ofstepping into the exam room to introducethemselves to patients. “Tell the patient howdelighted you are to have him or her with youtoday and that you are the doctor who will bereading the images about to be taken,” herecommends. “The ACR has done studiesdemonstrating that the majority of patients aradiologist interacts with have no idea thatthe radiologist is a physician. It’s hard toimage radiologists being able to justify highrates of reimbursement when the generalpublic doesn’t even believe radiologists arephysicians. The public perception is that theradiologic technologist—or, more commonly,

the referring physician—is the one whoreads the images.”

Seventh, increase the knowledge andskill sets of all members of the group. “Themore training the radiologists, the technol-ogists, the administrators, and the supportstaff receive, the better equipped the prac-tice is to provide excellent customer serv-ice,” Muroff says, “and service is the nameof the game.”

—R. Smith

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The Pushfor Productivity

PRODUCTIVITY | IT Infrastructure

By Jon Copeland In retrospect, 10 years ago, it took usmany months to accomplish our firstDICOM modality integration of a RISand a CT scanner at Inland Imaging,

Spokane, Wash. The standards were vagueand communications between systemswere difficult and incomplete, but at thattime, it was a great accomplishment.Although other industries had done thisform of machine-to-IT integration for sometime, it was relatively new for health care.

Today, we have more than 500 differentunits (representing modalities that includeCT, MRI, ultrasound, and digitizers) con-nected via DICOM to our RIS/PACS, andwe can add a new device in a matter of min-utes. The ability to share health informationvia DICOM, HL7, and other standards hascome a long way in the past decade.

At Inland Imaging, our imaging centersachieved efficiencies using IT (RIS, PACS,and voice recognition) that enabled themto handle increasing volumes with thesame, or significantly fewer, medicalrecords personnel, drivers, transcription-ists, and core (front-desk) staff. Our tech-nologists display their patient worklist via

DICOM Modality Worklist for the day andtake control of that workflow. We nolonger print and hang film. We no longerhave a need for darkrooms. We do nothave to chase down prior films or worryabout them being delivered in time toview along with the current examinationbecause most priors are already on ourPACS.

We no longer hand deliver more than20,000 film jackets monthly. Our referringphysicians and other health care providersaccess reports and images online. We havemore than 5,000 remote user accounts onour Web-based report- and image-viewingsystem today. Our radiologists performremote consultations with referring physi-cians while both are looking at exactly thesame images, without either physicianhaving to leave his or her office. Our tech-nologists and radiologists have the samereal-time communication and consulta-tion capability. Our report-turnaroundtimes are dramatically improved due tovoice recognition. Patient care has alsoimproved; we have made great progress.

William Keyes, MD, president of theInland Imaging division, is an InlandImaging neuroradiologist and is in chargeof IT. He says, “PACS and DICOMModality Worklist technology help ourtechnologists by providing a greater


In an era of declining reimbursement forradiology, one practice is testing the limits

of IT’s ability to improve productivity


degree of standardization and qualitycontrol. Our standardized PACS presen-tation states facilitate the training of thetechnologists and allow them to rotateeasily through different areas.”

Key to SubspecializationThe success of PACS and related tech-

nologies in moving exams to the radiolo-gist—versus moving the radiologists tothe exams—has allowed a growth oppor-tunity in subspecialization. Radiologygroups have grown much larger to gener-ate the volumes that enable them to sub-specialize. These larger groups tend toserve multiple medical centers and hospi-tal systems, multispecialty clinics, andother nonradiologist-owned technicalimaging service providers. This fragmen-tation of workflow is particularly chal-lenging when coupled with expectationsof higher productivity and higher quality.

As Inland Imaging expanded to dif-ferent cities, serving multiple health careentities, a whole new set of efficiencyand quality problems emerged. Weencountered many disparate informa-tion systems. The level of the different ITstaffs’ RIS knowledge and ability, andtheir willingness to cooperate in ITstrategies, varied dramatically. We wereexpected to use multiple PACS viewers

Using interface engines and applica-tion programming interface tools, wewere able to make our own software layerrelatively transparent to the host or origi-nating PACS, RIS, HIS, electronic medicalrecord, or other system. In the design ofour new workflow systems, we avoidedcausing problems for the existing systemsalready established in the assorted clinicsand hospitals that we served. We builtsystems to fill in the gaps that we saw inmeeting our needs. We built dispatching,worklist-monitoring, and electronicforms systems so that we could moveexams to Phoenix, Seattle, or Spokane—wherever the radiologist best suited tointerpreting that examination was situat-ed—without faxing paperwork.

Maintaining Quality Increasing the overall velocity of radi-

ology exams through the enterpriserequired changes in quality-control sys-tems. The radiologists responded byestablishing a physician-led quality com-mittee and a small department focusedon quality control and measurement.Today, that department focuses on:

• standardizing report formats andgeneral content by subspecialty or division;• reviewing a statistically significant

and dictation systems, and to signreports in multiple systems. We werereceiving exam information from five ormore RIS types, three kinds of hospitalinformation system (HIS), three voice-dictation or voice-recognition systems,and other systems. Not only were theretechnical hurdles, but security and gen-eral data-sharing policies also needed tobe aligned.

In order to move examinations aroundseamlessly, we decided to provide ourown common IT infrastructure for work-flow, productivity, and quality. We calledthis our franchise model of IT. We alsoneeded to convince our customers thatour own franchise IT model was of asmuch benefit to the hospital or otherentity as it was to Inland Imaging, andthat it would not disrupt their existing ITsolutions.

We chose to build a layer of softwaretechnology to rest on top of the assortedRIS, PACS, and other health IT systemsthat we encountered. Our goal becamehaving one radiologist worklist, onevoice-dictation/voice-recognition system,one report-signature queue, and oneaggregated source of data to use in ana-lyzing productivity, quality, and a numberof other factors, all independent of thehost or source systems.

PRODUCTIVITY | IT Infrastructure


sample of physician reports for errors,which are often related to voice recognition, and giving findings backto each dictating radiologist and to the IT staff to fine-tune the voice-recognition systems;• assisting in performing structured,formal peer review on a routine basis; and• establishing and supporting critical- and urgent-findings trackingsystems and processes.In describing the resulting Inland

Imaging quality initiative, Keyes says, “Wemeasure quality through our interactivepeer-review system. The peer-review sys-tem needs to be simple and readily acces-sible; otherwise, it is not going to be used.Our focus is on giving the radiologist moreexam-viewing time by requiring less timeto be spent on activities like dictation,exam sorting, and clinical and proceduralinformation gathering.”

He continues, “We have created individ-ualized and exclusive worklists to preventlost studies, and we electronically tally thework each day in order to avoid wide fluc-tuations in workload between similar workslots. In addition, we can begin viewing thestudy while it is in progress. We no longerneed to wait for all the paperwork because itis all immediately available online. This is ofparticular importance with stroke and otheremergency-department–related imaging.”

