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Turning Crisis
Into Opportunity — Challenges Facing Radiology in the 21st Century
Speaking at the 35th annual AHRA meeting, Frank J. Lexa, MD, MBA, shared his view of the challenges facing radiology in the coming years. There is disconcerting news and real opportunity for savvy imaging providers. What’s the biggest challenge facing radiology in 2007 and beyond? Imaging administrators and radiologists struggling to adjust to Deficit Reduction Act (DRA) payment cuts—which is just about everyone—probably will tell you reimbursement tops the list. If you ask practicing neuroradiologist and investment consultant Frank J. Lexa, MD, MBA, he’ll say reimbursement issues fall second on his list of the top five challenges facing the imaging field. His full list can be found below. “It might surprise [you] that in a year ... when the government has come after us on reimbursement in several ways that have been described by different people as the perfect storm ... that I didn’t list reimbursement as number one,” Lexa told attendees at the annual meeting of the American Healthcare Radiology Administrators in Orlando, Fla., earlier this month. (See Lexa’s take on reimbursement below.) Disruptive Technology Radiology is more accustomed to what Christensen calls sustaining technologies, incremental improvements that keep the user at the forefront of technology in a more evolutionary manner without changing the status quo in the marketplace. “When you come to a meeting like this, you see those [sustaining] technologies,” Lexa said. “They’re aimed at folks like you who are leaders. They’re better machines, faster. “Disruptive technologies are not aimed at you,” Lexa added. “They are things that you may turn your nose up at. They’re things you don’t want. They’re cheaper [and] less capable … but that’s exactly the problem. You ignore these things, but they’re good enough that an orthopedic surgeon, perhaps a podiatrist, will use it to chop away at some of your business.” That’s certainly an issue in radiology. Lower-cost scanners designed for physician office use have steadily pulled business away from hospitals and freestanding imaging centers. While some of the effect may have been masked by the rapid growth in imaging, Lexa sees it as a genuine threat. Equipment that costs less combined with reduced siting and maintenance costs removes barriers that discourage potential competitors from going after your business. "These things are serious issues and serious challenges for us, and clearly, it enables diagnostic imaging’s most frightening competitors,” Lexa told the audience. “When I first gave this talk in front of a room full of radiologists, I only half jokingly said we might need a cardiologist by the end of the talk because you could see their blood pressure going up, and they were getting angry and upset... " Supply and Demand • An aging population. The Baby Boomer generation will begin turning the age of 65 in 2011. People aged 65 and older use significantly more imaging than younger people. • Patients and referrers expect greater diagnostic certainty. • Physicians’ litigation fears drive defensive medicine. While Lexa projects imaging demand to grow, he noted that nonradiologists will capture much of that business. Disruptive technologies will continue to erode traditional imaging service delivery through hospitals and imaging centers. On the supply side, Lexa cited estimates of a radiologist shortage through at least 2020. Imaging demand is growing faster than the radiologist supply, but Lexa does not envision the dire shortages—as high as 50%—that some have predicted. “The government is not going to tolerate anything close to that; payers are not going to tolerate that; and society is not going to tolerate anything close to that,” Lexa said. “Our work would be [sent] offshore long before we got to that level.” Alternative Solutions As an example on the technologist supply side, Lexa pointed out that the 18% shortfall at the height of the technologist shortage in 2000 caused manufacturers to consider setting up call centers and using remote control software to replace technologists. “If you come close to that shortage in any component of our base, you will see alternative solutions,” Lexa said. While the economic and demographic threats to radiology are clear, Lexa warns against focusing on dollars and missing other important issues. “Of course, it is about money,” he said, “but if you only look at the money, you’re going miss all the other critical issues.” The Customer Service Question • the rise of boutique or concierge medical care; • greater consumer control over medical decisions; and • growing interest in complementary and alternative medicine. “This is part of a long trend,” he told the audience. “You can expect people to act much more like consumers than patients in the future. It’s also interesting that patients have higher expectations than