Town Meeting: To Read or Not to Read for Referrers?

We gratefully acknowledge the contributions of the participants in this electronic roundtable discussion: James B. Ball, Jr, MD, immediate past president and managing partner of Florida Radiology Associates, PA, Orlando, Fla; Howard B. Fleishon, MD, president, Valley Radiologists, Ltd, Phoenix, Ariz, and executive VP, Southwest Diagnostic Imaging, Glendale, Ariz; Richard S. Levine, MD, FACR, partner and board member of West County Radiological Group, president of the Missouri Radiological Society; Rodney S. Owen, MD, president, Scottsdale Medical Imaging, Ltd, Scottsdale, Ariz, and executive VP, Southwest Diagnostic Imaging, Glendale, Ariz; Robert E. Schaaf, MD, president, Wake Radiology, Raleigh, NC; and Anthony C. Toppins, MD, American Radiology Associates, PA, Dallas.

James B. Ball, Jr, MD	Howard B. Fleishon, MD	Richard S. Levine, MD
Rodney S. Owen, MD	Robert E. Schaaf, MD	Anthony C. Toppins, MD

IMAGING ECONOMICS: How prevalent is the phenomenon of referrers purchasing imaging equipment in your service area?

BALL: Many clinicians are talking about acquiring imaging equipment. Not all of them actually follow through. The most frequently involved specialties are orthopedic surgery, urology, OB/GYN, pulmonology, gastroenterology, oncology, and otorhinolaryngology. The most frequently involved modality is CT, followed by PET/CT, followed by MRI.

FLEISHON: Overall, in Phoenix, the numbers are growing rapidly. Many rheumatologists are getting into the MRI business. Most orthopedists and pulmonologists do their own plain films. I would estimate that 20% of orthopedists are referring patients to MRIs that they own, or in which they have an interest. Most obstetricians have their own ultrasound machines. The majority of the obstetrical ultrasound business sent to radiologists is from referrers who do not want the liability. Except for hospital-based work, virtually all of nuclear cardiology is done by cardiologists. Most large cardiology groups are either purchasing their own systems or entering joint ventures for cardiac CT angiography.

LEVINE: This practice is rampant: spine surgeons and neurosurgeons having spine centers that do MRI, CT, and myelography, that will not take Medicare, and that seek out full (over) pay workers’ compensation patients; orthopedic megagroups of 40 with five MRI scanners; oncologists with full imaging and therapy centers; otorhinolaryngologists with CT scanners for sinus work; and multispecialty groups that are in various stages of proposal, development, and business. Ultrasound is lost to the obstetrician-gynecologists and urologists, but the obstetrician-gynecologists have given mammography back to us. We still want it, and we do it very well.

OWEN: We have been relatively fortunate in that, at present, there are very few physician-owned imaging centers in our area. The trend, however, is disturbing. Over the past 3 years, a group of orthopedic surgeons have invested in an MRI, and the group sends most of its cases to that magnet. Most large cardiology groups use their own in-office nuclear medicine cameras. Obstetrician-gynecologists have been doing ultrasound in their offices for years.

In the recent past, we have seen endocrinologists getting into thyroid ultrasound, nuclear medicine, and sodium iodide I 131 treatment. A group of approximately 25 surgeons, co-owners of an outpatient surgery center, decided to band together and build an outpatient imaging center that will include MRI, CT, and probably ultrasound. One large cardiology group is planning to purchase a 64-slice CT scanner.

SCHAAF: Several otorhinolaryngology, urology, oncology, orthopedic, family practice, and internal medicine groups have, and are buying, used CT and nuclear medicine equipment.

TOPPINS: Prevalence is rampant in our market. Most specialists and some primary care physicians are involved, with the heaviest concentration being among orthopedic surgeons.

IMAGING ECONOMICS: Does your business strategy include reading for referrers?

FLEISHON: In the past, our group read for outside entities (mostly MRI centers run by venture capitalists). We used this strategy in the 1980s to gain our first exposure to MRI in the outpatient setting and to reduce capital risk. We left this business in the mid 1990s, once it became clear that the growth of MRI, along with the technical profit margin, made separate ownership more productive. We became involved in a similar situation, on a much smaller scale, in the late 1990s, due to a turf issue. We cancelled the contract once our goals were achieved. We elected not to enter the joint-venture market for PET imaging and regretted that choice.

LEVINE: We are interested in providing readings for referring physicians whom we know, who know and trust our service and interpretations, and who have and are opening imaging centers. When these physicians no longer send us business at our hospital and its imaging centers, we all lose business. There is a comfort level present in dealing with physicians and office managers who know who we are, where we are, and what we do (in particular, subspecialty radiology). The hospital imaging slots at our facility and its imaging centers still do remain quite full and in demand because many of our referring physicians have offices on the hospital campus.

OWEN: At present, we do not want to empower these operations by reading their cases. Since the specialists seem to be first to the gate, we are looking for investment models for primary care. Lock up the primary care physicians who ultimately control the referrals, and we are better off.

SCHAAF: We currently do not read outside studies, more for medicolegal reasons; the quality is definitely lower than what we are accustomed to reading.