Our goal was to increase productivityand quality while eliminating as manyhassle factors as possible. As we proceed inour efforts to improve throughput andquality with systems and process improve-ment, success is not always linear. Oursystems, in some cases (at least initially),have actually slowed us down or shiftedwork, causing some disruption. For exam-ple, although our report turnaround hasgreatly improved due to voice recognition,and the radiologist no longer batch signsreports 24 hours later, while trying toremember the nature of the exam, voicerecognition has placed the burden on theradiologists of correcting some errors thatwere previously corrected by transcrip-tionists. To remedy this, we created stan-dardized report templates, by specialty, toimprove report consistency while reduc-ing the rare misses of the voice-recognitionsystems.

Kill the ParrotAnother example is that we now have

the ability to insert signs, symptoms, andother data into our reports automatically,thus reducing dictation time for the radi-ologist. Our mantra here was kill the par-rot, meaning reduce dictation of data ele-ments that can be captured upstream else-where in the process and automaticallyinserted into the report.

As a consequence, we are working ongetting the upstream data collected moreaccurately for these inserted data ele-ments. The spelling and word case need tobe perfect when they are entered upstreamor the radiologist will need to make cor-rections to the inserted data, and might aswell dictate them. We are making aprocess-improvement effort to identify theworkflow and the key points at whichthese data need to be validated. This levelof accuracy was not previously expected ofour technologists, assistants, and sched-ulers, and achieving it may take more timeon their part, but this will ultimately savethe radiologist dictation time.

Another challenge that we continue toaddress, as a group, is that one technologysolution or workflow does not fit allmodalities or workflow types. We contin-ue to experiment with applying differentconfigurations of our systems to createfaster workflow scenarios while maintain-ing quality in screening mammography,radiography, and other areas withextremely high volumes.

Many people have asked me when oursystems will stop evolving. The answer isthe day we stop doing radiology. We are allunder pressure to increase productivity anddependence on IT. We believe that processimprovement and quality assurance are

crucial to leveraging IT. We realize thatgetting things right the first (or even sec-ond) time around may not happen; that’swhy they call it continuous process/quali-ty improvement. As long as we are willingto make efforts to improve quality andproductivity together, our push for pro-ductivity will be successful.

Jon Copeland served for 11 years as CIOof Inland Imaging and its affiliated companiesin Spokane, Wash. Currently, he is CEO ofInland Imaging Business Associates, a divisionof Inland Imaging. Copeland has been in radi-ology/health care IT for 14 years and spenttime prior to that in the distribution, processmanufacturing, and biotechnology industries;[email protected].

Our mantra here was kill the parrot,

meaning reduce dictation of data

elements that can be captured

upstream elsewhere in the process and

automatically inserted into the report.Jon Copeland

Historical Review of Mergers and Acquisitionsin Diagnostic Imaging

MERGERS AND ACQUISITIONS | Historical Review

By Jonathan A. Burklund

As we sit on the precipice of ameltdown in the credit markets,I am reminded of a quote fromWinston Churchill: “Those who

forget history are bound to repeat it.” In1998, a hedge fund called Long TermCapital Management (LTCM) boughtsecurities using approximately $30 of debtfor every $1 of equity, and eventuallyowned a portfolio valued at $125 billion(not including its assets off the balance).

Later that same year, the Russian bondcrisis set off a chain of events that precipi-tously reduced the value of LTCM’s portfo-lio, quickly eroding its equity value andthereby requiring massive write-offs. TheFederal Reserve invited the large WallStreet companies to its headquarters todevise a bailout strategy, for fear that thefailure of LTCM would negatively affect thecredit markets. Does this sound familiaryet? As a result, 13 companies participatedin a $3 billion bailout of one hedge fund.

The only two companies that did notparticipate, because it was too risky, wereBear Stearns and Lehman Brothers. Hadthe heads of these two companies dustedoff the credit analysis used in evaluatingthe LTCM bailout and applied it to theirown balance sheets in 2008, they mightvery well be going concerns today.

Merger-and-acquisition activity in thediagnostic imaging industry has often suf-fered from the same selective amnesia.Perhaps the repetition of some bad historycan be avoided through the review ofmergers and acquisitions in diagnosticimaging over the past 15 years.


From the go-go years to the present, acquisitionstrategies in the outpatient diagnostic imagingfield have not always worked

Go-go years

• Stark rules catalyzed the sale of doctor-owned facilities

• Access to debt made it easy for entrepreneurs to acquire centers

• Large companies created in a shortperiod:

- US Diagnostic Inc- Medical Resources Inc

• Little to no true operational integration

BBA and multiple arbitage fallout

• Balanced Budget Act dramaticallyreduced reimbursement

• Bloated balance sheets plus lowerrevenues equals restructuring

• US Diagnostics Inc reduced debt byselling off centers

• Medical Resources Inc executed amassive debt-for-equity conversion

1993—1997 1998—2000

Trends in mergers and acquisitions in diagnostic imaging.


The timeline from 1993 to 2008 (seefigure) is divided into five distinct peri-ods: the go-go years, the Balanced BudgetAct and multiple arbitrage fallout, thedays of cheap credit, the DRA and theoverbuilding hangover, and the revengeof the operator.

1993 Through 1997The go-go years: The original Stark

law was enacted in 1989 and prohibitedself-referrals only in clinical laboratoryservices. In 1993, an amendment wasmade to the Stark law (Stark 2) that wentbeyond clinical laboratory services andinto several other health care services,most notably diagnostic imaging. Withthe stroke of a pen, Congress unwittinglycatalyzed the creation of the moderndiagnostic imaging industry.

Historically, diagnostic imaging cen-ters had been predominately owned byphysicians, many of whom referredpatients to these centers. As a result ofStark 2, doctors were required to divestthemselves of their interests in these cen-

ment teams to focus less on key funda-mentals, such as local market clustering,that would maximize local staff efficien-cies and increase negotiating leveragewith managed care payors.

As the market heated up, more andmore competition developed in the diag-nostic imaging markets. Valuations creptup to six to seven times EBITDA, increas-ing the need for more debt. In a four- orfive-year period, US Diagnostic Inc andMedical Resources Inc acquired morethan 100 centers each. Not surprisingly,many of the acquisitions were in disparatemarkets and were poorly integrated.

1998 Through 2000The Balanced Budget Act and multiple

arbitrage fallout: In 1997, Congresspassed the Balanced Budget Act, whichdrastically reduced reimbursement ratesfor diagnostic imaging. For large diagnos-tic imaging companies, the BalancedBudget Act, coupled with rapid growth inthe previous years, triggered a number ofnegative consequences, including

ters, creating a glut in the market.Concurrently, acquisition financing wasreadily available for energetic entrepre-neurs who wanted to roll up the industry.In the early days, before too many playersentered the market, valuations were quitereasonable, ranging from three to fourtimes EBITDA.

Two companies quickly emerged asindustry leaders: US Diagnostic Inc andMedical Resources Inc. Their darling sta-tus in the investment community wasprimarily the result of their successfulfinancial engineering. US Diagnostic Incand Medical Resources Inc closed a seriesof acquisitions at around three to fourtimes the target companies’ EBITDAswhile maintaining a public marketimplied valuation of six times EBITDA.

