Dr Smith has just returned from the annual meeting of the Radiological Society of North America and hurries into the hospital administrator’s office. “George,” he says, “I need $500,000 for the XYZ upgrade to our MRI system.”
George, who is facing low bed occupancy, a potential nurses strike, higher energy costs, lower MRI reimbursements due to the Ambulatory Payment Classifications, and a host of other problems, swings around in his chair and exclaims, “I thought you told me the MRI was the top of the line when we bought it last year.”
“But you should see the new stuff!” presses Smith. “Our patients deserve the best. I also happen to know that St Ralph’s across town has already signed up for it.”
“There’s nothing like that amount in this year’s budget,” retorts George. “If you can cut back on people or delay the new CT purchase, we might be able to squeeze it in but I don’t see any other way.”
“No way,” howls Smith. “We’re down to two MRI technologists as it is and it’s been 3 years since we did anything to that CT.” “Didn’t you add the workstation and that cardiac thing last year?” asks George.
“But we’re behind, George, and it’s only getting worse the longer we have to wait. MRI is our money maker. We’d be crazy to let St Ralph’s get their claws into our territory!”
Such a fanciful exchange may be melodramatic, but it serves to highlight the fundamental conflict between the rapid development of MRI technology and the limited resources for upgrades or additions at most imaging facilities. Every imaging professional wants to have the latest bells and whistles but few have blank checks. There are, however, ways to keep your MRI close to state-of-the-art without breaking the budget.
|Robert A. Bell, PhD|
Radiology is hooked on high technology and nowhere is it more evident than in MRI. Of the current diagnostic modalities, no other has undergone as much change over the past two decades. In this brief span we have come from 0.15T resistive systems to high-field superconducting magnets. Open-sided MRIs now constitute about 30% of the installed base. Surface and specialty coils are available for almost every body part. Phased array technology is a practical requirement. Fast spin echo and other sequences have decreased scan times by at least a factor of two while allowing 512 resolution and TRs exceeding 4,000 milliseconds.
And, it seems, change has even accelerated in the past 5 years. Single-shot techniques can acquire images faster than patients can move. Breath-hold MRI is a reality. Active shield magnets have much smaller magnetic fringe fields, better homogeneity, decreased system weight, bore lengths less than 5 feet, and fields as high as 3T. Open-sided systems with higher field strengths and better gradient performance are now revolutionizing the low-field sector. Diffusion-weighted imaging can help to identify early signs of stroke and to improve the patient’s chances for recovery. New specialty coils and acquisition techniques offer superb studies of peripheral vasculature, neuro-perfusion, carotid stenosis, cardiac insufficiencies, and other maladies. Spectroscopy now can reliably and noninvasively sample important constituents in volumes as small as a cubic centimeter. The problem with technology is that someone is always improving on it.
|Figure 1. A visualization of three acquisition strategies employed in maintaining state of the art in MRI.|
HOLDING ONTO THE CUTTING EDGE
Is it possible for facilities to remain at the leading edge? The answer depends on the resources available, the judicious selection of appropriate additions, and the presence of at least one champion for change. Five key areas deserve special attention.
- What is the local market situation?
- When do you upgrade?
- How do you fund extra equipment?
- Which technology is worthwhile?
- How do you obtain the necessary technology?
Question No. 1: What is the local market situation?
Step back and take a cold, hard look at the need for MRI services in your community. As preached by the world-renowned management expert, Paul Drucker, constantly ask yourself, “What is the nature of our business?” Each site has a unique set of advantages and limitations. Those who are part of a major university research and teaching hospital may need to have as many new features as possible. If you are at a community hospital providing the standard MRI care, you may be able to delay some upgrades and forego others that may not reach broad acceptance. List your needs and prioritize them depending on their relative importance at this time and in your locale. What may be vital for you may be only a frill in another location. Revisit your needs list at least every 6 months. Below are some ideas for general categories:
- Market type. Is your referral base isolated or do you have competing MRI units on every corner? Is your MRI located in an independent imaging center, in a clinic, or in a hospital imaging department? Are your referrers highly sophisticated in MRI? Are there any nonstandard facets to your services (eg, distribution of scans by anatomic region, age distribution of patients, geographic extent of referral base, etc)?
- Examination capacity. If you are conducting more than 4,000 examinations per year, it may be time to consider additional equipment. Since MRI is growing at an average rate across the United States of about 15% per year, patient volumes can swell by as much as 25% during the time needed for review, purchase, and installation.
- Throughput efficiency. Modern high-field systems are easily capable of examinations averaging 40 minutes or less. Local MRI throughput can be calculated by dividing the hours your scanner is available for imaging per week by the examinations actually conducted that week. If your time per examination is more than 1 hour, it may be prudent to review the causes of delay. Some, such as examination type (pediatrics, difficult inpatients), may be unavoidable. Others, such as inefficient scheduling, lengthy examination protocols, excessive cancellations or no shows, and poor reception/registration procedures, can be ameliorated. If examination times are long due to multiple averages needed to boost image quality, it may be time to consider new equipment with higher field strength.
