Much has been written recently about the pressures facing the practice of radiology, as well as some possible solutions to the field’s problems. One area that has not been addressed, however, is the growing need to expand back-office services to support the business practice of radiology. As radiologists implement new or expanded services, thought must be given to developing and/or expanding the existing infrastructure necessary to support increased technical and professional services. While most radiology groups fret about the increasing use of imaging services and the impact that this has on their productivity (and ever-expanding work days), proposed solutions call for careful consideration of their impact on the business aspects of radiology.

A radiology practice requires an organizational infrastructure that addresses the functions of a business. Whether these functions are handled by an individual, multiple individuals, or a department, each radiology practice, as it contemplates growth, needs to address the potential impact of changes on billing, finance and accounting, contracting, daily operations, marketing, data analysis, medical records, credentialing, compliance, human resources, materials management, information-technology infrastructure, radiology quality assurance and improvement, and management. This is true of both hospital-based and outpatient radiology practices.


There is probably universal agreement that the most important aspect of radiology is taking care of patients, but the ability to collect money after services have been rendered ranks as a close second. To accomplish this, radiology groups either outsource their billing or, when the size of the practice warrants, internalize the service. In either case, measuring the effectiveness of billing is something each radiology practice should do routinely.

Some of the key billing benchmarks that radiology practices should be evaluating are days in accounts receivables (DAR), percentage aged more than 120 days, net collections ratio, and bad debt percentage. The Medical Group Management Association (MGMA) conducts an annual survey and has established benchmarks of 63.27 days in accounts receivable, aging over 120 days at an average of 22.9% of total accounts receivable, and net collections of 91.73% (see Figure 1). For radiology practices, these standards may be unattainable for several reasons. First, days in accounts receivable can be severely impacted by how the radiology group receives its billing information from the hospital. If the radiology group is electronically interfaced for demographic information, and that information is received daily, it is not inconceivable for a radiology group to be only 2 to 3 days behind in submitting a claim. Therefore, the first step in keeping days in accounts receivable low can easily be met. If, however, the radiology group must rely on receiving paper copies of the hospital’s demographic information and then manually enter them into the radiology billing system, delays of 10 to 20 days to several months in submitting a claim are not uncommon. These delays can significantly affect the amount of cash that radiologists are not receiving on time for their services. Groups should monitor their days in accounts receivable to ensure that billing is being done properly (Figure 1).

Figure 1. Key billing benchmarks are used to monitor accounts receivable.

The net collections ratio is another good indicator of the effectiveness of the billing follow-up staff, as it measures the amount of money actually received (versus the amount the group expected to receive). For example, when a claim is submitted to an insurance company, the amount the group will receive is a function of the reimbursement rate that has been negotiated with the insurer (or the Medicare or Medicaid fee schedule). Ideally, the radiology group should receive 100% of what it expected (charges minus contractual allowance). However, net collections of less than 100% occurs because some patients do not make their copayments and/or deductibles, billing is not always timely, insurance companies underpay, and some patients do not actually have the insurance coverage that they indicated. That is why the MGMA average net collections ratio was 91.73% for all medical groups in 2001, not 100%.

The group I work for, Radiological Associates of Sacramento (RAS), Calif, provides diagnostic radiology, nuclear medicine, and radiation oncology at 18 freestanding imaging facilities, six radiation oncology sites, and seven contracted hospitals and has its own internal billing system and staff. We strive for a net collections ratio greater than 98%; and for 2002, we reached 98.7%. The last indicator to routinely monitor is the percentage of accounts receivable over 120 days old. Obviously, the longer the practice waits to collect, the less it will collect. At our practice, we strive to keep this figure below 20%.

Another critical support service centers on the practice’s financial functions. Finance & accounting activities include the budgeting process, monthly financial statements, payroll, accounts payable, and audits. Surprisingly, some radiology practices do not develop annual operating and/or capital budgets and monthly financial statements, nor do they have an annual financial audit of their books conducted by someone outside their practice. These activities, whether performed by an external accounting office or an internal department, are essential to ensuring the smooth financial operations of the practice.

Budgets predict how much business and revenue the radiologists expect to bring in each year and allow management to see variances from the plan. These variances, in turn, cause management to investigate why and, in most cases, make changes, if appropriate. Monthly financial statements allow management to better match revenues with expenses to ensure the group’s financial success. Outside audits make certain that the practice is being run appropriately, and act as a check and balance for the business and management staff.