Furthermore, these acquisitions werecompleted using debt, not equity, whichcreated instant value for the shareholderby improving the earnings per share ofUS Diagnostic Inc and Medical ResourcesInc. This multiple arbitrage strategyworked so well that it allowed manage-

Days of cheap credit

• During the economic downturn,investors sought recession-resistantinvestments

• New modalities (such as PET) createdpromise of increasing growth rates

• Credit was abundant; it was easy tobuy or build

Activity highlighted by numerousfinancial sponsors with access todebt markets

- MedQuest — JP Morgan- River Oaks — CapStreet- DIG — Evercore

• Financial buyers typically outbidstrategic buyers due to the greaterneed to deploy capital, the growingleveragability of centers, better accessto capital, and greater optimism

Revenge of the operator

• Good operators have weathered thestorm caused by DRA and are seekingnew acquisitions

• Private equity sponsors interested ininvesting in the sector

• Health care finance companies hop-ing to finance acquisitions once again

• Hospital companies continue to seekto diversify into outpatient diagnosticimaging

Positive data points

• RadNet’s operating performance• Alliance’s performance• CML’s acquisition of ARS• Memorial Hermann’s acquisition ofRiver Oaks Imaging and Diagnostic

On the other hand

• RBMs coming on strong

DRA and overbuilding hangover

• Uncertainty surrounding DRA

• Easy credit for new centers duringearlier period caused a flood of centersin the marketplace, reducing same-store sales growth for all centers

• Largest strategic buyer was perform-ing poorly

• Independent financing sourcesreducing exposure to the sector or folding

2001—EARLY 2005 LATE 2005—2007 PRESENT

MERGERS AND ACQUISITIONS | Historical Review


decreasing revenues (and, therefore, cashflow); bloated balance sheets; geographi-cally disparate centers; and poorly inte-grated operations.

As would be expected, these factorsresulted in poor performance at USDiagnostic Inc and Medical Resources Incand caused them both to consider restruc-turing options. In April 2000, after negoti-ating several waivers, Medical ResourcesInc filed a Joint Plan of Reorganizationunder Chapter 11 in connection with an agreement with itslenders to convert $75 million in debt into90% of Medical Resources Inc’s commonstock.

In July 2000, US Diagnostic Increceived shareholder approval for itsrestructuring plan, in which the companywould sell off its centers and distribute thecash from the sales, first to the debt hold-er and second to the shareholders.Ultimately, US Diagnostic Inc raised $188million from the sale of several of its cen-ters and significantly reduced its outstand-ing senior debt. The remaining centerseventually were acquired by PresGarCompanies in 2002.

2001 Through Early 2005The days of cheap credit: This period,

which can also be called the onslaught ofthe private equity investors, saw the great-est number of large mergers and acquisi-tions, for several reasons. Among themwere that during the economic downturn,investors flocked to health care companies,considering them a recession-resistantinvestment; that new imaging modalities,such as PET, created the potential forincreased unit and revenue growth; andthat credit was abundant.

On the last point, credit was availablenot only for acquisitions, but also for newcenters. It was as if anyone who could spellMRI was able to get debt financing forequipment and leasehold improvements, aswell as for initial operating losses.

Private equity investors liked investingin the diagnostic imaging industry becauseof its dependence on capital expendituresand, in turn, cheap capital. The rationalewent as follows: as an independent com-pany, it would have to finance its capitalexpenditures and acquisitions with expen-sive debt, perhaps at an interest rate of10%. As a portfolio company of a large

private equity company, however, withmany a bank fawning to do business withit, the same company would enjoy a lowercost of capital (for example, 8%).

As a result, a private equity fund couldbring synergies to the table immediately inthe form of interest-expense savings; herewe go again with financial engineering. Inaddition, larger diagnostic imaging com-panies dramatically reduced their activityin mergers and acquisitions, as theyremained focused on adapting their oper-ations to the new economic realitiescaused by the Balanced Budget Act’s reim-bursement cuts. As a result (see table), pri-vate equity companies dominated mergersand acquisitions during this period, typi-cally outbidding strategic acquirers.

Late 2005 Through 2007The DRA and the overbuilding hang-

over: On February 8, 2006, George W.Bush signed the DRA into law. This actmade sweeping changes to Medicare andMedicaid, most notably in the form ofreimbursement cuts in diagnostic imaging.While this legislation was enacted in early2006, the discussions of the cuts began in

Latest LatestImplied 12 Months’ 12 Months’ Equity Equity

Equity Value Revenue EBITDA Value/ Value/Date Target Buyer (millions) (millions) (millions) Revenue EBITDA

04/30/08 River Oaks Imaging Memorial Hermann Healthcare System — $58.6 — — —

12/21/07 American Radiology Services CML HealthCare $151 146.4 $22.5 1x 6.7x

07/06/06 Radiologix Primedix 208.9 254.6 44.4 0.8x 4.7x

10/12/05 PET Scans of America Alliance Imaging (KKR) 44 20 — 2.2x —

06/26/05 Comprehensive Medical Imaging InSight Health (JW Childs) 48.3 — 11.7 — 4.1x

04/05/05 Diagnostic Imaging Group Evercore Capital Partners 253.7 119 35 2.1x 7.2x

10/29/04 Center for Diagnostic Imaging Onex Partners 183.5 — — — —

06/23/03 CDL Medical (23 mobile sites) InSight Health (JW Childs) 66.4 22 10.9 3x 6.1x

03/28/03 American Radiology Services Advent International Corp 115 — — — —

12/04/02 US Diagnostic PresGar 53 45 16 1.2x 3.3x

09/06/02 River Oaks Imaging CapStreet Partners 77 73.4 15.6 1x 4.9x

08/16/02 MedQuest JP Morgan Capital 411 198.8 52.4 2.1x 7.8x

07/02/01 InSight Health JW Childs 448.1 214.3 82.5 2.1x 5.4x

Low . . . . . . . . . . . 0.8x . . . . . . . . 3.3x

High . . . . . . . . . . . 3x . . . . . . . . . 7.8x

Mean . . . . . . . . . . 1.7x . . . . . . . . . 5.6x

Median . . . . . . . . 2.1x . . . . . . . . . 5.4x

Diagnostic Imaging Comparable Transactions


mid-2005, raising concerns that the ratefor IDTFs could be reduced to the hospi-tal outpatient rate and that reimburse-ment for imaging contiguous bodyparts might be cut by an unknownamount. These questions createduncertainty and made it impossible toproject the future earnings of diagnosticimaging companies.

To make matters worse, the overbuild-ing of centers led to an oversupply ofimaging services and to fierce competi-tion in most markets. Increasing compe-tition had the dual detriments of reducingthe same-store sales growth for all centersand emboldening managed care payors tomake draconian reimbursement cuts forcommercial patients.

As a result of these market dynamics,mergers and acquisitions halted. Many ofthe private equity companies that invest-ed in the previous era wrote down theirinvestments or received lower-than-expected returns on capital.

The one transaction that was theexception, which was executed at anunusually low multiple of EBITDA, wasthe Primedix acquisition of Radiologix inJuly 2006. Since the DRA had beenpassed by this point, Primedix was able toquantify the impact that such reimburse-ment cuts would have on the RadiologixEBITDA, thus eliminating the uncertaintyrelating to future earnings.

