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Imaging: Growth Center or Not?

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Opportunities appear to be strong for hospitals.

Given the pall cast over the healthcare industry by the specter of healthcare reform, many senior executives are looking for growth strategies that won't face the budgetary scalpel. On first glance, imaging might not qualify: The feds are continually slashing reimbursement for it, especially in freestanding centers and in imaging tied to physician offices.

But it's always been a piece of the healthcare continuum that experiences rapid growth—mainly because new methodologies appear frequently.

"The entire bank of imaging seems to be an area of potential growth because there's new technologies and scanners and MRI machines being developed all the time," says Glenn Crotty Jr., MD, chief operating officer at Charleston (WV) Area Medical Center. CAMC is currently working on a strategic plan for imaging.

"Outpatient imaging is a huge opportunity for hospitals," says M. Shane Foreman, principal and founder of 3d Health Inc., a Chicago consulting firm that focuses on helping hospitals with outpatient opportunities. "It will take some time, however, for payers to deal with huge growth in freestanding centers and self-referral."

He's talking about efforts to rein in spending on "manufactured demand," which payers believe comes mainly from freestanding imaging centers and physician-owned radiology equipment. That presents an opportunity for hospitals to acquire or joint venture with physicians who feel that their reimbursement no longer offsets the investment they've made in imaging centers.

"The hospital lobby has been successful in not experiencing cuts because they receive provider-based reimbursement," Foreman says. "That's the huge distinction."

Foreman says hospitals have two basic ways to structure imaging facilities to their reimbursement advantage. One is through a provider-based joint venture, which contains a rash of regulations hospitals have to meet to bill and collect as provider-based, the biggest of which is that the facility must be located on the hospital's campus. The other model is a so-called "under arrangement." That means the hospital in essence outsources a portion of the delivery of a service to a different entity. Under either scenario, the patient must be a hospital patient.

If a hospital goes to the periphery of its service area to partner with a freestanding imaging center that brings it new patients, a joint venture makes sense, Foreman says, especially if the physicians truly possess management and operational skills that the hospital may not have.

"But to just partner around what was historically hospital volume, I would not recommend that," he says. "There has to be a compelling business reason to do it." Foreman says hospitals shouldn't take too long formulating a strategy.

"There's a three- to five-year window of opportunity for hospitals and health systems where they clearly have a reimbursement advantage," he says. "They need to be active now in determining the freestanding competitors in the market and whether they want to partner or buy them out."

Philip Betbeze

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