Data analysis, usually performed within the finance & accounting department, is invaluable to the successful radiology practice. Analyses cross all lines, providing information to the billing office, finance and accounting department, and contracting, operations, and marketing functions. No matter the size of the radiology practice, the ability to own, control, and manipulate the practice’s own data is vital.

For practices that outsource billing, the electronic receipt of demographic information at the end of each month (in a separate data warehouse) is required. For practices that do their billing internally, the data warehouse must be established and the weekly transferring of data from billing will be necessary. This data can then be manipulated to provide management with routine as well as ad hoc reports.

The rates the radiology practice is paid for services rendered is a function of the contracts the practice negotiates with the insurance payors. In some cases, hospital-based radiology practices have allowed the hospital to conduct contracting for the group as a part of the hospital’s overall negotiations with payors. By doing so, the group is giving the hospital a source of its power, and that may not be in the best financial interest of the group. Negotiation is a process of give and take; when the hospital negotiates with a payor and must give something, it may find it easy to give radiology concessions because it does not really belong to the hospital. When the group controls its own contracting, it is more apt to negotiate successfully for the radiologists.

In today’s environment, contracting directly for outpatient services takes on greater importance for radiology groups as hospitals expand their outpatient services and more groups get involved in freestanding imaging centers. Having and controlling the practice’s own data have been invaluable in outpatient contracting for my group. In 2000, during negotiations with one of the largest PPOs in California, our data showed that the PPO had paid RAS almost $400,000 less than it thought. This weakened the PPO’s negotiating position and caused it to eventually sign a special arrangement for RAS, instead of offering the statewide network rates that it had initially proposed. This occurred specifically because RAS had its own data and contracted directly with the PPO.

When we think of marketing for the radiology practice, the first thoughts that come to mind are centered on the development of brochures and the placement of advertisements in local newspapers. Marketing, however, should be looked on as the first line of contact with the community, patient, and referring physician liaison. With a large practice encompassing more than 5,000 referring physicians, it is a colossal waste of the radiologists’ time to be providing routine contact with all of the practice’s customers. The practice needs a group of staff to provide this initial contact. Through its marketing department, RAS has established regular feedback mechanisms for referring physicians and their staffs When there are issues, the marketing staff researches the problem and reports to the group’s physicians and operations section. From this, we have learned that our referring physicians want quick turnaround for reports, short telephone waiting times when their staffs schedule appointments, short waiting times at RAS for their patients, and high quality. Having RAS marketing representatives visit physicians weekly and obtain feedback, followed by the timely implementation of any necessary change at RAS, is crucial to our success.


Every year, providing radiology services becomes more complicated, more time consuming, and more paper oriented. The 2003 requirements in the Health Insurance Portability and Accountability Act in the areas of patient privacy and insurance billing have done nothing but make our lives more difficult. Compliance with Stark physician self-referral regulations and antikickback statutes has become part of the daily life of a radiologist. And we cannot ignore these issues, hoping they will either go away or will not impact our practice. For example, providing free radiology services to a referring physician, once called professional courtesy, can only get the radiology group in trouble today. Having an active compliance program with board-approved guidelines allows radiologists who are asked for professional courtesy to refuse while noting that the decision is “not up to them.” This protects the practice from the risk of internally generated qui tam lawsuits.

One of the more time-consuming issues, with little visible financial benefit to the radiology group, is the credentialing function. However, without the ability to acquire new physician’s credentials quickly, the practice risks delays or denials of reimbursement. And if the group hopes to obtain more PPO business, the ability to maintain credential files in an electronic format hastens the credentialing process and provides PPOs with an impression of professionalism and sophistication that warrants the inclusion of the group in the PPO’s provider network.


While technology continues to advance in the practice of radiology, nowhere is it more important than in the information technology (IT) arena. Short of hiring more radiologists, nothing has greater potential impact on the efficiency and productivity of radiologists than picture archiving and communications systems (PACS). However, without a strong information-technology service, whether purchased externally or developed internally, PACS could turn out to be a burden rather than a benefit. It is through information-technology services that routers, hubs, switches, and bandwidth are managed and optimized to fit the PACS needs of the practice. Without the IT developed capability to move the images seamlessly, PACS could be dead in the water.

