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Is Your Facility Ready to Compete in the World
of the $450 MRI Technical Fee?
By Jim Knaub

Brian Klepper, PhD, firmly believes that imaging departments and hospitals will face a whole new level of severe price and margin competition in the coming years. And Klepper isn’t just making predictions; he’s that kind of competitor. He’s a principal and chief development officer for WeCare TLC, LLC, a worksite primary care clinic and medical management firm based in Longwood, Florida, and managing principal of Healthcare Performance Inc, a healthcare strategy and business development practice based in Atlantic Beach, Florida.

Klepper’s companies develop and manage worksite primary care clinics for employers and manage specialty care for their employees. Companies like his are responding to employers’ critical need to reduce employee healthcare costs and delivering 20% to 25% reductions, he says. Speaking at the AHRA annual meeting in Kissimmee, Florida, on August 14, Klepper told the audience that his company had recently negotiated a deal in Indiana for $450 MRI exams in a market that had technical fees ranging between $1,750 and  $3,200. Simply put, they see a market opportunity in an often overpriced market.

“Somebody like me is going to come in to your market, and your volumes are going to plummet because there is no way you can compete against a $450 imaging price when you’re currently used to getting $2,800, or whatever you’re getting,” Klepper told the audience. “That is the problem.”

To be fair, some markets already face this kind of pressure, but in many, it’s an unheard of situation. Klepper told the audience that three major drivers of this intensifying competition are a ridiculously wide reimbursement spread for advanced imaging procedures (and many procedures in general), the excess service capacity in many markets, and the business community’s increasing determination to reduce healthcare costs, which he sees as the primary cause of both the struggling economy and the federal budget crisis.

“If we didn’t have a lot of excess capacity, I couldn’t go in and cut a $450 [deal] for a high-quality MRI,” Klepper said. “It wouldn’t be possible.”

The strategy reduces revenue and margins but wins on volume, he says, telling the audience he operates using a McDonald’s model, not a Ruth’s Chris Steak House model. “I’m going win on volumes,” Klepper explained. “I’m going to have the highest technology. I’m going to have the most appropriate care, and I’m going to have the best outcomes. You watch.”

Klepper’s point wasn’t to gloat but to drive home the fact that the surging cost growth that has existed in the American healthcare industry for the past 45 years faces a fundamental change, driven by business’s unwillingness and inability to keep bearing that spiraling cost. He believes the way for hospitals and other imaging organizations to survive this tectonic shift is to understand and manage revenue data in their markets and adjust accordingly.

“The real point is you can’t do any of this unless you really, really understand data,” Klepper said. He said it’s possible to ascertain the average episodic cost for each facility for a given diagnosis in a market. Paired with outcomes quality assessments—and he adds that, for many places, there tends to be little correlation between cost and quality outcomes—he believes healthcare is moving toward a future where revenue and margins will be “intensely competitive” and that savvy organizations should be preparing for that now.

“For the capitalists here among us, this is a market opportunity,” Klepper adds. “We can go in and identify spots where there are egregious healthcare practices, and we can offer alternatives to those. We leverage and take advantage of those. And that, ladies and gentlemen, that is the challenge you are about to face in imaging.”

— Jim Knaub is editor of Radiology Today.