2008 Revenge of the operator: The

Primedix–Radiologix transaction markedthe beginning of a new era in diagnosticimaging mergers and acquisitions: onemarked by well-financed, high-qualityoperators. Good operators have weath-ered the storm caused by DRA and arenow thriving. The two public companiesin the sector, RadNet and AllianceImaging, have been reporting strongearnings growth over the past severalquarters.

When looking at an acquisition, theoperator first asks whether the target fitsinto its business strategy. With the ever-increasing influence of radiology benefitmanagers and continued pricing pressurefrom managed care payors, diagnosticimaging companies need to cluster theircenters in geographically defined markets

in order to maintain some balance ofpower. In addition, hospital companies,hoping to diversify their revenue bases inthe outpatient sector, are expanding theirfootprints within their markets by acquir-ing diagnostic imaging centers. Financialengineering and multiple arbitrage, while

nice to have, no longer drive the acquisi-tion decision. Today, operating strategyand market presence do.

This new era is made evident by thetwo most notable transactions in the sec-tor this year: Memorial HermannHealthcare System’s acquisition of RiverOaks Imaging and Diagnostic and CMLHealthCare’s acquisition of AmericanRadiology Services. Memorial Hermann,which is one of the largest hospital sys-tems in Houston, acquired River Oaks toincrease its presence in the diagnosticimaging market, thereby providing itspatients with a greater number of accesspoints. CML, a Canadian company,obtained an important beachhead in theUS diagnostic imaging market throughthe acquisition of American Radiology’scluster of Maryland centers. While finan-cial metrics were important in theseacquisitions, they were not the only con-siderations.

For another bright spot in this era, pri-vate equity companies are hoping to re-enter the industry, since they believe inthe long-term viability of the industry andits need for consolidation. This time, how-ever, they are focusing their due diligenceon operational efficiencies and growthstrategies, not just short-term financialsynergies.

ConclusionThe need for industry consolidation

has never been greater; diagnostic imag-ing unit growth is increasingly scruti-nized, radiology benefit managers aregaining more influence, and reimburse-ment cuts always loom. To succeed, diag-

nostic imaging companies need programsof mergers and acquisitions to increasetheir regional market presence andsqueeze operating efficiencies out of thesystem.

Over the years, there have been acqui-sition strategies that have worked andothers that have not. Those that have nothave typically been based solely on finan-cial metrics, such as multiple arbitrage orinterest-rate synergies. There has alsobeen a temptation to acquire diagnosticimaging businesses using too much debt.Just because the bank is willing to lend itdoes not mean it is the proper amount.Remember Lehman Brothers and BearStearns.

The companies that will be able tonavigate in the ever-changing sea ofdiagnostic imaging are those that cangrow through acquisition, but focusfirst on operational integration andsynergies. If those are done properly,creating value will surely follow overthe long term.

Jonathan A. Burklund is a managing director in the health care investment banking group of Stanford Group Co and has specialized in the diagnostic imaging sector for the past 10 years;[email protected].

The need for industry consolidation has

never been greater; diagnostic imaging

unit growth is increasingly scrutinized,

radiology benefit managers are gaining

more influence, and reimbursement cuts

always loom. To succeed, diagnostic

imaging companies need programs of mergers and

acquisitions to increase their regional market presence

and squeeze operating efficiencies out of the system.

Jonathan A. Burklund

Maintaining a Steady Aimat a Moving Target

DIAGNOSTIC IMAGING | Regulatory Changes

By Thomas E. Bartrum, JD

A lthough the Bush administra-tion may ultimately be viewedby history as the zenith of theconservative philosophy of less

regulation, such laissez-faire treatment hasnot extended to the diagnostic imagingsegment of the health care industry. Sincethe passage of the DRA, CMS has issued abarrage of proposed and final regulationsaffecting suppliers of diagnostic imagingservices. As if a new wave of proposed andfinal regulations every six months werenot bad enough, CMS has unduly compli-cated the process through a series of sweep-ing regulatory changes, false starts, and alter-native approaches, while ignoring or revers-ing many of its own long-standing positions.

A neutral observer of this process couldeasily reach two conclusions: First, CMSdesperately wants to reign in the utiliza-tion of diagnostic imaging services so as tomanage its spending on such services bet-ter; second, CMS lacks a comprehensivestrategy to achieve its goal. In fact, attimes, it seems that CMS is just throwingregulatory restrictions against the wall tosee what will stick.

Unfortunately, CMS’ approach is creat-ing havoc in the diagnostic imaging seg-ment of the health care industry. Theuncertainty resulting from such anapproach has made strategic planning,capital equipment budgeting, access tocapital, and evaluation of strategic oppor-tunities extremely difficult for most diag-nostic imaging suppliers.

CMS’ approach has also resulted in con-siderable confusion among diagnosticimaging suppliers as to their current regula-tory obligations and what, exactly, they canand cannot do with respect to their imagingoperations. Given the current enforcementenvironment generally (and with respect todiagnostic imaging suppliers specifically),

such confusion needlessly exposes diagnos-tic imaging suppliers to considerable risks,including false-claims exposure, loss ofMedicare billing privileges, and inappropri-ate referral relationships.

Recent Regulatory ChangesIn the final Medicare Physician Fee

Schedule (MPFS) update for fiscal year(FY) 2008 and phase III of the final Starkregulations, CMS made the following reg-ulatory changes affecting diagnostic imag-ing suppliers, which are currently in effect.

New IDTF Supplier Standards.—Inthe FY 2008 update, CMS continued toexpand the supplier standards applicableto IDTFs. The following new standards,which went into effect on January 1, 2008,most directly affect diagnostic imagingsuppliers.

IDTFs Are Now Prohibited FromSharing Space or Equipment and FromSubleasing Operations.—Most IDTFs arenow prohibited from sharing space, shar-ing diagnostic-testing equipment, or sub-leasing their operations to another personor entity enrolled in the Medicare pro-gram. CMS, however, recognizes twoexceptions to this general prohibition;they are for mobile IDTFs and for IDTFsthat are colocated within a hospital.

Further, for those IDTFs that sharedspace with another Medicare-enrolled enti-ty or individual as of the date of the finalFY 2008 update, CMS delayed—untilJanuary 1, 2009—the effective date of theprohibition on space sharing. CMS, how-ever, made it clear that such a delay did nothave an impact on the effective date of theprohibitions on sharing diagnostic-testingequipment and subleasing operations. Theimpact of these regulatory changes is thatIDTFs, unlike physician practices furnish-ing imaging services, can no longer enterinto block-lease arrangements to shareequipment and overhead expenses.

Effective Date of Initial Enrollment.—The effective date of initial IDTF enroll-ment is now the later of either the filingdate of the 855B (so long as the 855B issubsequently approved by the contractor)or the date that the IDTF commences fur-nishing services at its practice location.CMS takes the position that so long as theapplicant responds in a timely manner torequests for additional information, theapplication will relate back to the date ofthe original submission; however, if the855B is rejected or denied, the filing datewould be the date that the applicant sub-mits a new 855B (assuming that the new855B is complete at the time of filing).This approach can be a problem becauseMedicare contractors more readily reject855B applications today than in the past.

Clarification of Existing IDTF SupplierStandards.—In the FY 2008 update,CMS also continued to refine the supplierstandards applicable to IDTFs. Many ofthe clarifications were helpful to diagnos-tic imaging suppliers, and they finally tookinto consideration certain practical reali-ties. The following regulatory clarificationsto the IDTF supplier standards are mostsignificant and are currently in effect.


