d02a.jpg (11987 bytes)Let’s face it. General radiography is the bread and butter of radiology, but surely not a highly profitable moneymaker. Jeff Levett, product manager for X-ray at Siemens Medical Solutions Inc. (Iselin, New Jersey), says “You’re never going to get rich doing general radiography, so you might as well make it as cost-effective as possible.”

Digital radiography (DR) could be the ticket to cost-effectiveness. Many hospitals that have invested in DR have realized enhanced workflow, increased productivity and throughput and supply cost savings. Some report savings of up to $1 million annually. But, like all good things, DR comes with a price tag, and a hefty one at that. The initial cost of a DR room can be several times that of a conventional film-screen room, which leads to the million-dollar question. Do the savings linked with DR outweigh its costs?

The answer, unfortunately, is not that clear cut. A variety of factors, unique to individual healthcare institutions, must be taken into account. These include productivity and film supply and processing costs savings. DR vendors have developed financial justification models to help hospitals make sense of the complex web of DR costs and savings. And although there are literally hundreds of variables to input into these models, the cost-effectiveness of DR really boils down to exam volume. “The model shows customers if there is enough exam volume it is worth their while to switch to digital,” Levett says.

On the other hand, if film and staff costs are low, it tends to be more economical to continue with a conventional film-based operation. What kind of exam volume justifies digital? Toby Smith, senior marketing manager for digital radiography at Eastman Kodak Co.’s Health Imaging division (Rochester, N.Y.), says, “Roughly 10,000 procedures seems to be the break-even-point. But this isn’t an absolute answer. It’s not the same answer in any two departments.” And this is where the hard work of calculating and comparing the total cost of ownership for DR, CR (computed radiography) and conventional radiography comes into play.

Elements of Productivity
“The real message of DR is that it does deliver increased productivity, and most cost justification models are based on increased productivity,” says Smith. Exam time with DR is shorter than exam time with film or CR. The Methodist Hospital (Houston, Texas) found that the average chest study exam time decreased from 6:05 minutes with conventional to 2:18 minutes with digital. This translates into increased patient throughput, which can free up both staff and space.

Most hospitals that have implemented DR report that they can complete double the number of exams in a digital room. This increased throughput was apparent even in the early days of DR. Phil Ames, administrative director of radiology at St. John Medical Center in Tulsa, Okla., says his department purchased a DR system five years ago. “Once we got used to it, we were amazed at the amount of work coming out of the room. We knew then that DR was the way to go.” The DR room is located next to a standard film chest room, and Ames estimates that techs in the DR room complete three times as many exams as techs in the chest room. Since then, St. John Medical Center has added two more DR rooms to its radiology department, and Ames concludes, “Conservatively, you can do twice the work in one room. Techs who are well-versed in DR could triple their work.” A study at The Methodist Hospital equates one DR room with 2.6 conventional rooms.

This productivity savings can be translated two ways. It could become a labor cost savings as hospitals eliminate tech positions, or it could become a revenue increase as the radiology department completes more exams. Ames says that increased throughput of DR could enable a hospital to cut the numbers of techs by one-third. While most hospitals face a tech shortage and wouldn’t necessarily cut techs, DR enables them to weather the shortage. With a volume of 210,000 exams a year, St. John Medical Center has a total of 83 tech positions. With the current shortage, eight tech positions are unfilled. And based on patient volume, Ames has justified another 11 tech positions. The hospital doesn’t plan to fill the additional 11 tech positions, partly because of DR technology. Ames says, “Even being eight techs short, we are not in a serious bind. If we were still a film-based department we would be in a pretty desperate situation.” Levett adds a final note to the tech situation. “The technologist shortage pushes radiology departments toward a more productive way of working.”