- Patient comfort. If a substantial fraction of patients are lost because of claustrophobia or other anxiety, it may be necessary to consider a short-bore or an open-sided system. Be careful, however, not to expect too much from the new open-sided equipment. The most recent units have field strengths only as high as 0.7T and they produce a signal to noise ratio (SNR) consonant with this field. A number of physicians familiar with 1.5T image quality have wondered why 0.7T does not seem as good. The answer is that it is 0.7T. These units, however, produce much better image quality per time unit than the low-field systems.
- New applications. Some facilities may promote themselves in a competitive market by selling high technology. Generally, this requires not only advanced instrument features but also a strong commitment from the radiologists to develop new applications and to educate the referral base. These sites want to be recognized as local “centers of excellence.” This expensive path requires a commitment to frequent upgrades, some of which may not achieve mainstream acceptance. Since it can be embarrassing to later ignore new features that you may have emphasized, this strategy may also be difficult to abandon once undertaken. It is often preferable to identify one or two new applications that you wish to bring to your community rather than trying to invest in all.
- Payor distribution. Markets that have small managed care components may be poised for transition. If there is a shift in the market from traditional third-party reimbursement to managed care, MRI providers who do not anticipate a significant reduction in revenue per examination may get a nasty surprise. Temper your desire for upgrades with a review of potential risks.
Question No. 2: When do you upgrade?
Although one might expect that upgrades should occur when technology becomes available, their timing almost always depends on the resources that are allocated for the equipment. Figure 1 shows a development curve for an MRI system over a number of years. Ideally, one would prefer to ride the innovation curve by having every improvement as soon as it reaches the market. In practice, however, the best that can be done is to trace out a series of notches that get back to the curve from time to time. Presumably one purchases the state of the art but development continues upward while the installed system remains the same. Small, frequent additions keep a facility close to the curve, but the expense can be high, and with that strategy comes the risk of wasting funds on features that may quickly become obsolete. Note that one cannot exceed the curve because it is not possible to buy ahead of development (in spite of what some salespeople may tell you).
THE CRITICAL TIMING ISSUE
What follows are some acquisition strategies.
- Buy and forget. This is the least complicated but potentially the worst plan for MRI (see Figure 1, Plan A, page 104). Participants usually spend top dollar to acquire every available option knowing that they will not have the opportunity to add to the system for a number of years. Such a plan has three basic faults. First, the purchase price is often inflated with too many options. Second, some of the options may not achieve broad acceptance, limiting their potential for generating additional income and wasting the funds that were expended on them. Third, the system remains at one level of technology for as much as 5 to 7 years, thereby missing any proven upgrades during the period.
- Beggars can’t be choosy. The second approach relies on the financial state of the enterprise at the time an upgrade is needed (Figure 1, Plan B, page 104). A required addition may coincide with a profitable year or a delay in another project, but the inherent lack of planning invites a likely application of Murphy’s Law (whatever can go wrong will go wrong at the worst possible time). More commonly, adequate funds are not available when an upgrade is needed.
- Anticipating the future.The best strategy provides ongoing reasonable support for technically sound upgrades (Figure 1, Plan C, page 104). This requires planning and some estimate of reasonable costs to upgrade, usually on the order of about 5% to 7% of the original purchase price per year. New equipment or software is not delayed by the budget process and is added when it has been justified to the organization.
Question No. 3: How do you fund extra equipment?
Resources are allocated for MRI in a variety of ways. The most common is the standard annual budget process in which next year’s needs are debated and expected revenue is dispersed. Unfortunately, many annual budgets do not recognize the need for periodic upgrades. Consequently, such funds are rarely allocated in advance. Another difficulty of this method with respect to MRI is the inability to accurately predict what funds will be needed. And, if one expects additional funds in later years, all allocated funds must be spent, regardless of efficacy, which can lead to waste. A third problem arises if site construction is part of the upgrade. Building delays can render some upgrades obsolete before they can be used. The worst aspects of such a process are sometimes seen in the purchase and installation of MRI systems by the federal government. The review procedures and site construction requirements are often so cumbersome that by the time the site is ready for installation, the successful vendor usually has developed a newer model but the contract requires delivery of the designated (and now obsolete) technology. But the sale proceeds because an old MRI is better than no MRI at all.
EDUCATE THE DECISION-MAKERS
If your administration tends to prefer the “buy and forget” strategy, it is vital to educate them to the nature of MRI development. To fail is to potentially doom your system to years of second-class citizenship. Point out that competitors may be upgrading more frequently, giving them an advantage. It also does not hurt to mention that MRI is potentially the most profitable of the diagnostic modalities.
Some enlightened budget processes ensure upgrade funding by reserving a fraction of collected revenue, typically 5% to 8%, for system improvements. This can be a winning strategy, especially if it incorporates a mechanism to shift unused reserves into later years where they may accumulate for a major upgrade. However, reserving a portion of revenue may lead to tax complications when it is not spent during the fiscal year. These might be deemed profits, which may incur tax consequences. It is wise to review all potential funding plans with your legal and accounting staff in advance.