An overview of recent regulatory changesaffecting diagnostic imaging


Liability Insurance.—CMS clarifiedthat failure to maintain comprehensiveliability insurance, as required by thesupplier standards, will result in revoca-tion of the IDTF’s billing privileges,retroactive to the date of such a coveragelapse; that the IDTF must furnish CMSwith the contact information regardingcoverage for the issuing insurance agentand underwriter; and that such coveragemust be in the amount of both $300,000per location and $300,000 per incident.

Reporting Obligations.—CMS limit-ed the 30-day reporting obligation tochanges in ownership, changes of loca-tion, changes in general supervision, andchanges in adverse legal events reportedto CMS. All other IDTF changes of enroll-ment information must be reported with-in 90 days, in accordance with CMS’ gen-eral change-of-information reportingobligation. Nonetheless, in our experi-ence, many Medicare carriers will not payfor new diagnostic tests until after suchdiagnostic tests have been added to theenrollment file through a change-of-information filing.

Beneficiary Complaints.—CMS clari-fied the appropriate beneficiary-com-plaint process by restricting such aprocess to written complaints, by clarify-ing the information that must be obtainedby the IDTF, and by requiring that suchrecords be maintained at the physical siteof the IDTF (or the home office, formobile IDTFs).

Supervising Physicians.—CMS clari-fied that the restriction that supervisingphysicians can only provide supervisionto three IDTFs only applies to furnishinggeneral supervision, and it removed thelanguage regarding supervising physiciansbeing responsible for the overall operationand administration of the IDTF. CMS alsoclarified that its concern is with concur-rent supervision, so a mobile IDTF thatvisits multiple locations would be treatedas a single IDTF; however, if the entity hasmultiple mobile units operating, each unitwould be treated as a separate IDTF sitefor purposes of the restriction on furnish-ing general-supervision services.

New Stand-in-the-shoes Concept.—In phase III, CMS adopted a new stand-in-the-shoes approach to analyzing cer-tain indirect relationships between physi-

the shoes of their physician organizations.The changes do not apply the stand-in-the-shoes concept to an arrangement thatsatisfies the exception to the Stark law foracademic medical centers.

Scheduled RegulatoryChanges

In the final MPFS update for FY 2009,CMS took the following steps.

More Flexible Approach to thePurchased-diagnostics Rule.—In theFY 2009 update, CMS adopts a moreflexible approach to the purchased-diag-nostics rule (which is scheduled to gointo effect on January 1, 2009) than theapproach finalized by CMS in the FY2008 update. CMS adopts a two-alterna-tive approach to determining whether thephysician performing the professionalcomponent or technical component of adiagnostic test shares a practice with thebilling physician or supplier that is suffi-cient to avoid the anti-markup provisionof the purchased-diagnostics rule.

Specifically, the physician performingthe professional component or technicalcomponent (the performing physician)will be deemed to share a practice withthe billing physician or other supplier(the billing entity) and, therefore, will notbe subject to the anti-markup provisionif, first, the performing physician furnish-es substantially all (at least 75%) of his orher professional services through thebilling entity; or, second, if the perform-ing physician is an owner, employee, orindependent contractor of the billingentity and the technical component orprofessional component is performed inthe office of the billing entity.

Further, CMS expands its definition ofthe office of the billing entity to include“any medical office space, regardless ofnumber of locations, in which the order-ing physician or other ordering supplierregularly furnishes patient care, andincludes space where the billing physi-cian or other supplier furnishes diagnos-tic testing, if the space is located in thesame building (as defined in §411.351)in which the ordering physician or othersupplier regularly furnishes patient care,”as finalized by the FY 2009 update.

This approach offers greater flexibilityin structuring relationships so as to avoid

cians and entities furnishing designatedhealth services. Specifically, the regula-tions required referring physicians—whether owners, employees, or independ-ent contractors—to stand in the shoes ofphysician organizations, which serve as anintervening organization between thereferring physician and the entity furnish-ing designated health services.

As a result, the relationship betweenthe referring physician and the entity fur-nishing designated health services mustcomply with the more demanding directexceptions to the Stark law’s prohibitionon self-referrals (such as the personal-services or equipment-rental exceptions)rather than with the indirect-compensa-tion exception. For purposes of thestand-in-the-shoes analysis, a physicianorganization is generally defined as aphysician, including a professional cor-poration of which the physician is thesole owner, a physician practice, or agroup practice.

The stand-in-the-shoes concept wentinto effect on December 4, 2007, for newcontractual relationships; however, CMSdelayed the effective date during the orig-inal term or current renewal term of anyarrangement that satisfied the indirect-compensation exception as of September5, 2007. At the end of such an originalterm or the renewal term, the stand-in-the-shoes provision would then apply tofuture contractual relationships. CMSsubsequently delayed the effective dateuntil December 4, 2008, for compensa-tion arrangements between an academicmedical center component and a facultypractice plan, as well as between an entityfurnishing designated health services andan affiliated group practice within thesame integrated health delivery systemthat is exempt from taxation under section501(c)(3) of the Internal Revenue Code.

In the recently published final FY 2009Inpatient Prospective Payment System(IPPS) update, CMS tweaked the stand-in-the-shoes provisions somewhat. It is mostsignificant that these changes, which wentinto effect on October 1, 2008, only applythe stand-in-the-shoes concept to physi-cian owners or investors, allow nonownerphysicians and physician owners withonly titular ownership (that is, no right toreceive distributions) to choose to stand in


application of the anti-markup provision.For instance, given the proper structure,two physician groups could block leaseimaging equipment in the same buildingwhere they furnish the full range ofpatient-care services without implicatingthe anti-markup provision of the pur-chased-diagnostics rule. The revised finalrule, however, will make it difficult forphysician practices that have set up diag-nostic services in a centralized building(under the Stark law’s in-office ancillary-services exception) to avoid implication ofthe anti-markup provision where thephysician performing the professionalcomponent or technical component doesnot furnish substantially all of his or herprofessional services through the practice.

Diagnostic imaging suppliers shouldunderstand that the purchased-diagnos-tics rule only applies to the extent that thebilling physician or supplier also ordersthe diagnostic test. For instance, if animaging center receives an order for adiagnostic test from an unrelated physi-cian, and the imaging center furnishes thetechnical component but contracts with aradiologist to read the professional com-ponent, neither the technical componentnor the professional component would besubject to the purchased-diagnostics rule(because the imaging center did not orderthe diagnostic test).

In the event that the anti-markup pro-vision applies, the payment to the billingphysician or other supplier for the techni-cal component or professional component(as applicable) would be the lowest of:

• the performing physician or suppli-er’s net charge to the billing physician orsupplier (without regard to any chargethat is intended to reflect the cost of theequipment or space leased to the perform-ing physician or supplier by or throughthe billing physician or supplier);

• the performing physician or othersupplier’s actual charge; or

• the fee-schedule amount for the diag-nostic test that would be allowed if the per-forming supplier directly billed for the test.