Another scenario made possible by DR is reducing the number of radiography rooms. A hospital might go from six conventional rooms to four digital rooms and convert two rooms to other revenue-generating ventures. When an institution can eliminate an analog room, there can be significant revenue gains. Intermountain Orthopedics, a high volume orthopedic group in Boise, Idaho, recently installed two DR rooms. Because the practice could run twice the work of an analog room through one DR room, it eliminated two x-ray units. This ‘additional’ space became a revenue-generating osteoporosis center. David Kirk, administrator at Intermountain Orthopedics, says, “Since the transition to DR, we have grown our practice substantially. We’ve added physicians and volume without throwing a lot of staff at it.” Although DR isn’t the only factor accounting for Intermountain Orthopedics’ growth, it did play a critical role in enabling new ventures.

Other hospitals find that demand for general radiography is growing, yet hiring the techs and finding the space to complete additional exams can be difficult. When Hutcheson Medical Center (Fort Oglethorpe, Ga.) added an additional Siemens DR room to its department, the hospital didn’t reduce the number of techs or turn to other revenue-generating ventures. Essentially the hospital added a third radiography room without adding staff, says Jerry Jeffers, director of diagnostic imaging at Hutcheson.

It is important that hospitals consider the ultimate use of exam rooms as they complete the DR cost analysis. Like Hutcheson Medical Center, many hospitals decide to maintain both the new DR room and old analog room, thus the institution incurs the cost of two rooms. DR can still be quite cost-effective in these cases, but the hospital will not regain the cost of the analog room.

Another key element is physician productivity. When hospitals employ physicians and pay their salaries, increasing physician productivity can be a tremendous financial justification. In some cases the savings attributed to increased physician productivity can overwhelm savings tied to technologists’ productivity and even additional revenue gained by increasing the number of exams, says Smith. Research shows that radiologists reading DR images spend 10 to 15 seconds less viewing each study; this can add up to an hour a day per physician.

Film and Supply Costs
Film costs associated with analog radiography are hefty. In fact, decreases in film costs can be quite large. With a volume of 16,000 exams, Intermountain Orthopedics’ post DR film costs are about one-third of the practice’s pre-DR film bill. This savings, however, must be attributed to the DR-PACS combination at the practice, and not every institution has PACS up and running when it installs DR.

Consider St. John Medical Center. Ames says the hospital has been working its way to full PACS implementation for six years and expects greater savings when the project is complete. “When we are completely filmless, the biggest windfall will come in film, chemicals, and printer maintenance. We calculate a savings of about $1 million annually. This is a hard dollar savings and does not include the soft dollar savings with regard to film handling and storage costs.”

Other film-related expenses include the costs of re-takes, printing additional copies and processing. Although it might seem that these figures add up quickly and tip the financial model in favor of DR, the savings are primarily a function of volume. Hutcheson Medical Center, for example, has a volume of 42,000 exams per year. The hospital will see substantial savings with its DR room, but it won’t be nearly as much as the larger St. John Medical Center. Jeffers says Hutcheson will save $1 million in both staff and materials over 10 years. Lower volume hospitals will see smaller savings; a hospital with a volume of 10,000 exams per year might save $3 in film and chemistry costs per exam for a total savings of $30,000 a year.

The PACS Tie-In
Technically, DR and PACS go hand in hand. DR creates the digital images, and PACS distributes them. Is the DR-PACS combination justified economically? Siemens’ Levett sees it this way: “There’s no point in DR without PACS.” According to Levett, the major cost savings comes from fast, centralized soft-copy reporting using a PACS with digital archival. Without PACS, digital images must be printed on laser film, and because laser film costs more than standard film the cost per image increases, which means that most of the film and supply savings is eliminated when DR is implemented without PACS.

Smith is not quite as convinced about the one-two punch of DR and PACS. “To achieve the full cost savings of DR, PACS is needed, but most of the DR cost savings come from productivity increased by elimination of cassette handling. This can be done without PACS. DR can be a success before or after or concurrent with PACS.”

And the harsh financial reality is that many hospitals can’t afford to implement DR and PACS concurrently. While the radiology department’s wish list probably incorporates both DR and PACS, there are only so many dollars allocated to capital acquisitions in any given year. The result? Smith says, “We see different implementation models. Some places install PACS before DR; others won’t touch PACS until every modality is digital.” Both implementation models work, but the upshot is the cost justification model should be flexible and capture categories of cost by year. For instance, if a hospital wants to implement DR two years before PACS, the model should show costs for two years of film printing, laser imager maintenance, and file room personnel. These costs would be eliminated after the hospital installed PACS. It’s critical that the DR justification model doesn’t count the financial benefits of PACS as this essentially amounts to double counting.