TOPPINS: We have always been a professional services group and feel that we will improve patient care by reading outside studies. We also value the relationships with these referrers and, in some cases, we staff their large in-house imaging centers. For example, our largest orthopedic referral group has a full imaging center within its clinic, with two new 1.5-T magnets, 64-slice CT, fluoroscopy, dual-energy x-ray absorptiometry, and ultrasound.

BALL: We are in the process of negotiating interpretation arrangements with several referral groups. We see this as both maintaining current outpatient business and adding new outpatient business. Our reasoning is that, if we are going to lose the outpatient business from our existing hospital contract or our existing outpatient book of business, we would prefer to lose the business to ourselves, at least in some capacity.

IMAGING ECONOMICS: If you read for other specialties, do you have any criteria for image acquisition?

LEVINE: We are quite involved with protocol development and maintaining quality of images, even if the equipment is owned by others. We had the chance to read for a nearby 20-physician group’s imaging center (with medical staff from a nearby hospital) that bought used MRI and CT equipment on the cheap through a national imaging center company. Despite our efforts to elevate the quality of the studies, images remained quite poor, and our group gave notice and withdrew from reading. On the other hand, we do read from MRI centers that have top-level quality, of which we and the providing technologists are proud.

SCHAAF: We are thinking about reading for one urology group. They have agreed to all quality parameters that we have set; they have been keenly interested in doing a good job and practicing to the American College of Radiology (ACR) standard.

TOPPINS: This is a great challenge. We are tightly involved with protocols and have set up standard protocols throughout our private practice, based on the protocols of our hospital practice. In general, the quality of our referrers’ images is comparable to our own.

BALL: We have fairly standardized imaging protocols for CT and MRI at all of our inpatient and outpatient sites, across all hardware and software platforms. We require that any examinations that we interpret adhere to those protocols, or mutually agreed-upon variants. Since many of the interpreters work at all of our sites, judging image quality is relatively easy. We have established standards already, and we expect any new facilities to maintain those standards. The quality level of images from referrers’ imaging equipment is generally good.

FLEISHON: In general, the outside images that we have interpreted have been of fair-to-poor quality. When we read for MRI centers in the past, we determined the appropriate protocols. In some cases, contracts were cancelled when the imaging entity could not (or would not) respond to our suggestions for quality improvement. We felt that the risks outweighed any benefit.

IMAGING ECONOMICS: If your group provides professional services for other specialties that own technology, how are you compensated?

SCHAAF: We use a fee-for-service structure with separate billing.

BALL: Generally, compensation is a percentage of the global fee. We hold fast to 20%. We also offer to do the billing for the imaging.

FLEISHON: Historically, we were paid a percentage of the global fee. In Phoenix, the rates being offered by radiologists can be extremely aggressive, on the order of 15% or lower. Rates are being driven down as more radiologists choose to compete for daytime work rather than onerous hospital contracts and their inherent on-call lifestyle demands.

LEVINE: We are paid a percentage of the fee, usually around 15% for MRI and 21% for CT.

IMAGING ECONOMICS: When your group hears about a new piece of technology going into a referrer’s office or a new imaging center opening, what steps do you take to protect your market share?

TOPPINS: We usually do some direct marketing, sometimes formally (with a presentation) and other times by just speaking to any friendly physicians in that group. We own our own picture archiving and communications system and can easily connect the group to our system to provide rapid reading and report turnaround.

BALL: Usually, someone in our group who knows the referrers makes the initial contact to ask who will be doing the professional interpretation. If there is a positive response, our executive director and one or more of our radiologists then work with the referrer to reach a mutually agreeable arrangement.

SCHAAF: North Carolina is a tough certificate-of-need state; we encourage and remind other practices to understand and conform to the statutes.

FLEISHON: Our principal strategy is marketing. We go to physicians, referral coordinators, and physician extenders in the area and tell our story. We are a physician-owned, physician-managed organization dedicated to comprehensive imaging and patient-centered services. Although it is burdensome, we feel it is our ethical responsibility to maintain our hospital services. Most referring offices can relate to our mission and are willing to sustain their support if we take care of their needs.

LEVINE: We know that, in most cases, the equipment is not as good as it is at the hospitals; for example, one imaging center has a PET scanner, but in most hospitals around St Louis, PET/CT is available, and it is a shorter and better test. Protecting our market share is difficult in the face of these outside imaging centers: it is a matter of continuing to emphasize the kinds of imaging we do in the hospital, our subspecialist expertise, and our established relationship with the referrer. Unfortunately, since referrers and their office staffs control the patient, it is their whim to refer exactly where they want—despite better technology, expertise, availability, or friendship.

IMAGING ECONOMICS: What is the most effective strategy that you have engaged to compete with referrers who are acquiring imaging technology?

TOPPINS: We really cannot compete with them in our market. They control patient flow. We tend to partner with them (usually, strictly on a professional fee basis). We have had some success marketing directly to primary care physicians, who tend to be less interested in getting into providing advanced imaging services like MRI and CT.

