What would it take to move a radiology business operation from “average” to peak performance? Could it be done within 1 year? That was a challenge posed by Radiology Consultants of North Dallas (RCND), a highly subspecialized radiology practice with a long-standing reputation for clinical quality, but interested in formalizing a quality effort throughout all aspects of the practice. This article is the first in a series to explore the progress and challenges of developing and implementing a formal quality program, with the goal of raising the bar in terms of industry performance measures. Performance in this context focuses on the business infrastructure, as well as improving the financial performance of the organization.


It is possible to review any radiology group (or billing service) and emerge with a list of things that could use attention. In a well-run, proactive organization, the goal would be to identify areas for refinement. In the average performer, the task is often to identify several objectives that will produce the greatest impact in terms of measurable improvement. Complicating the process is the fact that most surveys of industry performance publish averages, but there is little information available in radiology with regard to “best practices.” This led to our developing a proprietary database, which included poor to average performance statistics, as well as those contributed by organizations that appeared to achieve best practices status in several areas.

In developing the RCND program, we also reached outside radiology to tap successful, structured approaches to quality improvement/quality management. The search led to the Juran Institute’s cost of poorly performing processes or COP3 and the observation, “the costs of poor quality (COPQ) are the costs of unplanned, unnecessary waste&.Historically, studies have shown costs of poor quality to run as high as 15 to 40% of costs of goods sold or about 15 to 29% of sales revenue, an extraordinary sum of money lost.”1 The authors also noted, “A recent report provided by the Midwest Business Group on Health and the Juran Institute showed that the total cost of poor quality in the United States health care system is approaching 30 percent of the $1.3 trillion spent annually on health care.” 1

In addition, we included the premise of the Harvard Business School’s Balanced Scorecard concept, which asserts that in order to be successful, businesses need to move away from the tradition of determining success strictly upon the basis of financial performance. Instead, the Balanced Scorecard outlines measurement in the following categories:

  • Financial
  • Customers
  • Internal processes
  •  Learning and growth

Utilizing this framework, we began a thorough examination of the practice infrastructure that included a review of:

  • Policy manuals
  • Training programs and needs
  • Staff feedback (employee satisfaction)
  • Overhead associated with nonphysician areas
  • Billing and collections performance
  • Regulatory compliance programs
  • Process mapping and efficiency analysis
  • Identifying cost of poorly performing processes
  • Staffing, which included productivity levels as well as pay scales

We had the group’s permission to make necessary changes and then developed a formal, written plan, which detailed not only goals as categorized in each Balanced Scorecard area but defined action steps and responsibilities related to achieving these goals. While it is not possible to summarize the entire plan in a single article, we selected certain key objectives likely to be shared by radiology groups and therefore of interest in their commonality and applicability to most practices.


The battle to decrease administrative overhead in the face of declining reimbursement is a universal problem for all medical groups. The complexity of this task for radiology is increased by volumes inherent in the specialty, including:

  • A high volume of CPT and ICD-9 codes compared to other specialty areas
  • Relatively high volume on a per-physician basis
  • The need for efficient electronic processes to maximize efficiency
  • Regulations governing ordering and payment of radiology procedures
  • Relatively low reimbursement on a per-procedure basis for professional component billing

Just as a proliferation of new technology options has emerged to improve productivity for radiologists, the same trends have been occurring on the practice management side of the business. In order to achieve quantum improvement, it was apparent that technology must play a central role in the program. An analysis of the billing system in place revealed it was not adequately keeping pace with practice demands, as evidenced by:

  • Billing/collections staffing levels when measured on a procedures per employee basis
  • A relatively high incidence of complex, manual processes to compensate for failures and/or problems in the information system
  • A vast amount of data, but little that effectively supported management decisions
  • Service response issues from the software vendor, especially once problems associated with the Health Insurance Portability and Accountability Act (HIPAA) Transactions and Code Sets compliance became evident
  • The inability to effectively track and manage adjustments and denials
  • Indications the system would not meet HIPAA security requirements for electronic transactions

