By Matt Skoufalos
Radiology departments have been asked to cut costs for the better part of the last 20 years. Are there any strategies left that have yet to be tried out?
The end goal of the business side of health care is to minimize costs while optimizing quality of care. Getting the balance right in the pursuit of one or the other is an ongoing tension. For decades, one of the biggest profit centers in the system has been medical imaging, which also happens to house some of the costliest technologies to maintain and repair.
The persistent pressure of cutting operational costs is a refrain that John Garrett, supervisor of clinical engineering at Catholic Health Initiatives in Dayton, Ohio, knows all too well. After years of trying to answer the question, he has a depth of perspective on the subject.
To start, Garrett offers a mileage-may-vary caveat that different specialties (ER, mammography, cardiac laboratories, interventional radiology, nuclear medicine) and the size and structure of the health care organization in question will all affect the degree to which efficiencies can be leveraged. For instance, smaller-scale and rural institutions may find it difficult (or impossible) to find qualified in-house service, Garrett said, whereas “deep-seated internal political issues that can create an environment that is not conducive to cost-cutting” may stymie processes at larger hospitals.
“Overall, risk and savings are directly related,” if not linearly proportional, Garrett said. Soon after the warranties on most imaging systems have expired – typically on a five-year timeline, he said – that’s the best time to take on some risk and cut out the costs of a service contract.
Mitigating that risk may mean taking on a trained, in-house field service engineer (FSE), or outsourcing the work to an independent service organization (ISO). Garrett said ISOs can offer significant savings over manufacturer costs for CT, MR, mammography and nuclear medicine service contracts, particularly for off-hours or overtime service calls.
“Due to the reduced labor rates of ISOs, it may be cost-effective to pay an ISO the overtime rate to perform service or maintenance to allow the department to serve as many patients as possible,” Garrett said. “The added revenue combined with the cost savings (compared to the manufacturer’s prices) can show a reduction in cost.”
Other ISO benefits include customer-specific contracts that “allow for a proper level of service to be supplied,” he said, including time-and-materials-only agreements, onsite technician education, or other customizable contract options that Garrett said help to create cost savings.
As an alternative, Garrett suggests an approach that involves creating a position for an accredited in-house preventive maintenance (PM) specialist; a swing-shift role that can maximize uptime by deferring scheduled repairs during off-hours when they won’t interfere with patient scheduling and throughput.
“Some locations are only open three days a week and run patients 10 hours a day during those three days to cut costs,” Garrett said. “In a large system, scheduling the CT and MRI PMs after hours with a PM specialist could show a net gain of hundreds of thousands of dollars through reduced downtime.”
In general, Garrett believes retaining a full complement of FSEs for an in-house service program offers a greater opportunity for savings than does outsourcing repairs. The transition to an in-house team works best when staffers receive the necessary technical training and device-specific support as they build their proficiencies, he said.
“There are often contracts and outside services that are being paid for that could be eliminated or markedly reduced by employing another FSE,” Garrett said.
Another elementary step in risk mitigation is certifying that the entire inventory of a department is necessary to its operations, and that it is appropriately allocated for the same. Utilization rates are one potential indicator of waste (or an opportunity to identify efficiencies), and one of the first places savings may be found. For example, Garrett said, if data show that closing a seldom-used general X-ray room wouldn’t interfere with the pace of normal operations, a department should shut it down. Doing so can reduce service costs (and in many states, licensing costs as well) – meaning that keeping the backup might be more expensive than reallocating the real estate to other purposes.
“The common argument is that if one room goes down, they have a spare,” Garrett said. “When the data are analyzed, however, typically the mean time to failure versus loss of reimbursement for a unit shows that maintaining the third unit is not cost-effective.”
Along with utilization, “mean time to failure” and equipment downtime are important metrics for every imaging department to have a handle on: the former allows supervisors to know when equipment should be replaced as well as at what levels departments should be stocked. Downtime can inform calculations for equipment replacement schedules (and, “in some cases, service provider replacement,” Garrett notes), but the most important statistic it indicates is lost revenue. It also varies by department.
“In an emergency department, a CT runs 24-7, so any time is downtime,” Garrett said. “In a cancer center, a CT may only run 10 a.m. to 5 p.m. So if the CT is down over a weekend, there is no downtime for the cancer center but the emergency department would see 48 hours of downtime.”
At some point, however, even the most thorough exercise of due diligence may yield a limit on cost savings – and the command may still come from above to produce some. Even when it seems like there’s nothing left to give, Garrett points out it’s probably a theoretical limit. He points out that maximal staffing, idealized resource allocation, and rock-bottom prices for reliable parts and service are rarely achieved synchronously due to the constantly shifting variables, including equipment, technology, regulations, reimbursement and best practices.
In such a landscape, Shawn T. Coyne, managing director at The Coyne Partnership of Atlanta, Georgia, stresses the importance of decision-makers reviewing all the cost drivers within their realm of influence. These vary depending upon the organizational structure and their position within it, but a complete assessment of the circumstances involves looking at the experiences throughout a system, not just at its endpoints.
