Payors and most referring physicians want more than just MRI and CT these days. It is no surprise that cost efficiencies and economies of scale are even more important amid today’s changed imaging environment. It is also no secret that payors have been pushing for multimodality centers for years, but the industry has been slow to comply for myriad reasons. The imaging community does agree, however, that the days of finding the smallest square footage possible and cramming a high-end stand-alone modality such as a MRI into a strip mall are long gone.

A few years ago, many imaging companies would walk right past plain film and mammography exhibits at the annual meeting of the Radiological Society of North America (RSNA). It just didn’t make sense for a lot of outpatient companies to become involved with these multi-modalities since reimbursements were low and they seemed to be popping up in referring doctors’ offices. As more of these units began finding their way into the hands of the referring physicians’ offices and technology shifted to MRI and CT, many outpatient centers became single- or dual-modality centric. Plain film for orthopedic offices and ultrasound in many cardiology, OB/GYN, and urology offices made the situation far more competitive and political for many outpatient centers.

The cost of siting an ultrasound or x-ray unit was easier and thus much more attractive to the referring community. Operating these modalities also became easier because payors and certain states allowed limited license technicians to perform what today’s certified radiology technicians now handle in their roles at imaging centers.

In 2007, the industry saw a resurgence in sales of digital mammography, x-ray, and ultrasound across outpatient centers and a general slowdown in physician-operated modalities. Why the sea change?

Early on, competing against referring MDs often didn’t make financial or political sense since many radiology facilities during the late 1990s had refocused their energy on providing CT, MRI, and PET. Referring physicians became the destination for most plain film and ultrasound, but times have changed. Now, referring MDs are not the only ones losing money in the health care industry. They too have seen a huge decrease in reimbursement within their own specialties. Many older referring physician offices have determined that the cost to go digital and eliminate old systems is extremely high and perhaps not worth the slight profit they used to make or the convenience they once realized

Payors are concerned that there are too many high-end procedures being performed that can be accomplished by x-ray, ultrasound, or mammography. Radiology business organizations and managers have begun to require MRI and CT providers to offer a comprehensive package. ACR accreditation, certified techs, multimodalities, and subspecialties are just some of the requirements they are bringing to bear to control utilization. This is due not only to patient convenience and care, but also to the fear that too much focus is being placed on higher-end reimbursement rather than lower-end modalities.

As Jennifer Meko, MD, western region medical director at Medsolutions, a radiology business management organization, explains:

“There are a number of advantages for multimodality versus single-modality centers. Ultrasound and mammography are important modalities for diagnostic care. They are often the most appropriate initial imaging studies and offer the advantage of low or no radiation exposure. Using them for an initial diagnosis will better help to identify if a higher-cost, higher-tech modality is needed, and which one is the best option. Centers that have only one or two modalities use them for all patients even though another modality may be more appropriate, effective, and efficient. Another advantage of a multimodality center is continuity of care. When all of a patient’s diagnostic testing is performed at one location, previous exam results are readily available for follow-up visits to compare former exams to current ones. Not having comparison exams or the reports is a disservice to the patient, and it happens more than we would like with centers that have not tracked down previous exams or reports from other imaging locations.”

Payors have used the multimodality approach not only to create a seamless one-stop-shop environment for the patient but also to expose the elephant in the room. The fact that utilization is soaring in physician-owned self-referral practices has not escaped the eyes of payors. Utilization of 8% to 10% a year wasn’t stemming from the outpatient radiology center, but instead from the specialist utilizing their own equipment.

To weed out the self-referrals in MRI and the CT business, payors are not waiting for state or federal self-referral laws to be enacted. They are not waiting around for the next round of Stark changes to control improper utilization of high-end modalities. Instead, payors are placing radiology back in the hands of the radiologist by requiring four or more modalities be offered at one center. This makes an orthopedist think twice before purchasing an MRI if they can’t staff, accredit, and run three other modalities. Many specialists are now finding they would rather spend $1.5 million investing in a surgery center or specialty hospital rather than add these nonprofitable small modalities. In the end, the demand for low-end modalities exists but is primarily being offered at hospitals or radiology facilities.

Historically, many outpatient centers avoided these break-even modalities at all costs. However, some have found ways to make them profitable again and easier to operate, maintain, and staff. But just like the referring offices had enjoyed convenience and profitability for the past two decades, this is not the case for many outpatient centers today. The decision to offer these modalities emerged not out of the Deficit Reduction Act, but from payer credentialing and privileging requirements. Just like the flu travels up from Asia into Europe and then into the United States, the one-stop-shop multimodality craze is creeping along from East to West.