Per-click Arrangements Are GenerallyProhibited.—Effective October 1, 2009,the rental of office space, the rental ofequipment, fair market value, and indirectcompensation exceptions to the Stark lawwill prohibit per-unit or per-click compen-

sation arrangements in situations wheresuch charges reflect services furnished topatients referred by the lessor. CMS has alsoindicated that it will treat on-demand rentalarrangements as being per-click arrange-ments subject to the prohibition. Thechange will not, however, prohibit block-lease arrangements, so long as the block oftime is not set artificially low so as to be, ineffect, a per-click arrangement. It should benoted that the per-click prohibition wouldnot generally affect radiologists since, underthe so-called consultation exception, radiol-ogists typically do not make referrals underthe Stark law. Likewise, the per-click prohi-bition has not been extended to personal-service or employment arrangements.

Under-arrangement Transactions AreSubject to Stark Law.—Effective October1, 2009, CMS expands the definition of anentity furnishing designated health servicesto include the person or entity that per-forms the designated health service. As aresult, under-arrangement serviceproviders will generally be subject to theStark law, and physician ownership of suchservice providers will have to comply withan applicable exception to the Stark law forphysician owners to continue to makereferrals to such service providers.

For instance, cardiologist owners of ahospital–cardiologist joint venture to fur-nish 64-slice CT angiography (CTA) to thehospital, under arrangement, would beprohibited from referring patients to thehospital for CTA services unless their own-ership interests could be structured to fitwithin an ownership-interest exception tothe Stark law (which, except for ruralarrangements, will generally be unavail-able). Here again, radiologist ownership insuch joint ventures will generally beallowed, since radiologists typically do notmake referrals under the Stark law.

In commenting on the regulations (73Federal Register 48434, 48726 [2008]),

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CMS explicitly stated, “We do not consid-er an entity that leases or sells space orequipment used for the performance ofthe service, or furnishes supplies that arenot separately billable but used in the per-formance of the medical service, or thatprovides management, billing services, orpersonnel to the entity, to perform [desig-nated health services].” Unfortunately, todate, CMS has refused to give meaningfulguidance as to when such arrangementscross the line and result in the perform-ance of designated health services.

Percentage-based Rental Arrange-ments Are Prohibited.—Effective October1, 2009, CMS will prohibit the use of per-centage-based compensation arrange-ments under the rental of office space,rental of equipment, indirect compensa-tion, and fair market value compensationexceptions when the percentage is tied torevenue raised, earned, billed, collected,or otherwise attributable to the servicesperformed or the business generated inthe office space or with the equipment.CMS, however, refrained from extendingthe percentage-based compensation pro-hibitions to other nonprofessional servicearrangements (for example, managementand billing arrangements).

New IDTF Standard RequiresMedicare Enrollment for Both Mobileand Fixed-site IDTFs.—Effective January1, 2009, CMS will require all mobile enti-ties furnishing diagnostic imaging servicesto Medicare beneficiaries to enroll in theMedicare program. The requirement is anattempt by CMS to ensure that mobileimaging suppliers meet the IDTF supplierstandards, as set forth at 42 CFR§410.33(g), and that the owners of suchsuppliers are otherwise eligible to partici-pate in the Medicare program.

New IDTF Standard Requires MobileIDTFs to Perform Direct Billing.—EffectiveJanuary 1, 2009, mobile IDTFs will have tobill directly for diagnostic services that theyfurnish to Medicare beneficiaries. In thefinal FY 2009 update, CMS provides anexception to this general requirement forservices furnished by a mobile IDTF to ahospital under arrangement.

Effect of Revocation of an IDTF’sBilling Privileges.—An IDTF that has hadits Medicare billing privileges revokedmust, as of January 1, 2009, submit all

Percentage-

based rental

agreements

are prohibited.

Thomas E. Bartrum, JD

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outstanding claims for services furnishedprior to revocation within 60 calendar daysof the effective date of revocation. The 60-day period represents a significant reductionfrom Medicare’s prior timely claim-submis-sion regulations, which allowed such claimsto be submitted for up to 27 months afterthe effective date of the revocation.

Abandoned, Postponed, orFuture Changes

In the final FY 2009 update, the follow-ing previous proposals were abandoned,postponed, or held in reserve for futureimplementation.

CMS Will Not Require PhysicianPractices to Enroll as IDTFs.—In the finalFY 2009 update, CMS abandons, for thetime being, its proposal that physicianpractices furnishing diagnostic-testingservices must enroll as IDTFs. Relyingupon the enactment of section 135 of theMedicare Improvements for Patients andProviders Act of 2008, which requires theDHHS secretary to establish an accredita-tion process for those entities furnishingadvanced diagnostic-testing procedures(including MRI, CT, and nuclear medi-cine), CMS indicates that it will continueto monitor the issue and, if necessary, willfinalize the requirement in the future.

CMS Makes No Changes to the In-office Ancillary Services Exception.—Although CMS has repeatedly expressed itsconcern that the in-office ancillary servicesexception is being used as a loophole toallow physicians to capture unrelated ancil-lary revenue streams, CMS has not adoptedany significant changes to the in-officeancillary services exception. The changes tothe purchased-diagnostics rule, however,will severely limit the usefulness of theexception for certain ancillary serviceshoused in a centralized location. Further,CMS continues to monitor the use of theexception and stands ready to modify theexception as necessary to address any per-ceived concerns about program abuse.

IDTFs and Other Entities FurnishingDesignated Health Services Will Not BeRequired to Stand in the Shoes ofRelated Entities.—In the FY 2008update, CMS had indicated that it was con-sidering whether, and under what circum-stances, it would be appropriate to havethe entity furnishing designated health

services stand in the shoes of another enti-ty. CMS went on to propose that it mightbe appropriate for such an entity to standin the shoes of any entities that it owns orcontrols. In the proposed FY 2009 IPPSupdate, CMS seemed to say that such treat-ment might be appropriate to deem theentity furnishing designated health servicesto be standing in the shoes of any organi-zation in which it has 100% ownershipinterest. CMS, however, has decided not tomove forward on this proposal.

CMS Continues to Allow Percentage-based Compensation Arrangements inIndependent-contractor and EmploymentRelationships.—In the FY 2008 update,CMS had proposed revising the definitionof set in advance for purposes of the Starklaw’s compensation exceptions, so that per-centage-based compensation arrangementscould only be used for compensationdirectly resulting from a physician’s person-ally performed services. Although CMS hassubsequently limited the use of percentagecompensation arrangements for the spacerental, equipment rental, fair market value,and indirect compensation exceptions, thisproposed change was never implemented.CMS, however, has indicated that it contin-ues to have concerns about percentage-based compensation arrangements andmay further restrict their use in the future.

Impact on IDTFsDiagnostic imaging suppliers enrolled

in the Medicare program as IDTFs wouldappear to be disproportionately affectedby CMS’ recent regulatory changes. In par-ticular, the prohibition on sharingspace/equipment or subleasing operationsresults in IDTFs being unable to share thecost of expensive diagnostic equipmentwith other potential users of such equip-ment in the community.

