Staying Profitable in Tough Times

It’s no secret that the recent economic recession has hit the medical industry particularly hard. Unemployment and skyrocketing health insurance costs have meant that fewer patients are going to the doctor for routine or preventative care.

Clearly, this has done nothing to improve the nation’s health. It also has had a detrimental effect on healthcare providers’ bottom line, and arguably no other institution category has felt the pinch quite like outpatient centers. Already operating on razor-thin margins, these clinics have had to tighten their belts more than ever. But thanks to new technology and software, facilities such as North State Radiology in California have streamlined workflows and turned their operations into lean machines.

North State Radiology operates in Chico, Calif., a rural area that serves approximately 200,000 patients. The clinic has its own outpatient imaging centers and is the exclusive provider for three of the county’s major hospitals. The clinics are a staple of the community, having cared for patients in the area for nearly half a century.

Despite this success, a series of events reduced the clinic’s revenue. The economy cut patient volume, as more people opted to forego many procedures. This is especially true in mammography and screening mammography, according to Don Hubbard, the controller at North State.
Additionally, some state-funded programs dried up, particularly affecting low-income patients. However, demand is still there. During Breast Cancer Awareness Month, North State offered a free day for uninsured women to get mammograms. The large turnout underscored the gap between desire and resources.

“We had more than 200 women show up and we scanned 175 of them that day,” Hubbard said. “That accentuated the point that a lot of folks would otherwise get them if they had the resources.”

A shift in the referral base has also affected the clinic’s bottom line. Hubbard said several long-time referrers have either retired or left the community, and the doctors who have replaced them don’t utilize the technology in the same way.

Finally, funding cuts from the Centers for Medicare and Medicaid Services (CMS) meant fewer reimbursements in 2010 and increased uncertainty going forward into 2011. North State (and all other physicians and clinics in the Medicare program) faces an immediate 10 percent reduction in reimbursement this year, because CMS changed the underlying assumptions on cost-structure.

Hubbard said this will have a significant impact on high-end imaging, such as magnetic resonance (MR) and computed tomography (CT). For those modalities, costs will have to be spread over three patients instead of two, meaning reimbursement for the equipment component of those exams will decline about 50 percent.

“That’s a 10-cents-on-the-dollar decline, just for doing the same thing we’ve been doing,” he said.

CMS is also changing the rules and guidelines for patients receiving multiple studies on the same day. Originally, patients received a 50 percent discount only if the second study was on the same region of the body. In 2011, though, any additional imaging study will be discounted.

Weathering the Storm
Patient volume at North State Radiology has recovered on a month-to-month basis, but Hubbard said revenues are down 7 percent practice-wide. So the outpatient center took several steps to cut costs and go leaner. Five years ago, the clinic decided to transition to filmless imaging centers. Now, all imaging studies are filed electronically, and North State no longer has to spend time or money storing and transporting physical files.

“In the material environment, you have X-ray film, then you have jackets and you’ve got storage bins, and then you’ve got the whole management issue of timing that stuff out. It’s an ordeal,” Hubbard said. “The electronic environment gives you the ability to do a lot of what you did before sitting at a terminal with fewer people.”

A secondary benefit is that patients and physicians can now view images and studies on the clinic’s website. The shift has been a boon for the clinic.

“Our film costs have evaporated,” Hubbard said. “We do about 200 patient procedures a day in our outpatient centers, so that was a lot of film.”

North State also revamped its information processing systems, particularly for administrative support. It now utilizes a document management system called CNG-SAFE that has allowed the center to make its accounts payable area almost entirely paperless. Invoices are routed electronically and the clinic is writing fewer checks and processing fewer bills, which has cut costs.

The center also has an Amicas radiology information system (RIS), which enhances its productivity. The new technology has translated into a leaner outpatient center that has been able to thrive despite the economy and CMS cuts.

“It’s been somewhat less painful than it otherwise would have been,” Hubbard said. “If we were operating today like we were operating four years ago, it would be a different story.”

A Cloudy Future
Hubbard said the new technology has helped the center’s bottom line and puts it in a good position going forward. But more looming cuts from CMS leave North State Radiology, and other outpatient centers like it, looking at a potentially bleak future.

“We can weather intermittent hits,” he said. “But if they keep cutting reimbursement, it’s just going to have an adverse impact.”

Revenues from high-end imaging, such as MR and CT, let North State subsidize X-ray studies. But if reimbursements continue to decline, Hubbard said the clinic may be forced to make tough choices. Since imaging equipment can cost millions of dollars to buy and hundreds of thousands annually to maintain, North State might not be able to upgrade as frequently. It may have to cut staff, which would result in longer waiting times. Or it could be forced to get out of the X-ray market entirely, leaving hospitals as the only alternative for patients needing that type of study.

However, by utilizing electronic billing systems and filmless technology, North State Radiology is poised to carry on.

“We’re really proud of the environment that we’ve cobbled together here to take advantage of the technology and help the bottom line,” Hubbard said. “And it does put us in a place where we can weather the storm.”