“In the medical world, the temptation is to look at things and assume that everything must be perfect for every patient at all times,” Coyne said. “From a cost management standpoint, that sometimes leads to standard decisions being made rather than situation-specific situations. We’re always asking people to recognize what their biases are and be careful to not be sucked in.”
In a 2010 article in the Harvard Business Review, Coyne and his partners, Kevin Coyne and Edward J. Coyne Sr., outline a three-tiered approach to cost-cutting, the respective levels of which they say are capable of generating as much as 30 percent in savings: incremental ideas, redesign ideas and cross-department or program-elimination ideas. The first point they make is that no one of them alone will be enough to get the job done; anything of that magnitude “would most likely entail so much risk that the organization would never be willing to implement it,” they note.
“Instead, you should plan to reach your goal with a combination of 10 or more actions,” the Coynes advise.
Furthermore, the consultants note that “the degree of organizational disruption caused by your reductions will usually be proportional to the degree of cutting you do,” with greater cost-savings actions generating greater institutional reverberation.
At the 10-percent level are decisions that surround behaviors that could be best described as housekeeping: combining incidental costs, reining in miscellaneous spending, and optimizing labor, including management. Reductions of 20 percent or more include redesigning processes and workflows, possibly streamlining interlocking pieces of an organization, or eliminating some of the pass-throughs and go-betweens among them. Other savings at this level of administration may be related to changing reporting requirements; eliminating, automating, or optimizing tasks; time-shifting work; and eliminating the costly exceptions to typical processes.
“Sometimes it’s really necessary, and sometimes you fall into the habit of always wearing a belt and suspenders in a different situation where it’s not always required,” Coyne said. “Sometimes you can look at things from a process inefficiency standpoint and say, ‘Am I purchasing something in increments that are too small, and I could get volume discounts?’ Or, ‘Am I purchasing things that are too big for what I need?’ I think there is probably more savings out there than many people realize, and I would not be surprised if there’s a 25 percent or so process efficiency improvement available even in the context of something as complicated as radiology.”
Decisions that can cut organizational costs by as much as 30 percent will typically involve the elimination or absorption of one or more departments or services, Coyne noted.
“The last bucket is often: look across universes,” he said. “Every once in a while, somebody has given everything they have to give, and you have to look elsewhere within the organization. But everybody’s inclined to say, ‘We’ve looked at everything as hard as we can, please look elsewhere.’ If you’re the guy trying to cut costs, there’s no elsewhere left.”
Dennis Durmis, head of commercial operations, Radiology Americas for Bayer of Indianola, Pennsylvania, said that from the vendor perspective, manufacturers seeking to drive greater adaptation of their products have to be focused on creating value instead of cutting costs.
“In the long-term, it’ll yield better outcomes for patient care,” Durmis said. “We focus on providing tiered solutions to our customers so they can match our offering to what their needs are.”
Durmis said the technologies that help departments cut costs are those that smooth inter-device communication, leverage data analytics, and support personalized medicine, from patient records to custom-tailored health care solutions. Like Garrett and Coyne, he cited the breadth of variety among operations at different hospitals and health networks.
“Until you see what’s done in another system, it’s difficult to say you’re best-in-class,” Durmis said. “It really gets back to foundational comparative data. Every radiologist likes to look at things their own way [but] we’re seeing a trend to more standardization, and as a result the cost per procedure is going down. Best-in-class hospitals embrace technology versus doing things the way they’ve always done.”
One way to leverage technological advantage is through remote service: Durmis cited Bayer VirtualCare as an offering that allows the company to track the functioning of its technologies through remote monitoring. The data can inform scheduling of service appointments, allowing for more up-front notice ahead of the need for longer-term shutdowns. Any behavior that can allow a department to be more proactive and less reactive helps to obviate the need for more expensive emergency repairs.
Durmis said he sympathizes with department managers and hospital decision-makers who “have been put in a difficult position because of the short-term orientation of cost-cutting” instead of making a more holistic, full-system evaluation.
“Everyone’s in kind of a tight spot,” he said. “There clearly is a bottom. There’s no silver bullets left. If you think about where we’ve come from as an industry, most of the cream’s already been taken off the top. It requires more effort, more work to dig in and discover some of the root causes.”
Conversely, Durmis points out that failure to expend the necessary funds on service contracts or preventive maintenance is simply planning for an unplanned shutdown at a future date. When suites fail for hours or even days, there’s an impact on patients’ lives, which has its own subsequent impact on the profit-and-loss lines of the radiology suite, “and really what is the true cost of that downtime?” Durmis said.
“Radiology managers are taking more risk, and oftentimes it’s extremely counterproductive,” he said. “There’s some challenges out there with access to service or access to equipment, but there are still different ways to do some benchmarking studies across those types of institutions and trying to make some incremental changes to drive some efficiencies in their process.”
By Matt Skoufalos