BALL: We use joint review of the costs involved. Often, once they realize that the net revenue is less than they were told, they give up the venture or inquire about a joint-venture arrangement with us. Referrers want income, but seldom want to take the risks involved to obtain that income.

FLEISHON: Securing and enhancing our relationships with our hospitals and primary care physicians have proven instrumental. They are very aware of what is happening in the marketplace and understand our plight. While others can develop competing outpatient services, radiologists are difficult to replace, especially at 3 am or on a weekend. Administrators acknowledge that value, especially if their medical staff is happy.

The second strategy is at the commercial payor level. We measure the value of contracts in terms of both rates and nonreimbursement provisions. We will also consider rate concessions in exchange for meaningful measures against self-referral.

LEVINE: We are constantly pushing our hospital to invest in the latest scanners and upgrades in order to have better equipment and technology than the referrers can afford. How many open MRI scanners actually do diffusion imaging, or even fat saturation? Not many, because it costs money, reduces profit, and does not generate additional income, but most hospitals have scanners that do. So far, in eastern Missouri, there are four 64-slice CT scanners that I know of: three in and owned by hospitals, and one owned by a freestanding radiology group that both owns imaging centers and covers centers owned by nonradiologists.

OWEN: There are three reasonable strategies. First, bond with the primary care physicians. If they garner some income from imaging and we can convince them to send patients only to specialists that use our service, then we can indirectly control the specialists. This is a theory, yet to be tried and proven. Second, we can bond with the payors. If payors refuse to contract with specialists for imaging codes, then we can offer services at a lower price. No one out there is getting into self-referral plain films, mammography, or fluoroscopy outpatient work. None of the specialists are vying for night, weekend, and holiday work. If payors want us to continue to provide these services for them, then they need to make certain that we continue to get our historical portion of the cream (CT, MRI, and PET). Third, bond with state lawmakers. If legislators see the ultimate evil in self-referral and prevent its existence, then the issue may be solved. We are at an early stage in our pursuit; other states have been quite successful.

SCHAAF: We try our best to educate them on the prevailing standard of care.

IMAGING ECONOMICS: Is reading for referrers who have imaging capabilities a concept on which prevailing opinion seems to be changing?

BALL: Opinion is certainly changing, mainly because of the reality that this will be business lost unless we get involved.

FLEISHON: There is a widening spectrum of opinions. Some remain convinced that a go-it-alone strategy will be the best long-term play. Others are increasingly concerned because of articles in the trade and financial literature, trends in several marketplaces, and increasing competition in our outpatient imaging arena. In general, the more your situation is leveraged on the outpatient market, the more concerned you are about losing market share if you do not read for referrers with their own equipment.

LEVINE: I do not yet see a change in the concept of reading for referrers, as most groups use this to offset income loss in hospitals. Rarely do different groups actually share this kind of information, but we should, because if there were a community-wide standard fee for reading, then no one would undercut the next group’s bid; groups could also be warned about poor quality and poor payors.

OWEN: Some see the issue as do or die. If the tide swings quickly enough, there may be no choice. Radiologists may prefer to read some cases, even if generated in offices they do not own, as opposed to not working or moving to a new practice.

SCHAAF: I think the mind-set is changing; more radiologists seem to be willing to accommodate the self-referring physician’s requests for interpretation.

TOPPINS: I believe that most radiologists would like to see imaging become more centralized (in hospitals and large imaging centers) again. In reality, this is not likely to occur without legislative changes or payor-driven restrictions. In the meantime, I believe that radiologists provide the highest level of care and should be the interpreters, regardless of who owns the modalities. Radiologists must also be involved in the protocols and quality-control activities needed to ensure optimal imaging.

IMAGING ECONOMICS: How prevalent might reading for referrers become over the next few years?

FLEISHON: Radiologists will continually be threatened by the acquisition of technology by other specialists, venture groups, and hospitals. The diffusion of technology, along with mounting pressure from competitive teleradiology services, will force a significant number of radiologists to enter the outside reading arena.

At least in the short term, the chances for regulatory relief seem small. Most of organized medicine is lobbying against any kind of self-referral legislation. Most legislators see this as a turf battle and are staying away, but we should keep pushing for legislative action. Remember, it took 6 years to get PET included in Stark self-referral legislation. We need to rally behind the ACR and contribute to RADPAC.

OWEN: : If it costs payors money (which it will, eventually, via huge overutilization), then they will put a stop to it. We hope that this happens before we lose so much that our infrastructure of outpatient offices has to change drastically or irreparably.

SCHAAF: : Only one payor in North Carolina seems to care, but all appear unwilling to do anything about the potential abuse of the power of self-referral.

TOPPINS: : I think the trend will continue to grow out of necessity and increasing pressure in many markets. I think that payors will probably be the driving force behind radical changes in this model of decentralized imaging, as they have been in certain states such as Pennsylvania (where a minimum number of modalities is required within imaging facilities to qualify for reimbursement under certain plans).

BALL: : It will be determined by the willingness of payors to reimburse for examinations performed by the referrers. If the referrers cannot make money at imaging, they will give it up.

Kris Kyes is technical editor of Decisions in Axis Imaging News.