In light of advances in practice management technology, we focused on finding a vendor who could offer productivity enhancements we were seeing emerge in best practices groups and who could support our peak performance goals. This meant offering extremely competitive pricing for the following options:

  • Document scanning and electronic storage
  • Front-end editing for claims review prior to submission
  • Direct filing capabilities as well as a clearinghouse option
  • Automated coding
  • Flexible management reporting to support data-driven decision-making
  • Information to support an aggressive denials management program
  • HIPAA security features
  • Electronic remittance

In order to maximize the potential of these features, we were faced with completing the acquisition and conversion to a new practice management system within a short period of time. Therefore, a system conversion became one of the major objectives for the year.


Like every other medical practice in the country, we recognized we were looking down the gun barrel of the HIPAA deadline for the Security Standards. That meant HIPAA had to be part of the work plan in order to ensure the group had the appropriate infrastructure to meet peak performance expectations, which by definition include regulatory compliance.

With resources strapped (primarily people and expertise resources), this also meant identifying vendor options to meet the regulatory requirements for disaster recovery and contingency planning. We viewed these as the greatest challenges in terms of meeting the HIPAA security requirements and felt if we could outsource this portion of our plan, we could concentrate in-house on the extensive list of administrative requirements, including risk assessment, training, and development/implementation of new policies and procedures. The “technology needs” list was getting longer.


Denials management is beginning to be recognized in the health care industry as the source of “found” revenue. Insurance companies can be arbitrary in denying claims payment and often appear capricious in their decisions. In fact, aggressive claims follow-up activities often reveal the person responsible for interpreting insurance company guidelines (when the denial is not an automatic system edit) may be undertrained and/or incorrect.

The sheer volume of radiology procedures makes it difficult to identify, classify, and effectively follow up on claims denials. The problem is compounded with the computer system and internal process limitations. For example, it is not unusual to see several hundred different denials codes and/or an inconsistent method of posting denials. As a result, it can be virtually impossible to pull this information into a report for effective analysis, and amounts in question are often “adjusted off” rather than worked. In addition, information that would be extremely valuable during contract negotiations too often cannot effectively be gathered and accumulated.

One of the greatest challenges in denials management, however, has to do with analysis and feedback regarding radiology dictation, which is often the source of coding problems and codingrelated denials. When compared to the American College of Radiology communications standard, reports can be found to be missing one or two critical elementsmeaning the radiologist may have dictated 95% to 98% of the necessary information, but fell just short of getting paid.

A comprehensive denials management program involves organization and an intense level of work in the beginning, but offers significant financial (and regulatory compliance) incentives over the longer term.


RCND physician leadership approved what would represent a quantum level of changewith the goal of also achieving quantum improvement as measured by various industry indicators. In some cases, such as measuring our cost of poorly performing processes, we would be developing a radiology baseline and indicators, which could then be compared to the national estimates for health care.

Crys Sory, MD, president of RCND, recognized the plan is comprehensive and ambitious and represents a challenge in the level of cultural change that might have to occur, especially as the practice implements its denials management program. “We have always had a passion for excellence,” he stated, “but recognized a disciplined, focused effort will help us maintain these levels as the practice grows and the business challenges increase.”

NOTE: Future articles will discuss specific steps in the work plan as they relate to the quality concepts used, challenges related to implementation of the program, as well as documenting results in several key measurement areas. We will also be sharing what did not work as planned, along with any areas that exceeded our expectations.

Patricia Kroken, FACMPE, is a principle of Healthcare Resource Providers, a consulting firm based in Albuquerque, NM

Phillip W. Carmody, MD, is a principle of Healthcare Resource Providers, a consulting firm based in Albuquerque, NM.


  1. DeFeo J, Barnard W. Juran Institute’s Six Sigma: Breakthrough and Beyond. New York: McGraw-Hill; 2004.