The Growth Channel

Freestanding imaging strategy: The good, the bad—and what it means for you

by Matt Morrill and Domenica Gilbert 

High quality, fast service, and low price: Health care consumers, especially your imaging patients, want it all. However, succeeding at all three is no small task. 

A recent survey of imaging leaders suggests that nearly 50% have either opened a freestanding imaging center or are considering doing so. The reason? These centers are often better positioned than hospital-based outpatient departments (HOPDs) to deliver on imaging patients' preferences.

To succeed at this strategy, though, you'll need to know about the pros and cons of freestanding imaging centers—and what they mean for you.

The good: They give your patients what they want

When the Imaging Performance Partnership surveyed imaging consumers on their preferences, we learned a few things about what patients want. Respondents told us that low out-of-pocket costs and convenience were the top two most important factors when choosing an outpatient imaging provider. We also learned about what patients don't want: namely, long wait times to get an imaging appointment.

The good news is that freestanding centers are well poised to deliver on these patient preferences. For one, freestanding centers can price their scans more competitively. With a generally low-acuity case mix, they can run on a leaner budget (think fewer staff and more affordable equipment) than HOPDs can. Also, freestanding centers have greater flexibility to adjust slot times and schedule more patients, since they don't have to accommodate inpatient or urgent cases.

The bad: You get lower reimbursement

Freestanding centers bill at a lower rate than HOPDs. And you probably can't get around this if your imaging center is affiliated with a health system: Site-neutral payment (SNP) regulations stipulate that any new, relocated, or remodeled HOPDs will have to bill at half of the Hospital Outpatient Prospective Payment System (HOPPS) rate.

Average outpatient imaging payments by fee schedule
2017 Medicare Fee Schedules weighted by national volumes


What it means for you

Here are three takeaways for planners:

1. Evaluate possible co-ventures. Before you go at this alone, evaluate your market for potential partners. For example, some health care systems partner with large radiology groups or third parties that have efficiency down pat. The key is to ensure that any partnerships you enter help you meet your organizational goals. 

2. Find the right market. The right market location can make or break your investment. For example, if you choose a location right near your main center, you risk cannibalizing your existing volumes. If you pick a location that's too far, you may not have the referral pathways in place to secure enough patients breakeven. Consider calculating an opportunity score that compares how potential markets perform on metrics you care about.

3. Maximize operational efficiency. If you're planning to bring down your price, you'll need to keep your costs low to sustain a healthy per-scan margin. Explore tactics for running your center efficiently, such as flexing staff, rationalizing equipment, and redesigning your slot times. 

Separating fact from fiction in a price-sensitive market

Advisory Board research has found that 56% of Americans now actively look for pricing information before getting care—and that a four-hospital system can see swings in revenue of $16M to $40M due to its price transparency strategy, or lack thereof.

Download this white paper to separate fact from fiction and help your organization prepare for the rise of consumerism.