First Bend in the Health Care Cost Curve

Recent trends in radiology imaging portend a dramatic and rapid reduction in this segment of a hospital’s business plan. Even before capitated (or global) payments have come into full play, there has been a large reduction in the number of some types of imaging studies in hospitals.

Our Chief of Radiology summarizes our experience — common to other hospitals as well — and provides some of the reasons.

The biggest hit has been in CT, the modality we are most dependent on for revenue. We are about 10% down in CT cases from last year, due to a combination of patient and physician fears about radiation exposure, more prudent ordering of studies by physicians, leakage out of the medical center, and the introduction of physician incentive programs (to minimize the amount of imaging) by some insurers.

Also, and very surprising, we have not seen an upswing in ultrasound or MRI to match the CT volume drop. We have, however, seen an increase in the number of patients arriving with their scans on CD ROMS having been imaged at other lower priced vendors. We don’t bill for these interpretations even though we are frequently asked to reinterpret the studies for our clinicians, and BIDMC is paying to store these images on our PACS systems.

By the way, this occurred while our overall patient volume increased during the same period.

The result of these trends will be to reduce the number of radiologists working in hospitals, and there will also probably result in a reduction of salaries for this physician specialty.

Paul Levy is the President and CEO of Beth Israel Deaconess Medical Center in Boston. Paul recently became the focus of much media attention when he decided to publish infection rates at his hospital, despite the fact that under Massachusetts law he is not yet required to do so. For the past three years he has blogged about his experiences in an online journal, Running a Hospital, one of the few blogs we know of maintained by a senior hospital executive.

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14 replies »

  1. I think that the stagnation in ultrasound and MRI with CT volume drop is very telling. I guess patients today want more value for the money they spent and would not settle for anything less. If there are some lower priced vendors that deliver, patients would obviously visit them and save money.

  2. I recently came across your blog and have been reading along. I thought I would post my first comment. I don’t know what to say except that I have enjoyed reading. Great blog. I will keep visiting this blog very often.

  3. We need to fix, improve, and expand on the healthcare reforms, but the party in power wants to go in the opposite direction.

  4. My start as an imaging technologist began in 1993 when I first started X-Ray school. The hospitals I trained at all joked about how much money the Radiology dept pulled in profit yearly. The college instructors all were saddened about how the salary structure for the technologists was historically low since this was considered a woman’s job like teaching and nursing.
    When my wife was injured in a MVA and had a brain and C spine CT done via the ER, they tried to bill me 4K for the two scans. I called them up and said that I would be filing a complaint for price gauging with the state via my State Rep. since they were paid fairly by my auto ins at twice the Medicare rate and could pull any dollar amount out of their ass to charge me. Before calling I looked up the CPT codes and charges to see what various ins and Medicare rates were for the two scans.
    The billing dept read from their script about how they have “special machines” and used contrast. I replied that I work for an imaging cetner and they have the same GE CT scanners, contrast is 30 dollars a vial and you do not inject twice so charging me for two injections will also be part of the complaint. Since I used to work at their hospital in Radiology as a temp , I know how much they pay and their techs make the same as ours.
    Since this is a multi bilion dollar company, they should be getting lower rates for leases and contrast and should have lower overhead and machines which are used 24/7 with much higher revenue volume.
    After I asked them for who my State Senator needs to talk to about this, they LOWERED my bill by over $3,500 ! If I did not know what I was talking about, they would have sent the bill to collections and then tried to garnish $3,500 dollars + legal fees. This is what happens to many people who do not ask for itemized bills and do not question charges.
    The bottom line is that Radiology has always been viewed as a cash cow and the difference in payments between a regular X-ray and more high tech imaging creates a crazy world where I have seen Radiologists not want to read conventional films as being beneath them and techs who do lower dollar earning studies be treated as trash, regardless of their skills and work ethics. On the other hand, I don’t think that there is a diffrent reimbursement for your CT scan if done on a single slice or 64 slice machine.
    I have also seen Radiology groups sign contracts with a hopsital and then complain about having to be called for night reads! Is it any wonder that a Hospital would contract with an overseas group to get coverage when the spoiled local Rad group acts childish? Years later when the Rad groups had to let some of their Rads leave, their attitudes about reading conventional and night cases suddenly changed.
    When you see benefits and pay for the employees go backward along with increased workloads, don’t expect to get sympathy from the rank and file when bloated hospitals get rid of layers of management and become leaner, and in my ER adventure, meaner.
    BTW, when I called the same hospital for pricing on their CT studies and provided the CPT codes, they absolutlely refused to discuss this and suggested that a “specialist” could call me in the future. When the person called me back a few days later I was shocked that their OUTPATIENT pavilion price was $1,600 for what ins would pay maybe $300 for.
    Why should a pt go to a Hospital based setting where they may be on the hook for a huge difference in out of pocket costs when an out pt facility may have the same scanners, licenced techs and sometime the same radiology group reading the exams?
    We should have realistic pricing from CMA so that techs are paid for being professionals instead of the modality gross, Rads to read cases regardless of the modality gross and patients can benefit from fair pricing and excellent equipment. This to me is like the health care bill where no one will get everything they want, but will still be employed and in in business if they adapt.

