CHICAGO - According to recent estimates by the American College of Radiology, the demand for radiological services in the U.S. will increase by 6% annually over the next five years. The needs of an aging population, new technologies and services, and the capacity constraints of capital equipment, technologists and radiologists will all contribute to the growth of radiology.
"Don’t expect payors to sit back and pull money out of their pocket," said Jeffrey Oxendine, executive director of radiology at Brigham and Women’s Hospital in Boston. "The increased use of radiology services is driving more companies and organizations toward capitation," he added.
Oxendine, along with Dr. David Levin and Fred Gaschen delivered a fact-filled presentation Sunday on negotiating managed care contracts. Levin told the audience that profitable capitation contracts begin with diligent market research.
"Having accurate utilization numbers is critical," he said. "Utilization numbers currently available as guidelines are highly variable because they often don’t specify:
- outpatients only vs. out- and inpatients
- which studies have been included
- age mix
- and whether or not emergency room and trauma center patients are considered."
Because the U.S. covers a wide geographic and demographic range, these numbers will change dependent on a practice’s location. Capitated contracts on the West Coast, due to excess capacity in some markets and aggressive payors, may have a per-member-per-month (PMPM) payment of $2.50 to $4.00. On the East Coast, because of both high costs and high utilization, these rates may be from $8.50 to $10.00 PMPM.
Oxendine advocates a five-point plan as a general approach for contract negotiations:
- Understand your market and customers
- Have a business strategy that positions you for success in contracting
- Define your strategy, objectives, leverage, and thresholds
- Define what is at stake, both in terms of total revenue and strategy
- Identify the payor’s objectives and constraints
Gaschen, executive vice president of Sacramento, CA-based Radiological Associates of Sacramento (RAS), expanded on Oxendine’s theme and urged that each audience member create a strategic plan for their own firm.
"If you don’t know who, what, and where you are, and where you want to be in the next five to ten years, how do you plan on getting there?" asked Gaschen.
Research and more research
The RAS model holds that strategic preparation and planning are an ongoing process that is part and parcel of doing business. This includes defining the advantages and disadvantages of both one’s own facility as well as those of the competition. This market knowledge, explained Gaschen, is invaluable when negotiating managed contracts.
"A payor is going to know what each facility in the region can and cannot accomplish. If you expect to be able to negotiate, you better have access to that same data set," he advised.
RAS utilizes current technology as part of its negotiation strategy. The firm requires that a payor e-mail a contract to it so that it can enter into the contract all the changes that it requests. The company then e-mails the contract back to the payor for revision. This way, said Gaschen, it ensures that the document is complete. If a payor balks at providing electronic copy, RAS merely scans the contract with optical character recognition software.
In addition to fully researching every aspect of the business objectives and performance of a potential payor, RAS carefully delineates each service that the firm will provide in the capitation contract.
"A typical contract will include 27 pages of single-spaced CPT codes defining the services we will provide. We also further define each service by each of our locations and by the hour each service will be offered at each location. Anything outside of this is outside the capitation contract," said Gaschen.
Radiology services, according to most market prognosticators, are slated to grab a larger slice of the healthcare pie for the next few years. The lean times of the recent past, however, are not far from the minds of administrators such as Gaschen and Oxendine.
"It’s OK to sit around and grow a fat and happy practice during boom times. But negotiating a well-researched, long-term, no-cut managed care contract ensures that your business will continue to live large even during slack times," noted Gaschen.
By Jonathan S. Batchelor
AuntMinnie.com staff writer
November 26, 2001
For the rest of our coverage of the 2001 RSNA meeting, go to our RADCast@RSNA 2001.
Copyright © 2001 AuntMinnie.com