Currently, referring entities are eliminating plain film and other lower-end modalities due to the cost of upgrading to digital x-ray and 3D ultrasound. As these new technologies become the new standards of care, referring doctors are forgetting the convenience and refocusing on their specialties in many areas of the United States.

Diagnostic outpatient provider companies once turned a blind eye to the one-stop-shop trend, shunned mammography, and insisted on high-profit, high-margin businesses like MRI, PET, and CT; they are now being forced to rethink their strategies. After years of hearing payors’ requests for more low-end procedures and getting away with it, outpatient centers are finally realizing that they must be more than just a single- or dual-modality center to survive over the long-term. Centers refused to believe that transitioning to multi-modality was going to be necessary for success. They built many of their centers on a two-modality concept, and now they find themselves landlocked, fighting to stay afloat as preferred providers garner new contracts with centers offering more modalities.

Companies like Touchstone Medical Imaging LLC, Brentwood, Tenn, with 18 centers have done an excellent job preparing for the future. A few years back, the company began listening to payors and the referring physician community. As a result, they altered their model by adding ultrasound, plain film, and, in some cases, mammography to their service offering. CEO Kevin Cross indicates this certainly was not the easiest program to employ because of the initial losses and disruption to the business during the ramp-up phase. A Touchstone center would experience a shortfall early in the process on these lower-reimbursed modalities. But over time, the transition provided Touchstone with the key to success that makes Cross confident the company made the right decision.

By transitioning to a multimodality model, the individual center, in effect, becomes a single point of access for all of the patients’ and referring physicians’ needs. Patients and the referring offices are seeking convenience and quality for their imaging studies. Touchstone has experienced growth in MRI and CT by adding these other modalities.

On a different end of the imaging spectrum, look at Moreno Valley Imaging in Moreno Valley, Calif, which is located in a highly competitive geographic area. To successfully compete with the likes of RadNet and large hospital-based imaging programs, Brian Hennebry, CRA, CEO, knew he would have to start from lower-end modalities and begin to work his way up. The center secured contracts because it offered lower–end modalities in a geographic area where they were needed and well received. Plain film and ultrasound paved the way for the center to build a reputation and earn many of local contracts. Two years following the launch of its business, Moreno Valley has established itself as a top-notch service provider and recently added MRI to its menu. Hennebry noted: “MRI was successful right out of the gate. Our referrals ramped up three to four times faster than if we were to begin with offering just MRI. This is due to us having the established referral base in place that recognized our levels of service. This also gave our marketing representative another reason to get in front of the referring community and reinforce our commitment to them. Also, our lower-end modality volume has increased by more than 150% since adding MRI.

“Starting from the bottom up so to speak wasn’t a bed of roses. Having an entrepreneurial radiologist who shared this vision, and read low-paying modalities while still providing a high level of customer service, was extremely helpful. The company lost money initially but is now well positioned in the community and among payors. The center is soon looking to add more profitable modalities such as CT, for example.”

Moreno Valley Imaging is just one of many companies finding results from the addition of lower-end modalities.

In conclusion, many centers around the country have had to rethink their strategic operations and stay on as privileged provider positions to give them an upper hand. Looking into the future, commercial payor reimbursements will drift toward Medicare rates. However, those providers with an arsenal of modalities and specialties and that have geographic dominance will fare much better in protecting reimbursement downfall if they are appropriately positioned to negotiate with payors. Conversely, a single-modality imaging center will find it harder to hit break even and stay out of the red. Many centers stuck with one or two modalities should look at controlling expenses by renegotiating equipment leases and service contracts and seeking to cut costs in other variable areas. Providers should also audit their revenue cycle, coding, and claims management to ascertain gaps in lost revenue. They should strongly look “outside the box” by working directly with self-insured employers and consider forming joint venture relationships.

If there is light at the end of the tunnel, it is the fact that self-referral is drawing more scrutiny among payors as a suspect in excessive utilization. Additional thinning out of competition through closures and consolidations in highly competitive markets will also benefit the well positioned. The one-stop-shop model process will push MRI/CT back out to the imaging centers that will need those scans to make this a viable business. Utilization and demand will continue to increase, but outpatient imaging providers can no longer avoid the difficulties that lie ahead. Those providers that have prepared and seized the opportunity to position themselves for the future will survive. The rest of the centers still have a chance to make it, assuming they have taken proactive measures to protect themselves by trimming costs to ensure their success.

Steven R. Renard, MBA, CHE, is president and CEO of Diagnostic Radiology Services Inc, Roseville, Calif, and an editorial advisor for Axis Imaging News. For more information, contact .