Perhaps the most flexible process can be achieved through equipment leasing.
- Leasing can be used to add upgrades at any time through small increases in monthly expense and/or lease term.
- By relieving the fear of excluding useful options, initial purchase negotiations can focus on system essentials. Options for everything else can be exercised as needed. This minimizes purchase price, which increases cash flow.
- The lease terms can include skipped or reduced payments in the first few months to help until revenue flow is established.
- End of lease options may offer some degree of protection against obsolescence. Typically, one can return the equipment, purchase it at fair market value (FMV), or re-lease it under a new agreement. If the FMV is capped at a reasonable value (eg, 25% to 30% of the initial purchase price), the lease rate will reflect the belief the vendor or other financial source has in its ultimate viability. If the equipment is totally obsolete at the end of the lease, the lessor makes less profit.
IS IT REALLY NECESSARY?
Question No. 4: Which technology is worthwhile?
Which upgrades or options make sense for you? In general, facilities seek additions that can increase revenue and/or enhance their reputation. They agree, somewhat reluctantly, to upgrades that remedy portions of the system that time and technology have rendered obsolete. Of the myriad features that are available, how does one decide?
- Be honest with yourself. If you rarely do a breast MRI, must you spend $25,000 for a dedicated breast coil? Review those studies that you truly anticipate conducting. Forego optional devices until there is a clear need. Surface and specialty coils typically have a useful lifetime of about 2 to 3 years. Buying too early can result in waste if a new coil is needed later.
- Talk with everyone. Investigate the claims that are made. This can start with your local MRI specialist. Do not be afraid to ask questions and to challenge his or her assertions. Call friends and colleagues who may have similar systems or upgrades. You may save dollars by not repeating their mistakes. Talk with their technologists who often know volumes about uptime, software glitches, user friendliness, and efficacy. Contact independent experts who may have tested the equipment or reviewed it at technical meetings. Search the web for information from the vendor, chat rooms, or other online sources.
- Attend radiology meetings. Visit the vendor booths at major technical conferences such as the Radiological Society of North America or the International Society for Magnetic Resonance in Medicine. Do not settle for the standard patter. Ask the hard questions. Go to sessions describing the clinical use of features of interest. Talk with the speakers afterwards. Remember, however, that they may have research contracts or enjoy other incentives from the vendor that may color their opinions.
- Call and/or visit sites using the technology. Talk with the technologists and manager as well as site physicians. Ask why they made the choices they did. What would have been their second choice? What were the important elements of the decision? What would they change now if they could?
- Know when to pull the plug. If you have an older system, it may not be cost-effective or even technically possible to upgrade. Look for major transitions in technology as the opportunity to graduate to a new level. If it is feasible to salvage reasonable portions of your system, compare the cost of the upgrade to that for new equipment. Get bids from all vendors that can service your needs. It is surprising how competition can help everyone to sharpen their pencils. Ask them to provide their best offer for the trade-in value for your old system (including removal) as a line item in their quotation.
- Consider used MRI equipment. Most preowned equipment is usually one or more generations behind state of the art. However, for a group with modest examination volume or uncertain future revenues, it may be advantageous to consider a late model used instrument rather than new. Remember to include projected costs for transportation, installation, and first-year service in any comparisons with a new purchase.
Question No. 5: How do you obtain the necessary technology?
Surprisingly, it may be difficult to get your local sales representatives to spend time selling you some upgrades. Major transformations with multi-hundred thousand dollar price tags may be worth his time, but a single surface coil may not hold much interest. Explore third-party sources for potential sales from smaller vendors.
- Try before you buy. Most vendors have programs that allow use of selected features or equipment for a period of 1 to 3 months before purchase. Use these to evaluate the utility of upgrades before making a purchase commitment.
- Explore research or show-site status. You may have a location or other characteristic that is of interest to a vendor. Think about ways to sell this local advantage for additional support. Remember, however, beta version software often has bugs that can damage your throughput. Visitors can also take time away from scanning. If you agree to serve as a show site, strictly limit the days for visits and require the vendor to make all arrangements subject to your approval.
- Consignment. At the time of purchase, request that certain optional items be included for an evaluation period of up to 6 months. This will allow the deferral of some purchase costs and provide an opportunity to test questionable features before the decision to buy.
- Sharing. If you have a sister facility, you may be able to share specialty coils or other options that are used infrequently. You can always add a second one if the need is justified.
In summary, MRI requires planning for change. This may be foreign to some organizations, resulting in possible damage to their competitive edge. Those who recognize the diagnostic and financial contributions this modality can make must educate less progressive administrations to provide funds for growth. Leasing can simplify the process by smoothing capital requirements, increasing cash flow, and providing some obsolescence protection.
Robert A. Bell, PhD, is president of a health care consulting firm in Encinitas, Calif, [email protected], (858) 759-0150. He specializes in technical and operational services for diagnostic imaging equipment.