How Cost-Cutting is Affecting Radiology Departments

There’s no doubt in the United States that healthcare is expensive. While most attention is given to how much health services cost the average patient annually, keeping hospitals and health systems open and functional is a costly business, too. Hospital administrators are constantly on the lookout for how to reduce those expenditures, and they frequently have radiology in their cross-hairs.

According to 2016 data from the Centers for Medicare & Medicaid Services, national hospital spending increased 4.7 percent from the previous year, rising to $1.08 billion. With radiology often viewed as a cost center, many health system leaders look to imaging, among the myriad departments, as low-hanging fruit when it comes to controlling how much money walks out the door.

“The principle of cost cutting is getting applied pervasively in a very rudimentary manner,” says Geoffrey Rubin, MD, professor of radiology and bioengineering at Duke University Medical Center. “There’s a tendency of managers in healthcare systems to ask departments to uniformly cut some percentage from their budget to result in improved performance at the end of the year.”

The concept is simple enough, he says. However, the problem is radiology relies highly on fixed, rather than variable, costs, such as equipment costs versus personnel salaries. Fixed costs can’t be eliminated without compromising the department’s fundamental ability to provide imaging services, he says.

When radiology’s administrative and support staff positions disappear in the effort to control facility expenditures, those responsibilities are automatically scooped up by providers who should be focusing on patient care.

“If the staff that handle phone calls or other administrative duties are suddenly downsized, radiologists immediately have to compensate for that loss,” says Rubin who published a paper on cost-cutting in radiology in a 2017 issue of Radiology. “They can’t be as effective or efficient in doing their best to interpret studies - their productivity is diluted.”

Adding duties that consistently interrupt a radiologist’s concentration can also contribute to physician burnout, he says. Consequently, the potential exists for a facility’s attempts to minimize radiology’s departmental expenditures to backfire.

“It’s a flaw to consider that across-the-board cuts are going to result in better bottom lines at the end of the year,” he says. “That assumes cost-cutting has no impact on revenue generation.”

Identifying the Cost of Cost-Cutting

But, departments don’t have to blindly slice a dictated percentage from their budgets to answer an administration’s cost-cutting call. Instead, they can implement activity-based costing-a strategy that takes a collaborative look at the individual contributions of employees and resources in each cost creation, such as a chest/abdomen/pelvis CT or a brain MRI. It can specifically outline how much a minute of a technologist’s time costs compared to a radiologist’s or other staff member.

Examining the financial breakdown of each activity offers two benefits, Rubin says. First, by including the cost associated with everything involved, it provides an accurate assessment of each service’s price tag. Second, it requires that all parties-radiologists, technologists, nurses, schedulers, hospital administrators, and revenue management-cooperate to accurately map out the service’s workflow.

“This method provides a greater understanding of the pressures various constituents are facing,” he says. “It creates an environment that is more supportive of people working together to find a solution that ideally benefits as many as possible.”

For example, he says, examining chest/abdomen/pelvis CT costs in several environments, including inpatient, outpatient, and emergency department, can reveal the variety of personnel and equipment associated with providing the service. If the cost associated with each person is known, it’s easy to calculate how much it costs to shift the burden of responsibility to another employee or provider. In many instances, Rubin says, adding administrative duties to a radiologist’s plate can make a service more expensive in the long run, adversely affecting the facility’s bottom line.

For cases where losing administrative staff creates a higher price, departments can look for other cost-neutral ways to increase efficiencies and cut waste. Examine scheduling backlogs and look for ways to more quickly process more patients through the department or assess whether all scanners are being used to their full capacity.

Despite the benefits it provides, however, activity-based costing does present some challenges, Rubin says. Identifying accurate costs associated with all personnel and equipment can be time consuming and resource-heavy. Many institutions have reported abandoning the strategy due to a lack of will within the facility.

The Paradigm Shift

For many in the industry, though, the emphasis on being cost conscious is shifting from controlling expenses to creating greater value with what’s spent, says Dennis Durmis, vice president, Head of Region Americas for Radiology and Interventional at Bayer Healthcare. In particular, he says, vendors are looking for ways to help departments maximize their money.

“Vendors are focusing on producing products at lower cost with the same quality and support level,” he says. “We’re looking to provide efficiency and drive throughput while minimizing the amount of time for patients to receive scans.”

Industrywide, he says, there’s a push among vendors to standardize equipment and protocols so radiologists and technologists can be seamlessly productive regardless of what site or suite they’re working in. The goal is to drive efficiencies and prevent radiologists from taking on administrative duties.
The biggest step toward more significant cost consciousness, he says, is the creation of value analysis committees charged with making purchasing decisions. Rather than letting the responsibility rest solely with radiologists, many administrators now include representatives from sourcing and procurement, risk management, and finance.

“The diversity of the decision-making has helped, and I think society will benefit from it,” Durmis says. “But, there’s a learning curve, and everyone involved must get up to speed to understand the trade-offs associated with cost containment.”

The intent of having varied voices, he says, is to ensure purchasing decisions will be made that streamline a patient’s radiology experience from scheduling to receiving results. Doing so could yield a higher monetary return than choosing equipment based only on lowest price.

These conversations and decisions are why, Rubin says, it’s important for practices and hospitals to maintain open channels of communication at multiple levels, from department to C-suite.

“When there is as relationship established where the head of a practice or other representative can sit down with a hospital CEO or other key people to discuss challenges or brainstorm solutions to fundamental concerns, decisions can be made that aren’t disadvantageous to anyone,” Rubin says.

Ultimately, the greater focus on cost containment is changing how hospitals approach their daily operations, Durmis says. In doing so, they’re making decisions that to control expenditures while considering the best ways to still provide quality care to patients. And, the long-term impact for radiology will likely be beneficial, he says. 

“Hospitals are starting to shift toward running like a business rather than like a not-for-profit. It’s enabling them to make richer decisions based on greater business acumen,” Durmis says. “It’s helping to lower the cost of healthcare across the U.S. They’ve reached a level of sophistication that bodes well for patients and healthcare overall.”