Feature | June 10, 2007 | Jeanne-Marie Phillips and Steven Washer

Will the DRA Diminish Radiology's Assets?

Some say the DRA is a recipe for more problems, while other counter that it will drive IT innovation.

In October of 2006, they gave us fair warning: “If the Deficit Reduction Act goes through…facilities will buy less and less expensive products,” said one industry expert. Others echoed this, and now the river of anxiety has morphed into a tsunami.

With the DRA here, we re-visit the issue, questioning an industry cross-section to find some surprising issues hiding in the shadows.

1. How has your organization adapted to prepare for the DRA?

Rothschild: Despite a bad situation, the imaging centers that will win will be those taking a long-term view and continuing to improve services and patient satisfaction to increase market share.

Gillen: Part of our charter is to continue focusing on decreasing costs and working closely with customers to introduce innovations that are clinically focused and have benefits in capital and operational dollars and efficiency. In MRI, we are focusing on efficiency and workflow that ultimately allows imaging of more patients in shorter time periods.

Kaye: We began planning almost immediately upon DRA passage. Each director (IT, HR, operations, marketing, and finance) was charged with analyzing areas for enhanced efficiency and productivity in their area and for finding opportunities for enhancing revenue. We achieved significant savings, but also came to realize that to compensate for DRA losses, we must supplement cost-cutting with new revenue sources.

Reicher: Every radiology organization is trying to adapt by renegotiating their private contracts, by dropping the Medicare/HOPPS fee schedule wherever possible, and by cutting costs. However, “adaptation” implies an evolutionary process. The DRA is not evolutionary; it’s a draconian cut that ironically most hurts independent outpatient centers, where radiology costs have historically been lowest. The DRA will lead to imaging center bankruptcies, with the unintended consequences of driving outpatients to more costly hospitals, or self-referred imaging facilities.

Cook: We have developed pricing models and financing tools to help facilitate acquisition of critical digital imaging modalities and infrastructure. We have also developed a full suite of managed PACS services, allowing customers to benefit from economies of scale.

2. How has the DRA affected your imaging product introductions?

Roth: Imaging centers will be keeping their MRI equipment significantly longer, and accessories such as pads will wear out. Tears are serious issues, making pads impossible to thoroughly clean and putting patients and technologists at risk. This will increase demand for our MRI pad products.

Gillen: Our long term strategy is developing products that deliver a cost/productivity customer advantage. We have always considered this type of trend, so it has not had a negative but a positive impact.

Kaye: Initially, we froze purchases of new and unplanned equipment. Now, we have slowed acquisition of new equipment and upgrades and not entered any new markets.

Reicher: All imaging providers are more cautious in purchasing this year. Paradoxically, the RIS/PACS technology my company DR Systems provides, which lowers operating costs, is now more essential than ever.

Cook: There is no question that DRA will place financial pressure on certain providers. This may even stimulate demand for technology to help deliver a digital imaging service.

3. Will the DRA affect innovation and the practice of medicine?

Roth: Significant reimbursement cuts create a definite slow down in innovation, and smaller players often disappear, decreasing product diversity. The silver lining may be that as MRI reimbursements decrease, utilization will increase and compensate.

Gillen: DRA may have a short-term effect, but ultimately medical efficacy drives medical services. For example, the recent recommendation by the American Cancer Society that annual breast MRIs should be done on women with high risk, family histories or dense tissue will dramatically impact patient treatment. We have to deal with the diseases in front of us today and to work towards a predictive and personal method of health care for tomorrow.

Kaye: Depends what you mean by “innovation.” There will be definite retardation of imaging technology introductions. Conversely, business innovations that drive efficiency will thrive for both vendors and providers.

Cook: The immediate impact is an increased bottom line focus as providers face dramatic reimbursement cuts for outpatient exams. Compliance with emerging P4P programs is an obvious opportunity to improve margin.

Reicher: Yes.

4. How can manufacturers and purchasers work together to overcome the obstacles created by the DRA?

Roth: By developing relatively inexpensive products and increasing through-put as well as patient and clinician satisfaction. Imaging service demand is increasing at double-digit percentages. Combined with the aging population, high quality imaging volume will overcome much of the DRA cuts.

Gillen: Open dialog between manufacturers and purchasers is critical and helps determine which product is right for the customer depending on the needs of their community and reimbursement constraints. The industry also needs active involvement with agencies affecting healthcare legislation. We cannot stend for stagnation of technology that will positively affect human life and long-term healthcare benefits.

Kaye: Manufacturers must abandon their practices of promoting self-referral of imaging by non-radiologists. Many manufacturers specifically cite opportunities for revenue enhancement when selling technology. This increased utilization adds to the unsustainable rise in healthcare costs that brought imaging to the radar screen of payers and legislators and sparked the DRA.

Cook: Manufacturers must adapt products and value equations to ensure successful digital transformations. It’s not just about implementing a digital system anymore; it’s about understanding and adapting internal processes only possible with the right digital technology.

Reicher: The solution is fairly straightforward. DRA exists because of runaway imaging costs. These are largely related to legal loopholes allowing self-dealing in imaging. If public and private payors refuse to authorize or compensate self-referred scans, imaging costs will drop precipitously and reasonable payment schedules can be restored. Who will benefit? The public, hospitals, insurers and independent centers. Who will be hurt? Physicians who self-refer. Seems reasonable.

Clearly, some believe the remedy is going to bring on the very disease it was invented to cure. Others contend that the DRA may be partially successful—but not in the way intended, of course. The act of self-referring may cease, but only because clinics engaging in it go out of business. The big questions remain: Once these behaviors are history, will patients have more or less access to quality healthcare? Will the DRA eventually be shelved? Then again, emergency taxes are never repealed.

Participants:

Peter Rothschild, M.D
President
Patient Comfort Systems

Nancy Gillen
Vice President MR
Siemens Medical Systems

Alan D. Kaye, M.D.
President, Advanced Radiology Consultants
Chairman, Department of Radiology, Bridgeport Hospital
Bridgeport, Connecticut

Murray A. Reicher, M.D.
Co-CEO, Imaging Healthcare Specialists, LLC
Chairman, DR Systems, Inc

Bob Cooke
Vice President, Network Business Management
FUJIFILM Medical Systems USA, Inc.

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