Most teleradiology companies work within a business model that supports a local practice's contracts with hospitals. In fact, completely farming out its radiology services is difficult for a hospital due to the need for "boots on the ground" radiologists to perform interventional procedures. But reports of teleradiology providers contacting hospitals directly for contracts have been springing up, sparking fears that such firms could ultimately force local radiology groups out of the picture.
"There's a fear that teleradiology firms are competing with private (radiology) practices, and that these companies will come in, lower fees, and lure the hospital away from the local group," said Jesse Salen, vice president of sales and technology for Online Radiology Medical Group, a teleradiology company in Riverside, CA. "I'm guessing that these fears are based on the economic pressures out there."
The pressures are legion: declining reimbursement, increasing demand for services, and a radiologist shortage. And don't forget the fact that the U.S. is positively packed with teleradiology firms now, according to Douglas Smith, president of Barrington Lakes Group, a management consulting firm in Barrington, IL, that specializes in healthcare.
"With the market getting more saturated with teleradiology companies, what's the next step strategically for these firms?" Smith said. "Are they not going to consider full hospital business? We have no evidence that the name-brand guys have a strategic imperative to go into that model, but we've seen regional and local guys doing it."
Near misses, contract breakdowns
Last fall, Kent County Memorial Hospital in Warwick, RI, considered handing over its 140,000 annual imaging studies to a teleradiology operation run by Massachusetts General Hospital (MGH) of Boston. When the news of the pending agreement became public, Rhode Island radiologists, the Rhode Island Radiology Society (RIRS), and the hospital's current radiology group, Toll Gate Radiology, accused both Kent County Memorial and MGH of undermining local radiologists' business. In the end, the hospital chose to keep its contract for radiology services local, but it ended its contract with Toll Gate and hired XRA Medical Imaging, also of Warwick.
Earlier this year, after a protracted and painful negotiation process, a radiology group that has served Florida Hospital of Altamonte Springs since the 1960s lost its contract. Whether the hospital will replace the practice with a teleradiology firm or another local group remains unclear.
Some say these kinds of cases are still exceptions to the rule and the majority of teleradiology firms' business is with radiology groups.
"Approximately 90% of our customers are local radiology groups," said Dr. Sean Casey, CEO and co-founder of Virtual Radiologic, a teleradiology company in Minneapolis. "Of the other 10% or so that are hospitals, the majority of those came about when an existing radiology group negotiated successfully to get the hospital to pay the on-call teleradiology bill and hold the contract, so we're there as an invited guest of the local radiologists. In a small percentage of our contracts, the hospital has no group at all, but we're very careful to make sure that we're not the cause for why they have no group."
Casey concedes that a segment of the teleradiology market does deal directly in competitive situations with local practices using a subspecialty model and pursuing imaging centers owned by nonradiologists such as orthopedic surgeons.
"A few years back, the majority of musculoskeletal imaging was performed by radiologists," he said. "But in many locations now, orthopedic surgeons have bought MRI and have begun to run it. If their local radiology group doesn't want to deal with them, they're inclined to try teleradiology. Virtual Radiologic does not do that kind of business -- in fact, we turn it away."
The concern that teleradiology firms will take over local contracts isn't all in radiologists' heads. But radiology practices themselves may be encouraging the trend, according to Scott Giordanella, director of marketing for NightHawk Radiology Services in Coeur d'Alene, ID.
"If a hospital contacts a teleradiology firm directly, there's a reason, and it's not just money," he said. "The radiology group might not be performing as well as the hospital thinks it should. We try to strengthen local radiology groups in their range of service offerings by stabilizing a situation like this through offering additional value. If the radiology group can't offer the services the hospital wants, the contract could go elsewhere."
Key to avoiding this outcome is adjusting a radiology group's perception of the role it plays in regard to the hospital, Smith said.
"Say a private practice gets busy, senior members get tired, and they don't want to take night call. They go to the hospital and say, 'We need to have this work done by a teleradiology company, and we want you to pay for it,' " Smith said. "Whenever I hear that, I become greatly concerned: You've just invited your biggest customer into a direct relationship with your competitor. Get ready to be replaced, and soon. And the teleradiology company says, 'Hey, don't blame us. We got invited in.' "
A perfect storm
Whether these kinds of scenarios are stimulating a move toward more direct contact between hospitals and teleradiology firms, or whether they're due to a market accident, they are starting to happen more frequently, especially if the relationship between the local group and the hospital has become contentious.
Regional teleradiology firms may be more prone to accept a contract with a hospital and cherry-pick a couple of radiologists from the local group for interventional procedures, according to Smith. And hospitals aren't without responsibility, either: In the last several years, they've begun to erode what used to be exclusive agreements with radiologists by giving over some imaging, such as cardiovascular, to other specialists.
Yet, if a radiology group sees its contracted hospital as an onerous boss that's putting practice members in a corner rather than as a customer that's demanding a certain service level, the group becomes vulnerable to being perceived as just another vendor in an equal opportunity market, rather than a partner.
"Don't get me wrong -- I'm a dedicated radiologist advocate," Smith said. "But when private practice radiology groups lose sight of the fact that the place in which they work is their client, they also lose sight of their need to demonstrate their value, to take control and be the steward of imaging services for the institution throughout the continuum of care."
Hospitals that threaten to outsource all radiology electronically don't understand what radiologists actually do, according to Dr. Richard Duszak, an interventional radiologist with Mid-South Imaging and Therapeutics, a private practice in Memphis, TN. Duszak also serves as CPT advisor and chair of the Committee on Coding and Nomenclature with the American College of Radiology (ACR) in Reston, VA.
"(Hospitals) often don't see the work a radiologist does in addition to the interpretation," he said. "In a typical day, we're fielding requests from referring doctors, establishing protocols for exams, and overseeing technologists -- in other words, supervising. That can't be outsourced to Australia. I really worry about the institutions where hospitals have threatened to go the teleradiology route, because, after all, who will deal with the patient who has a contrast reaction? Is the hospital CEO going to be managing anaphylaxis?"
With the advent of the Deficit Reduction Act (DRA) of 2005 and the belt-tightening that has ensued, both private practice radiologists and hospitals are being forced to take a hard look at how to provide effective and efficient patient care for less. And although teleradiology can never replace a local doctor's expertise in daily, face-to-face medical procedures, it would behoove local radiologists to consider whether they've managed to shift their paradigm from a "that's the way it's always been" framework to a new business model, according to Salen of Online Radiology Medical Group.
"After all, if a hospital is happy with the local radiology group, why would they go elsewhere?" he said.
By Kate Madden Yee
AuntMinnie.com staff writer
April 22, 2008
Florida radiology group loses hospital contract, April 10, 2008
Rhode Island hospital opts for local radiology service, September 6, 2007
Mass General, Kent Hospital halt teleradiology talks, July 10, 2007
MGH teleradiology plan rankles Rhode Island radiologists, April 3, 2007
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