Is it more economical to implement DR before PACS or vice versa? The answer to this question is different for every healthcare institution. It depends less on economics and more on politics and technical capabilities. Questions hospitals should ask as they ponder DR-PACS implementation models are:

  • Are physicians ready for reading on soft display?
  • Is the network infrastructure capable of handling PACS?
  • How many sites does the hospital campus include?

When Does DR Begin to Pay Off?
Everyone knows that it costs more to buy a DR room than a conventional radiography room. For DR to work economically the hospital has to see a breakeven point, where the initial upfront investment in DR begins to pay off. Where is that point? Levett of Siemens says, “I’ve seen hospitals spend four times as much on a digital implementation as they would on a conventional room, and four and a half years down the road they’ve made that money back.” Jeffers found that Hutcheson Medical Center’s breakeven point was year four. By the fifth year, Jeffers’ analysis showed that the total cost of ownership for digital started to pull away from conventional, and by the tenth year of ownership, the total cost of ownership for the digital room stood at $3.8 million compared to $4.8 million for a conventional radiography room at Hutcheson Medical Center.

Other Benefits, Other Costs
Financial models focus on concrete variables punctuated by dollar signs. While hard numbers can help sell DR to administrators and CFOs, there are other savings and benefits that are an adjunct to DR. Kirk says, “Soft dollars do matter.” In fact, one of the deciding factors for Intermountain Orthopedics’ DR decision was future storage cost for pediatric films. Film storage space was becoming extremely expensive, and physicians and administrators realized that the practice couldn’t continue to pay for storage for pediatric films. Hence the transition to digital and elimination of the storage cost issue.

There are a host of other DR benefits that may not be measured in a financial model. Andy Mack, manager of x-ray marketing at GE Medical Systems (Waukesha, Wis.), says that justifying DR is about more than cost. While the numbers often justify the investment in DR, the technology also can help hospitals meet their clinical needs. Mack adds ergonomics, connectivity with PACS, and advanced applications to the list of other DR benefits. Moreover, DR can be a marketing goldmine for hospitals that are the first in their area to implement DR as the benefits of DR can be marketed both to patients and referring physicians.

The second half of other benefits is other costs, and one of the largest ‘other’ costs of DR is the service contract. Some financial models incorporate the cost of a service contract, but others don’t. The reality is the service cost for a DR room can be quite close to the cost of film. In some cases, the service cost for DR can negate film cost savings. Another service-related question is warranty on the detector. Some vendors treat the detector like an x-ray tube and exclude it from warranted service. If the detector needs to be replaced after two years, it can cost $50,000 to $100,000 and wipe out any savings that the hospital has realized.

Another harsh reality of DR is that DR can’t do it all. With some DR rooms, the detector doesn’t come out of the table. This means that the hospital must purchase an additional detector to place on the wall to complete chest films in the room. This can cost $150,000.

A final ‘other’ to consider is vendor stability. A number of DR vendors are start-up companies, and hospitals need to assess the long-term viability of potential vendors. So be sure to choose a company you evaluate to be in DR for the long haul.

Selling DR to Administrators
A radiology department can have a wish list a mile long, but ultimately hospital administrators and the capital budget committee hold the purse strings. How can the department persuade the powers that be to invest in DR? Jeffers says the first step is to get buy-in from the radiology department. At this early point, the department can take a basic look at DR. Kodak offers a handy simulation model at the DR 101 level. This model shows a standard radiology department and animates typical conventional and digital days. Basically it displays the decreased tech staff workload.

The next step is to approach the clinical staff, and explain how DR can meet their needs and enhance workflow. Physician satisfaction can be a key lever. Jeffers says Hutcheson Medical Center administrators appreciated the fact that several doctors could view images simultaneously. And the final step in selling DR is the detailed cost analysis, which demonstrates how the individual institution can save money by implementing DR.