Layoffs mean fewer insured people, and that fact is hurting MRI centers. Experts say tough times call for new tactics.
For MRI imaging centers, growing the business is always a challenge. But in today’s economic downturn, the hurdles are even greater. Key among them: MRI imaging centers are finding that as a growing number of people lose their jobs, they ultimately lose their health insurance benefits. The inevitable result is that fewer people are having MRIs.
According to the Centers for Medicare and Medicaid Services (CMS), private health spending growth, which includes growth in private health insurance spending and out of pocket payments, is projected to decelerate from 5.8% in 2007 to 5.3% in 2008. It is then projected to reach a 15-year low of 3.9% by 2009, driven by expected slower income growth and a decline in the number of people covered by private health insurance.
The Chicago Tribune recently reported that doctors are noticing the trend as patients skip or defer treatments because of the troubled economy. As the Tribune put it, “Many decline procedures even when they have medical insurance, doctors said, because the procedures are so expensive they can’t afford the out-of-pocket costs. For a colonoscopy, a stress test, an MRI, or a CT scan, the patient’s co-pay can run to hundreds of dollars.”
Joanne DeAngelis, chief operating officer of Jericho Specialty Imaging in New Hyde Park, NY, is feeling the pinch. “We’re very cautious these days,” DeAngelis said. “We specialize in pediatrics, so we won’t let a patient go untreated, but we’re still tightening our belts. For example, no new expansion is scheduled for now and no new equipment upgrades are planned until the economy stabilizes. Also, we are not hiring and are trying to keep administrative costs under control. One way is to use our staff more efficiently.”
Chip Hardesty, manager of Radiology Limited in Tucson, Ariz, agrees. “We’re slowing down the purchase of capital equipment,” Hardesty said. “But some medical care can’t be delayed. In response, we’re trying to improve efficiency. Doctors who used to read 30 images a day are now reading 50.”
Catherine Leyen, cofounder of MRI Optimize, a new MRI consulting firm in Tempe, Ariz, also notes that centers are postponing capital expenditures. “Centers are currently maximizing the systems they have now, and if a used system comes up for sale, they are purchasing the used system or buying a less expensive refurbished system to fill a need.”
Among other belt-tightening measures Leyen mentions are comparison shopping and getting the most out of vendors. “Centers are working more efficiently with fewer people by cross-training more of the staff to fill the needs throughout their departments. They are extending their operational hours to accommodate more cases and increase revenue opportunities, but are reducing hours overall with all of their staff, as opposed to firing anybody in particular. This tactic is respectable, and done by major centers that more often have consideration for their highly trained workforce.
“It’s true that many centers have been thrown off their expected and projected growth revenue because of the economic downturn,” Leyen said. “Budget expectations from fiscal year to year will be different than usual because of the recession being experienced in different parts of the country, whereas some areas have not yet been affected.”
Martin J. Farrell, CEO and COO, Epic Management Group LLC, a consultant for MRI centers (and now an owner of two centers himself), said, “MRI centers are dependent upon the health of the patient volume at their referring offices. Fewer people going to their primary physicians due to the economy, whether it’s a loss of income, loss of health insurance coverage, or just household budget constraints, mean less people are getting referred out for diagnostic imaging.”
Farrell notes that tough economic times call for new marketing tactics. “Progressive imaging centers are having to focus on three areas: self-pay prices, expanding referral relationships, and other cash pay services (like vein treatment, health screening, etc), in order to maintain or increase their referral numbers and income.”
“Manufacturers are being very aggressive in their pricing in both maintenance and upgrades because they are hungry for sales,” Farrell added. “Also, I haven’t seen an availability of qualified candidates, specifically technologists, like this in years. There are many qualified employees out there looking for jobs because they were laid off or their hours were cut. If imaging centers are stable, there are definitely benefits to all of this. However, if they have outdated equipment and a decreasing referral base, they are having a very difficult time surviving. Many of the smaller, poorer-performing centers are just simply closing their doors, giving more business and market share to the larger groups.”
More Aggressive Promotion
According to Farrell, more and more imaging centers are beginning to advertise directly to consumer patients whether it’s through the traditional avenues of television, radio, and print or through contemporary media like the Internet.
“I wouldn’t say that advertising directly to patients is effective if the focus is on traditional imaging services, such as MRI, CT, and x-ray. Those services are still heavily dependent on physician referrals,” Farrell said. “However, if a patient has been to an imaging center for a vein ablation procedure, for example, that patient is more likely to request being sent to that same facility if a need ever arises in regard to traditional imaging.”