they used to, and there is much more interest in complementary and alternative medicine.” Lexa cited a study in the February 2005 LDI Issue Brief reporting that more people seeking initial treatment sought some type of alternative provider instead of a physician in the traditional healthcare system. In addition to the direct competition for patients and their dollars, traditional healthcare providers will increasingly be compared with complementary alternative providers. “Their grading of us is going to be based on their experience with these [alternative providers], and these people are quite good traditionally at high levels of service,” he said. Some factors driving this consumer change, according to Lexa, include an increase in self-directed healthcare, direct-to-consumer products and advertising, the change of traditional insurance, the growing availability of quality measures, and the expansion of pay-for-performance measures. “When I talked to patients about their experiences and asked them, ‘Why did you give so and so’s imaging center an A, and someone else’s a C [grade],’ what you often find is their experience is very much colored by their expectations,” Lexa said. “And patient advocacy groups are making a big difference. They tell them what to expect, and they are steering patients to go to certain places.” Lexa mentioned patient and referrer convenience and greater access to medical information via the Internet as other factors fueling patient expectation. Challenge Equals Opportunity “I don’t have to tell you that many of the
people in our field are not well prepared for the way patients are changing
their relations with us, but it is a huge opportunity,” Lexa said.
“It’s a tremendous chance for you to take control and actually
succeed in tough times. — Jim Knaub is editor of Radiology Today. Lexa’s Take on Reimbursement Frank J. Lexa, MD, MBA, sees a simple reason why radiology felt the ax wielded by federal budget cutters. “Like anyone in [financial] trouble, the government looks at areas of high cost,” Lexa told his audience of radiology administrators at the American Healthcare Radiology Administrators annual meeting earlier this month in Orlando, Fla. In 2005, Medicare and Medicaid programs paid 22% more for radiology services than in 2004, Lexa said. And 2006 brought another hefty jump. The cost of healthcare also threatens to consume so much of the federal budget that it will force hard spending decisions. While the news media has heavily covered the threats to Social Security trusts, Lexa pointed out that by 2024, the Medicare expenditure would more than double Social Security spending as a percentage of gross domestic product (GDP). Lexa cited a Washington Post article from 2005 reporting that Medicare would consume 13.7% of the GDP by 2024 compared with 6.4% for Social Security. And, Lexa added, Social Security spending may level off at that point, but Medicare and Medicaid spending likely will still keep rising. “The Medicare deficit is an incredibly controversial number because the government gets to do its accounting based on a 75-year horizon,” Lexa said. “It gets to ignore a lot of the money it owes deep into the future.” Lexa said estimates peg the long-term Medicare liability between $33 trillion and $68 trillion dollars. “So there are 68 million reasons why the government is working hard to reduce healthcare expenditures,” he said. “This is part of where this DRA [Deficit Reduction Act] stuff came from.” He also noted that physicians are an easier target than senior citizens when it comes to budget cutting. “If you give me one lobby in America that I don’t want to have to fight with its AARP,” Lexa said, referring to the American Association of Retired Persons. “I don’t have to tell anyone in this room that they are probably the best organized, best [political action committee] in America. They’re good at raising money. They’re good at issues, and they’re really good at getting people to vote.” His take-home point on reimbursement: Don’t expect much relief on this front. “If you understand the underlying factors, you won’t be surprised the next time the government (or someone else) does something like this to us,” Lexa said. — JK 21st Century Challenges to Radiology 1. Disruptive technologies 2. Tightening reimbursement 3. Flux in demand for radiology services 4. Flux in the supply base for radiology providers 5. The revolution in customer expectations — Source: Frank J. Lexa, MD, MBA
The Modern Definition of a Customer Is Someone Who… • makes the decision to buy our services. • influences decisions to buy our services. • creates a contract so we can be open for business. • regulates our business. • has the ability to affect our brand perception. And They Include… • Patients • Families • Hospitals • Government • Payers • Disease and patient advocacy groups • Joint venture partners — Source: Frank J. Lexa, MD, MBA
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