Home

  • Home
    • » e-Newsletters

Business plan, debt reduction: Proper responses to DRA

Radiology Administrator's Compliance and Reimbursement Insider, December 1, 2006

With mere weeks left until the Deficit Reduction Act (DRA) implementation, radiology administrators need to prepare. Some analysts say the DRA will cost the imaging industry more than $1 billion annually.

Although many believe that something—divine intervention perhaps—will prevent the DRA implementation, “you have to behave as if this is really happening,” says Bob Maier, president of Regents Health Resources, Inc., in Brentwood, TN.

“Everyone should have done the math already,” to determine the effect of the DRA, says Fred Gaschen, MBA, CHE, executive vice president of Radiological Associates of Sacramento (CA) Medical Group.

Maier says to ask the following questions when conducting an analysis for your facility:

  • How severe will the effect be?
  • What will you do to make up costs?
  • Can you afford to cut costs internally?
  • Can you eliminate scheduling backlog?
  • Can you increase the volume of scans at your facility?
  • Will you add a second shift or extend hours to increase your capacity?

    Strategic plans plot business success

    To diversify or specify your business line, look at your surrounding market, he says. “I am amazed at the number of facilities that never completed even a basic strategic plan,” says Gaschen.

    A strategic plan helps your business find its focus and earn greater profits. It uses data to accurately describe the current pitfalls and powers of your business.

    For example, everyone talks about the importance of imaging to an aging baby-boom population. Examine census data in your specific area, Gaschen says. Just because the general population of elderly has increased nationwide doesn’t necessarily mean that the senior population near your facility grew as well, he says.

    “The DRA makes imaging a much more competitive business,” says Maier.

    Refinance debt

    Centers that carry a large debt for previous facility, or equipment, improvements should look to refinance where possible, Maier says. DRA cuts could make debt repayment difficult. Should the proposed Access to Medicare Imaging Act’s two-year delay come into play, it would provide a much-needed circuit breaker for centers to refinance or renegotiate their debts. Take advantage of this, Maier and Gaschen suggest.

    Renegotiate payer contracts

    Further, look at contracts with payers and keep an eye on new payer regulations, says Gaschen. Many private payers have already implemented measures similar to the DRA, he says. He points to insurers United and Aetna, both of which adopted payment policies mimicking CMS’ payment reduction on same-day, contiguous body part scans. “Make sure that you’re aware of what’s going on around you in the industry so you can be prepared,” Gaschen says.

    Examine commercial contracts and attempt to remove any ties to Medicare payments. Gaschen renegotiated contracts several years ago. “If you can, try to renegotiate with payers and aim for 2008. If not, you’re looking down the barrel of a double blast,” he says.

    Imaging shakedown

    Consolidating the market may be part of CMS’ overall design, says Maier. “Imaging centers will close [and] this can be a good thing or a bad thing,” he says.

    If radiology services improve overall because of increased competition, everyone benefits. Conversely, if cuts to radiology stretch the industry too thin, then customer service suffers, he says.

    “And with radiology,” adds Maier, “when we talk about customer service, we’re talking about people’s health and well-being.”

    The federal government wants to reduce imaging costs, Gaschen says. “That’s correct, that’s fine. We’re talking about taking a scalpel to remove a growth. They took a meat cleaver and hacked off a leg.”

    • Most Popular