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The imaging landscape is changing. Here's what you need to know.

September 27, 2017

    Health system leaders are being pulled in two directions. On the one hand, the shift toward consumerism is forcing them to focus on individual patients' needs. On the other, the emergence of value-based payment (VBP) programs and other population health endeavors is compelling providers to think about the health needs of a larger patient population.

    Although consumerism and population health seem like competing forces, both are pushing systems to keep an eye on cost—whether by limiting unnecessary utilization of expensive imaging technology or employing strategies to be more price-competitive.

    To learn more about the changing landscape of imaging services, I sat down with Matt Morrill, an expert on Advisory Board's research team that provides guidance to imaging leaders and planners about strategic decisions and growth opportunities.

    Matt Pesesky: How do you expect shifting payer dynamics will affect the imaging space moving forward?

    Matt Morrill: When it comes to VBP, imaging is one of the most at-risk service lines for two key reasons.

    The first is utilization management: Under a fee-for-service (FFS) payment model, providers were reimbursed for all services rendered, so unnecessary utilization didn't hurt their bottom lines. Now, providers who participate in value-based payment models are not necessarily paid per scan—and are therefore being pushed to limit unnecessary utilization.

    The second challenge for providers is the impact of high deductible health plans (HDHP) on consumer behavior. Imaging is the most at-risk service when it comes to consumerism and price sensitivity because generally, patients getting scans haven't hit their deductibles yet. Additionally, payers will continue to steer patients toward more low-cost freestanding centers, creating a double-whammy of price-conscious consumers and lower patient volumes for higher-priced hospital outpatient departments.

    The bottom line: Patients' needs for imaging will naturally grow as disease prevalence increases and demographics shift, but imaging volumes—especially health system-based imaging volumes—might not grow accordingly because providers will try to limit orders to only the most appropriate and steer patients to lower cost sites of care.

    Pesesky: How do we expect services and investment to shift from inpatient to hospital outpatient department (HOPD) imaging or independent freestanding sites?

    Morrill: Increasingly, we're seeing patients gravitate toward freestanding imaging centers because they are relatively lower cost and more accessible. With the rise in patients with HDHPs, these lower-cost settings appeal to patients' growing price-sensitivity. Additionally, freestanding imaging centers tend to be more conveniently located with easier check-in processes, rendering them more appealing to patients who prioritize access and convenience.

    However, we're also not expecting hospitals to rush toward buying up freestanding imaging centers like they did in the past. Before the implementation of site-neutral payment regulations (which slash reimbursement rates for outpatient services provided more than 250 yards from the main hospital), hospitals could buy freestanding centers and then bill for services as though it was a hospital outpatient department. The relatively higher reimbursement in the hospital outpatient space made these slam-dunk investments. Now, that advantage has basically disappeared. If a hospital buys a freestanding imaging center that's more than 250 yards from its campus, that center has to bill under the physician fee schedule, which tends to have lower reimbursements. It can still be advantageous for hospitals to buy freestanding centers in markets experiencing high levels of patient steerage or low volumes in their existing outpatient departments, but the return on investment is much less certain than it used to be.

    Pesesky: Do health systems view imaging as a growth industry? Do they view technology as a market differentiator?

    Morrill: Imaging used to be a major profit center for hospitals—very high-margin, very easy to achieve a return on investment. While that's still true, the equation is starting to change, especially for hospitals that are more fully in a cost-centered population health or capitated environment. For example, Maryland hospitals, which are now on global budgets, are not getting paid per scan, which lessens their appetite for new investment in imaging. If we continue to trend toward capitated payment, imaging could be on the chopping block. Still, imaging is very profitable in a FFS setting and it will remain in high demand due to the aging of the population.

    While modern technology is important to patients, they're primarily looking at price when making imaging decisions. Generally, patients won't pay more to get scanned using newer technology. Such innovation might matter to referring physicians, but for patients with HDHPs, physician referrals are becoming less important than price in determining where they ultimately get their scans. The importance of low-cost scans to consumers is encouraging hospitals to buy less expensive scanners and extend equipment lifecycles, with perhaps the exception of research hospitals that still value high-end technologies. Nonetheless, we expect both trends to continue. Overall, imaging is not the same investment opportunity or market differentiator it was in the mid-2000s.

    Pesesky: What technology and facility investments are top of mind for imaging leaders?

    Morrill: For the last few years, we've seen vendors introduce more cost-effective technologies, indicating that providers and suppliers alike recognize that consumer price sensitivity is here to stay. Beyond that, imaging leaders are focusing on enterprise imaging solutions and prioritizing investments that can be integrated with their electronic health records. IT solutions and optimization software to ensure interoperability and connectively will become increasingly important to provider organizations, as will workflow and clinical decision support tools that demonstrably increase efficiency.

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