Information technology plays other key roles for the radiology group, in addition to PACS. In a large radiology practice like ours, the ability to communicate effectively with member radiologists has a positive impact on the group’s internal satisfaction and strategic direction. A viable internal email system with the ability to transmit committee minutes, for example, improves the communication flow and the feeling of participation for all of the practicing members.

Since RAS is a radiology practice heavily involved in outpatient radiology through the 18 imaging centers the group owns, having an effective operations department is crucial to our success. The effectiveness of this department is aided by our ability to identify key operational performance indicators and then track them. Because we track appointment backlogs at our facilities, the time it takes to schedule our patients, how quickly we can deliver reports and films to our referring physicians, how long it takes to transcribe our reports, our transcription turnaround time, and productivity, our group stays focused on delivering a high-quality product to our customers, the referring physicians, in the most efficient and timely manner.

Figure 2. Appointment backlog report provides the practice with a feedback tool to assess appointment availability.

The first step in delivering diagnostic services is finding an appointment time for the patient. Without adequate appointment slots, patients will go elsewhere. Consequently, we track the availability of our appointment slots, calculating how many days it takes to get a patient an appointment at our facilities. Figure 2 is an example of an appointment backlog from July 2003. We track the number of days we are behind by modality, as well as for some specific tests. When the number of days exceeds the established standard over a period of time, then change needs to take place. For example, if we are unable to schedule screening mammography patients within 45 days, we will expand daily hours and open on weekends, staff permitting. If this does not permanently solve the problem, other solutions such as adding another mammography unit are considered.

Another key indicator of referring physicians’ satisfaction is how quickly we can get a report with film in the referring physician’s hands. We have learned that our referring physicians expect to receive reports and images (if requested) within 24 to 48 hours of the patient’s appointment with us. In order to make sure we are accomplishing this goal, we divide the process into several steps: completing the procedure, hanging the film, obtaining prior studies, dictating the report, transcribing the report, signing the report, and preparing the report and films for delivery to the physician’s office. Many hospitals focus on PACS, but have not asked what their referring physicians want. Many still want the film and the report in their hands. So, while PACS eliminates a lot of plain film being handled by radiology staff, MRIs and CTs still need to be delivered.

Figure 3. Turnaround time analysis involves assessing each step in the reporting process.

In order to meet a report turnaround goal of delivering 95% of all film and reports within 48 hours for 95% of reports, each step at each site is monitored. Figure 3 shows a turnaround-time analysis from one of those locations. The report indicates how well the facility is meeting the 95% goal by looking at the number of studies that have not had each step completed. While reports are signed and delivered during the day, it is the number of examinations left unread and reports left unsigned at 5:30 pm that cause the greatest delays. This type of step-tracking information has been eye-opening for the staff and physicians, resulting in process changes.


Another factor in report turnaround time is the ability to transcribe the reports at the time when they are dictated. Historically, a shortage of transcriptionists resulted in our hiring any transcriptionists we could find, no matter when they were available. Consequently, we had large numbers of transcriptionists working from 5 pm to midnight. With the ability to track when reports are dictated and transcribed, we now have been able to rearrange transcriptionists’ hours to match the productivity of the radiologists (Figure 4). Through this process, we were also able to hire additional staff for the hours needed and eliminate night and early-morning hours. Thus, the ultimate goal of having all reports dictated by 3 pm, transcribed by 4 pm, and signed by 5:30 pm has become reachable.

Figure 4. An hourly tracking log enabled the practice to compare the number of reports dictated (Input) with the number of reports transcribed (Output) on 6/3/03 to more appropriately schedule transcriptionists to meet volume (7/3/03) . *Tx denotes transcriptionists.

The functions of management (planning, leading, controlling, and directing) can be accomplished on a part-time or full-time basis by a physician or a professional manager, based on the size and complexity of the practice. The need for management is there, but what a particular radiology group needs has to be determined individually. A small radiology group may elect a president who spends some personal hours running the business aspect of the practice, while large radiology practices may purchase management services through their billing companies or may hire their own managers. Whatever direction a radiology group takes, having management to oversee daily operations and to conduct strategic planning is vital to the practice’s success.

Fred Gaschen, MBA, is executive vice president, Radiological Associates of Sacramento, Calif.