  5. The health system has added about a million jobs since the beginning of 2007, even though demand for most of the health system’s product has been falling. Seems like management hasn’t gotten the memo. Those million jobs are being paid for out of the society’s negative cash flow, another form of stimulus with borrowed money. In the case of business spending, it’s coming out of peoples’ incomes as wages foregone, which is one reason why we’re continuing to have a recession.

  6. Paul’s observations about imaging at BIDMC would seem to put the lie to predictions that we will be facing a train wreck of a doctor shortage under healthcare reform. Looks like we are well on our way to a glut of radiologists.
    The comment from “landlord services” about job growth in the medical field only reinforces my suspicions.

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  8. The health sector was one of the few areas of employment growth during the recession and the resumption of spraying, the creation of 96,000 new jobs in the first half of 2010, including11, 300 jobs in hospitals. Health care has created 228,700 jobs in 2009 and 618,700 jobs since the recession began in December 2007. During the past year, employment in health has increased an average of 20,000 jobs a month, the BLS figures show .

  9. Paul,
    Are you making more money on the DRG cases and saving on the indigent cases who will not pay anyway?

  10. “it is growing reality in bending the cost curve.”
    Especially when the cost curve (ours not theirs) has been dictated by providers in a trapped local market. Look what happened to North American car companies when they had a captured domestic market that they thought they could sell overpriced crap to forever. Now if we could just ship large numbers of Medicaid/Medicare patients to India.

  11. It would also be interesting to note how much of the imaging analysis is being shipped overseas to countries like India where large numbers of doctors are available to perform this work. As soon as any work involves a significant information component, we are likely to see it being shipped to these lower cost centers in a manner not dissimilar to a call centers. While not good for onshore jobs, it is growing reality in bending the cost curve.

  12. “there will also probably result in a reduction of salaries for this physician specialty”
    Good news! Offer your radiologists a 30% cut in pay or they can find a new job and you can hire a new group at a 30% discount. Better yet, send ALL your images to India or Australia, not just the overnight ones.
    Perhaps you were not aware that Radiology is a “lifestyle” speciality (see Dr. Wachter’s post above yours) where the big money is expected and they all leave at 5 PM.

  13. “more prudent ordering of studies by physicians,”
    “introduction of physician incentive programs (to minimize the amount of imaging) by some insurers.”
    “The result of these trends will be to reduce the number of radiologists working in hospitals, and there will also probably result in a reduction of salaries for this physician specialty.”
    Does this worry you Paul? Do you plan on getting this billing/revenue loss replaced from other areas?
    “We don’t bill for these interpretations even though we are frequently asked to reinterpret the studies for our clinicians, and BIDMC is paying to store these images on our PACS systems.’
    Would you think about charging for getting a patient’s paper medical records (and interpreting them) from another facility or doctor?

  14. I’m picking this up from a lot of other parts of the country. If it’s not just a blip, it’s a really big deal, and portends dramatic deterioration in hospital operating performance. According to our friends at the Advisory Board, imaging contributed $24 billion to hospital profits in 2007, fully triple the next most profitable service (cardiology).
    We shouldn’t forget that patients have been delaying elective healthcare because they cannot afford the copays, and that four million people who used to have insurance lost it during the recession. The economy is certainly playing a supporting role in this downturn.
    It may also be that, in some places, hospital purchases of physician practices (particularly in cardiology) could have cooled physician ardor for ordering imaging in situations where the hospital joint ventured their imaging centers. Not likely the case at Paul’s place. Curious if there was any change in the ownership of practices of imaging dependent specialists at the BI/Deaconess coincident with the downturn?