This puts IDTFs at a competitive disad-vantage, compared with hospital outpa-tient imaging providers and physicianpractices, both of which can share expen-sive diagnostic equipment if such arrange-ments are properly structured. Such anoutcome results in perverse policy incen-tives because, in effect, CMS is creating anincentive for diagnostic imaging suppliersnot to enroll in Medicare as IDTFs, whichresults in imaging services being furnishedin a less regulated environment.

Impact on Physician PracticesSeveral of the regulatory changes dis-

cussed here will require physician practicesfurnishing diagnostic imaging services toreevaluate their contractual relationships.Overall, however, the changes do notappear to be too draconian. For instance,most physician practices will be able toamend existing percentage-based and per-click lease arrangements to a comparableflat-fee lease arrangement.

To the extent that a physician (or his orher practice) furnishes services, underarrangement, to a hospital, it will be nec-essary to determine whether the physicianwill be making referrals to the under-arrangement service provider and, if so,whether the physician’s ownership interestcan be structured to comply with anexception to the Stark law. If the arrange-ments are appropriately structured, physi-cian practices will be able to continue toenter block-lease arrangements that com-ply with the Stark law while avoidingapplication of the anti-markup provisionof the purchased-diagnostics rule.

The FutureThe silver lining, if any, of the

onslaught of regulatory changes affectingdiagnostic imaging suppliers is that CMSseems to have developed a better under-standing of the diagnostic imaging seg-ment of the health care industry—andappears, finally, to be taking a more prac-tical approach to regulation, recognizingthat there are legitimate suppliers of diag-nostic imaging services.

Further, in several recent speeches, CMSofficials have indicated that they are unlike-ly to make a number of material changes tothe Stark regulations in the short term.Instead, we should expect CMS to continueto tinker with the scope and application ofchanges. At the very least, this should givethe industry some stability, so that diagnos-tic imaging suppliers can concentrate onoperations, instead of on responding toproposed regulatory changes.

Thomas E. Bartrum, JD is a shareholder inthe Nashville, Tenn, office of Baker DonelsonBearman Caldwell & Berkowitz, PC, where hefocuses his practice exclusively on federalhealth care regulatory issues affecting healthcare providers; [email protected]. Answers for life.

Introducing Biograph mCT. Reach the next level ofintegrated imaging with the world’s first molecular CT.

Biograph mCT brings together the world’s first advanced HD·PET platform and the world’s firstAdaptive Spiral CT. All in one space-saving design that combines a large bore, short tunnel, andan incredibly small dual-modality footprint. Biograph mCT. Use it for routine 5-minute whole-bodyPET·CT scans. Use it day-in, day-out as a dedicated premium CT. Use it to take you into the future.It’s the CT with features that have everyone saying, “I want my mCT.” www.siemens.com/mi

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Answers for life.

Introducing Biograph mCT. Reach the next level ofintegrated imaging with the world’s first molecular CT.

Biograph mCT brings together the world’s first advanced HD·PET platform and the world’s firstAdaptive Spiral CT. All in one space-saving design that combines a large bore, short tunnel, andan incredibly small dual-modality footprint. Biograph mCT. Use it for routine 5-minute whole-bodyPET·CT scans. Use it day-in, day-out as a dedicated premium CT. Use it to take you into the future.It’s the CT with features that have everyone saying, “I want my mCT.” www.siemens.com/mi

A9135-9010-A1-4A00 ©2008 Siemens Medical Solutions USA, Inc. All rights reserved. Results may vary. Data on file.

Are you m-powered?

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Enhanced Thin-client 2D, 3D, and 4D ToolsVisage Imaging, Carlsbad, Calif, will show a new version of its CS/ThinClient/Server platform at the upcoming RSNA meeting.Enhancements to 2D, 3D, and 4D visualization are featured, including CTand MR angiography, cardiac analysis, perfusion analysis, and oncologyapplications. All tools are fully integrated within the platform, which is scalable from the imaging center setting to meet the needs of the enterprise. (888) 3D-VISAGE; www.visageimaging.com

High-definition, Time-of-flight PET/CTSiemens Healthcare, Malvern, Pa, has introduced BiographmCT, offering routine, whole-body PET scanning in five min-utes and advanced CT capabilities with up to 128 slices.Combining an advanced reconstruction algorithm calledultra HD-PET with time-of-flight (TOF) technology, theBiograph mCT can produce 2-mm uniform resolutionthroughout the field of view, and enhanced contrast andreduced noise due to the TOF technology. The scanner fea-tures a small footprint, a large 78-cm bore, a short tunnel,and a 500-pound–capacity bed to accommodate mostpatients. (888) 826-9702; www.siemens.com/healthcare

Breast-imagingWorkstation DebutsFUJIFILM Medical Systems, Stamford, Conn, hasintroduced the Breast Imaging DiagnosticWorkstation (BIDW), available to any facility thathas implemented full-field digital mammography.The workstation complements the company’sComputed Radiography for Mammography(FCRm) solution and provides broad workstationinterpretation capabilities for facilities that mayuse another vendor’s PACS. The stand-aloneworkstation delivers full support for computer-aided diagnosis and MQSA overlays, as well asSynapse PACS functionality. (800) 431-1850;www.fujimed.com


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High-field, Patient-friendly MRISolutionHitachi Medical Systems, Twinsburg, Ohio, will showcase OASISTM at theupcoming meeting of the RSNA. The open architecture of Hitachi’s proprietary1.2T vertical-field magnet meets the demands of advanced studies and imagequality with an unobstructed viewing angle to alleviate patient anxiety, there-by decreasing scan time and increasing throughput. Combining the high-per-formance MRI electronics of the best high-field equipment—fast gradientsand multichannel radiofrequency (RF) technology with Hitachi-designedZenith RF coils—with Hitachi’s proprietary 1.2T, open-architecture vertical-field magnet, OASIS represents a new generation of MRI systems, providingdiagnostic confidence, patient comfort, and investment value. (800) 800-3106; www.hitachimed.com

Single Worklist Unifies Multiple PACSIntelerad Medical Systems, Montreal, has announced the availabil-ity of InteleOneTM, a software and networking solution designed tounify multiple PACS workflows across facilities, based on theIntelePACS architecture. The solution employs standards-basedinterfaces with existing RIS and PACS to provide a unified solutionfor reporting radiology studies. Radiologists are provided with asingle universal worklist, a single viewer, a single dictation (orvoice-recognition) solution, and a single signing worklist for allstudies, regardless of the different PACS and RIS solutions runningat each facility. Radiological studies can be routed from many dif-ferent acquisition sites and integrated into the InteleOne masterdatabase for reading and case management alongside relevantprior studies. (514) 931-6222; www.intelerad.com

Online Teleradiology AuctionTelerays, Houston, has launched the nation’s first teleradiology auction site, wherebuyers and sellers can offer and buy reading services. Houston-based radiologistDaniel Roubein, MD, CEO of Radiology Reading Centers of America, launched theservice. Radiologists must become credentialed, which takes 7 to 30 days, and canbid only on contracts from hospitals and imaging centers that have preapprovedthem. Clients post their requests, preapproved radiologists begin bidding, and thecontract is won by the lowest bidder, who downloads the cases and uploads thereports. Telerays takes a 15% share and also provides billing services. (832) 778-9729; www.telerays.com

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Affiliated Professional Services(800) 841-5200www.affilprof.net ....................................11