Advertising direct to consumers gets mixed reviews. “We currently do not do much direct advertising,” DeAngelis said. “We depend on referring doctors and word of mouth for the most part. But we do have a full-time marketer pounding the pavement on our behalf.” Leyen, however, notes that some centers she knows advertise directly to their patients through newspaper ads or postcards. “This may not have the return on investment that it used to even a few years ago,” Leyen said.
“Imaging centers are promoting themselves through follow-up calls with particular attention to the referring physician’s staff,” Leyen said. “It’s often the office staff of the referring doctors who suggest imaging centers, so this is where the attention needs to be directed. We recommend a series of personal customer relationship protocols that will serve patients better, so they return for services when needed again or recommend the center to their friends.”
Building business by promoting to referring physicians is an absolute necessity, according to Farrell. “Let’s say an existing referral relationship typically produced 20 referrals a month in the past, but is now producing only 10 referrals due to a drop in patient volume. That imaging center, in order to maintain their referrals, must find other referring physicians who haven’t been sending patients to make up the difference.”
Lower Self-Pay Fees
Farrell said that in today’s economy if imaging centers are not lowering prices for out-of-pocket exams, “they definitely are evaluating them.” He notes that patients are more aware of what Medicare and other insurance companies are reimbursing for procedures like MRI, CT, and x-ray. So when they go to an imaging center and are given a cash pay price that is over what Medicare pays, they are being more vocal about the fairness of that.
“In some markets, this can turn into a bit of a bidding war situation where centers play off each other’s cash pay price in order to attract more self-pay patients. The overall effect of this is that many imaging centers are lowering their cash pay prices,” Farrell said.
“Some centers are offering reduced fees for cash pay patients, or are now accepting payment plans when they haven’t in the past,” Leyen observed. “Others will send out a manager to negotiate privately for any type of payment.”
One of the strategies suggested by MRI Optimize Consultants is that a “hardship slot” be kept open on a regular basis for patients who have no insurance and cannot pay for the exam, but definitely need the procedure. This “hardship slot” can be marketed to the referring physicians (and even nonreferring doctors) to create imaging center loyalty.
“These patients are treated no differently than those with full insurance,” Leyen said. “However, it is conveyed to them that the staffer is doing the exam without pay, and the radiologist is doing so without reimbursement. The center can write off the exam and become a community contributor as well. The PR value can be priceless for outpatient imaging centers.”
Competing with Other Modalities
In a struggling economy, do MRI centers find themselves competing with other—less expensive—imaging modalities? “Yes, some are trying to use ultrasound as a substitute,” Leyen said. “But ultimately, the modality that answers the medical question is the one that is best.”
As Rosemary Fisher, cofounder of MRI Optimize, noted, “Ordering an ultrasound, and not getting the answer needed, could ultimately cost more after that procedure is completed. Then an MRI is ordered because the ultrasound did not answer the question, and the patient experienced pain and inconvenience because of an attempt to shortcut. Ultimately, it is up to the referring physician to order the most appropriate exam for the symptoms presented.”
“Insurance companies are pushing less expensive modalities to be used for initial screening purposes, saving the more expensive tests like MRI and CT for what they term ‘medically necessary’ injuries or ailments,” Farrell explained. “I personally haven’t seen more of a push for this in light of the recent economic challenges, but I can say this has been an issue in recent years. MRI and CT are the only modalities that can give certain information to physicians that they need to treat a patient, so I wouldn’t say there is any viable competition to MRI. It’s just insurance companies pushing less expensive modalities.”
In addition to building referral business and lowering self-pay fees, what can MRI centers do to weather the recessionary storm? New services, staff training, and equipment maintenance are all key.
“Some imaging centers are getting into untraditional imaging services, like vein treatment, screening, and 3D imaging,” Farrell said. “These services are not typically reimbursed by insurance companies and can be marketed directly to potential patients. This is giving imaging centers new revenue streams and greater exposure to the patient market.”
“We recommend that centers take this opportunity to train their staff in newer procedures they are not currently offering, or better educate them on the ones they are doing,” Leyen said. “We also recommend centers expand their services, introducing new procedures and maximizing their equipment in small steps by upgrading with newer coils and software as a hedge against an uncertain economy. Remember, one extra case per day will improve your revenue on average $250,000 a year.”
James Markland is a contributing writer for Axis Imaging News.