AMICAS(800) 490-8465www.amicas.com ......................................3

Covidien(888) 744-1414www.covidien.com ..................................43

CSI Financial(800) 383-6303www.csifinancial.com ..............................39

Franklin & Seidelmann(866) 437-7237www.franklin-seidelmann.com ..................15

FUJIFILM Medical Systems(800) 431-1850www.fujimed.com ....................................5

GE Healthcare(800) 886-0815www.gehealthcare.com ............................60

GE Healthcare/Centricity® PACS-IW(888) 303-PACS(7227)www.dynamic-imaging.comwww.gehealthcare.com ..............................7

GE Healthcare—Lunar(888) 795-8627www.gehealthcare.com/YourPracticeIsAtRisk ................................21

Hitachi Medical Systems America(800) 800-3106www.hitachimed.com ................................2

Imaging Center Institute(714) 832-6400www.imagingcenterinstitute.com ..............31

Intelerad(514) 931-6222www.intelerad.com..................................19

Medical Imaging Specialists(800) 510-0680www.medicalimagingspecialists.com............9

NightHawk Radiology Services(866) 400-4295www.nighthawkrad.net ............................59

RBMA(888) 224-7262www.rbma.org ........................................57

Siemens Medical SolutionsMolecular Imaging(888) 826-9702www.usa.siemens.com/mi ........................53

TeraRecon Inc(877) 354-1100www.terarecon.com ................................33

Visage Imaging(888) 338-4724www.visageimaging.com/ ........................25

VIDAR Systems Corp(800) 471-7226www.vidar.com........................................51

3DR Laboratories(502) 569-1025www.3DRinc.com ....................................13

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Software Provides Assist in Dementia DiagnosisRoyal Philips Electronics,Andover, Mass, has devel-oped decision-support soft-ware designed to assist in thediagnosis of dementia usingFDG–PET. Areas of the braincausing dementia typicallyexhibit reduced glucoseuptake (hypometabolism);these areas show up as sub-tly different shades of gray.The software, developed with researchers at the University Medical Center Hamburg-Eppendorf, Germany, is designed to enable less experienced readers to recognize the sub-tle variations of the three most common neurodegenerative diseases—Alzheimer disease,Lewy-body dementia, and frontotemporal dementia—in three steps. The software is notyet commercially available. 011 (31) 40-27-43703; www.philips.com/newscenter

Final Reads Plus Billing ServicesNightHawk Radiology Services, Couer d’Alene,Idaho, has developed two new services to meet the needs of teleradiology clients. FinalsPLUS combines NightHawk’s Final Interpretations withthe company’s state-of-the-art revenue-cycle man-agement, designed to provide painless coverage,day or night, by providing billing services. Digital

Locums is designed to resolve the unpredictable productivity that practices receive fromtraditional locum tenens. Flexible pricing allows for a cost-effective short-term fix or a long-term solution to staffing needs. (866) 400-4295; www.nighthawkrad.net

Widely DeployableAdvanced VisualizationSolutionTeraRecon, Inc, a leader in advanced visualization technol-ogy, delivers Aquarius iNtuitionTM, a client-server solutionthat offers comprehensive, robust, real-time clinical toolsand applications that are easy to use and deployablethroughout a health care enterprise. Clinicians throughoutthe patient-care cycle can customize their clinical workflowto achieve an accurate diagnosis and treatment plan quick-ly and efficiently. Automated segmentation, centerlines,and quantification are just a few of the broad range oftools designed to enhance efficiency. Aquarius iNtuition isdesigned to bridge the clinical workflow and dataflow gapsin image acquisition, postprocessing, interpretation, anddiagnosis. (877) 354-1100; www.terarecon.com


The Ultimate Road Trip

FinalREAD

Are we almost there? That refrain isfamiliar to anyone who has evertaken young children on a longroad trip. The kids get anxious

and are easily bored, you get a bit cranky,and the trip seems to take a lot longer thanyou remember it taking, back when youtook the same route unencumbered byresponsibility for the necessities of others.Ironically, in retrospect, the travelers canrecall only the fun parts of the journey,remembering the highlights of shared expe-riences, challenges overcome, and interest-ing sites visited.

Such is the situation we find ourselves inwith the current state of the medical imag-ing profession, as it morphs into somethingother than what we remember it being. Thejourney has been long and hard, but weseem to recall, with nostalgia, the good olddays of radiology, as we face even more dif-ficult paths ahead.

I sometimes feel like that proverbial driv-er, as I help radiology groups and imagingexecutives navigate the roads on theirrespective journeys toward the full realiza-tion that their practices have, in fact,become businesses, in every sense of theword. It seems that we have been talkingabout it for years, and yet we are only just

finishing our first round of singing 99 Bottlesof Beer on the Wall. A major difference, ofcourse, is that I never lose my enthusiasmfor this journey, and I cherish the relation-ships that I have developed while being aguide and supporter for these fellow travel-ers. I guess I really am a true road warrior.

The good news is that we’re getting closeto being there. There is much more of a real-ization today that the road signs signalingkey milestones are pointing clearly in theright direction, making it obvious to mostthat a renewed attention to the principlesof business is the best way to ensure

success in today’s crowded imaging mar-ketplace. In years past, it was a lot easier tomake it up as one went along on the jour-ney, but that is no longer acceptable. Now,one needs definite guideposts and datapoints with which to measure progress.

How is radiology a business, and whydoes it matter?

As more information becomes availableto patients and payors about costs, out-comes, quality, methods, turf issues, andother determinants of success, it becomesincreasingly clear that patients/consumerswill demand more from tomorrow’sproviders of care. They will not be contentwith subpar customer service. They will not

be content to wait for access to the system.They will not be content with indefensiblecosts and vague descriptions. Consumer-driven health care is arriving, and althoughit is not quite here yet, it is destined tobecome a reality with which the business ofradiology will need to come to terms.

Successful businesses are governed byfundamental principles that relate to howbest to differentiate themselves in the heartsand minds of their constituents and stake-holders. These customer groups can and dobuild loyalty to brands, organizations, servicegroups, and other enterprises based on theentity’s ability to articulate these differencesin terms that the customer understands (andto which he or she can relate). Typically, thismeans finding the benefit to the customer,rather than the service feature that the entityis proud to describe.

The fundamental business propositionfor today’s—and tomorrow’s—successfulradiology practice, imaging center, or hos-pital outpatient group is to identify, and toarticulate persuasively, the benefit to thecustomer of doing business with it. Whyshould customers come to you? In whatway will they benefit? How are you differ-ent? In other words, what is in it for them?

The groups that figure out how best todeliver on these basic tenets of business willbe those that thrive in a consumer-drivenhealth care arena. Where is your organiza-tion on the journey to achieving this ability?

Are you there yet?

Curtis Kauffman-Pickelle is the publisherof Radiology Business Journal and is theCEO of The Imaging Center Institute,Tustin, Calif; [email protected].

Just in time, radiology providers arearriving at an understanding of theirunique branding propositions.

By Curtis Kauffman-Pickelle

Consumer-driven health care is arriving, and although it is not quite here yet, it is destined to become a reality with which the business of radiology will need to come to terms.

Documents

Radiology Business Journal - Winter 2008