The use of teleradiology services was originally framed around the need for a better lifestyle, usually to supplement a radiology group for its call obligation. Teleradiology reading was almost always ‘preliminary,’ with final reports generated by the regular staff, and it was always an expense to the practice that was deemed worthwhile to avoid having to provide night and weekend coverage by the regular staff. Today, the picture has changed to the point where teleradiology services are providing final reports and they have become an indispensable part of the practice that has shifted from a cost center to a profit center.
Teleradiology providers are facing the same shortage of radiologists as are group practices, and, amazingly, they are now asking the groups to resume the responsibility for night and weekend call! Practices have become so dependent on teleradiology as an integral component of their practice that they are now short of leverage to use in response. At the same time, the teleradiology services want to raise their rates to cover the increased cost to maintain their staff’s salaries and benefits.
Proactive vs. Reactive
Now is a good time for every radiology group to review their teleradiology service agreement. Even though everything may be working just fine at the moment, understanding the terms that would allow the service to change rates, service schedules, or to terminate the agreement is critical so as not to be caught by surprise. If unfavorable terms are found, consider whether it makes sense to try and renegotiate, but be aware that the chance to renegotiate might be just what the service needs to invoke its own idea of a better deal to the detriment of the radiology group. If there is nothing in the agreement that would allow the service to unilaterally make changes in the short run, then the group has an opportunity to assess its position and act carefully.
Key Contract Terms
There are several typical contract terms that can have a great impact on the group aside from the rate schedule.
Future Rate Increases
How often can the rates be changed, and is there a limit on increases? Using the inflation rate (Consumer Price Index, or CPI) can be good idea depending on the economic environment, but rarely does physician reimbursement keep up with inflation so there is a built-in mismatch. Keying the contract rates to the annual change in the Medicare fee schedule would be great, but probably a non-starter. If the parties can agree on a fixed annual increase, or an annual cap that cannot be exceeded, this might be a good workable solution. Annual increases are easier on both the practice and the service. We know of one group that had not experienced a rate change for over 5 years but is now facing a 37% increase, whereas a 2% per year increase would put them at slightly more than 10% higher than their old rate.
Termination Provisions
Teleradiology contracts once contained the ability to terminate with 60-90 days’ notice, but today we find that 120 days’ notice is common. Even this longer period is not enough if the service decides to suddenly terminate the agreement, considering the time it would take the group to locate and sign a new service agreement and then get the new providers privileged and credentialed (both of which can take at least 90 days if all goes smoothly).
Guaranteed Monthly Minimum
When the group wants to change teleradiology providers, they will normally phase out the old service while the new one comes online. However, if their contract has a minimum monthly payment then they have to be careful not to drop the old service’s volume too much during the transition or they will be wasting money. This is something that can be managed, but keeping any monthly guarantee as low as possible will work in the group’s favor.
Credentialing Costs
The cost of obtaining and maintaining hospital staff privileges and payer credentialing can add up quickly, so it’s a good idea to try and limit the number of providers in the teleradiology service’s pool. This can also help to ease the administrative burden of credentialing with payers. When the service does final reporting, the group has to be mindful of being credentialed for Medicare billing in the state where the reading takes place, so having the service limit the number of states involved can help. It is sometimes possible to negotiate some credentialing cost sharing with the teleradiology company.
Analyzing the Rate Schedule
A radiology group considering a change of teleradiology providers for any reason will solicit proposals from a number of vendors, and the initial focus will be on the rate schedule. Simply lining them up side-by-side won’t give an accurate picture of which one to choose. Some vendors might show a very favorable rate for certain procedures, but very high rates for other procedures. The analysis calls for volume-weighting, just as we recommend for any fee schedule analysis. If there is an outrageously high rate for a procedure that is rarely performed, then it doesn’t matter as much as the rate for the most common procedures.
The volume data has to be relevant to the work to be performed by the teleradiology service, so using the overall practice volume will not work. The best data will include the volume by procedure for the coverage period (for example, from 8 pm to 7am), separately by weekdays and weekends. The invoices from the incumbent service can be used to develop a monthly volume average. Applying the expected volume to the fee schedule will allow the group to calculate its expected cost for the service. This monthly cost can then be compared across the proposals from the various services.
The monthly cost can be impacted by the hours of coverage. If data is available that shows the volume of exams by hour, then the group can evaluate whether it might make sense to start the teleradiology service an hour or two later in the evening.
When the service provides final reports, another component of the rate analysis is the revenue that can be generated to offset the cost and create either a profit or a loss for the group. It’s important that the fee schedule from the teleradiology service line up with the billable procedures so that billing records can be used as a tool to directly audit the monthly invoices. For example, a CT Abdomen & Pelvis exam should be considered one study, not two separate studies, as the billing can only be done as a bundled procedure. Similarly, when the billing will be done as a complete procedure, the service should not charge for two limited exams.
Consider this table of sample rates:
|
|
Service 1 |
Service 2 |
Service 3 |
Service 4 |
Service 5 |
|
CT |
$56.75 |
$46.00 |
$40.00 |
$46.00 |
$58.50 |
|
CT Head |
$56.75 |
$46.00 |
$40.00 |
$46.00 |
$49.25 |
|
CT-Abdomen/Pelvis |
$76.00 |
$60.00 |
$60.00 |
$70.00 |
$74.00 |
|
CT-Chest/Abd/Pelvis |
$135.00 |
$80.00 |
$88.00 |
$115.00 |
$103.25 |
|
XR |
$15.75 |
$14.00 |
$11.50 |
$12.50 |
$15.60 |
|
US |
$40.00 |
$33.00 |
$33.00 |
$37.00 |
$40.00 |
|
Nuclear |
$55.00 |
$35.00 |
$55.00 |
$40.00 |
$42.00 |
|
MRI |
$87.00 |
$60.00 |
$50.00 |
$72.00 |
$61.00 |
|
MRA |
$87.00 |
$60.00 |
$55.00 |
$72.00 |
$61.00 |
|
CTA |
$80.00 |
$55.00 |
$48.00 |
$58.00 |
$60.50 |
|
CTA-Abdomen/Pelvis |
$95.00 |
$90.00 |
$72.00 |
$85.00 |
$85.00 |
|
CTA-Abdomen/Pelvis w/runoff |
$175.00 |
$130.00 |
$72.00 |
$150.00 |
$150.00 |
|
CTA-Chest/Abd/Pelvis |
$135.00 |
$115.00 |
$51.50 |
$114.00 |
$114.00 |
Which service offers the best deal? While Service 3 seems to be the lowest on most exams, they aren’t the lowest on all of them. Applying the practice’s monthly volume to the rate schedule, and also calculating the billable amount, allows us to fully understand the impact of each fee schedule, as shown below:
| Service 1 | Service 2 | Service 3 | Service 4 | Service 5 | |
|
Monthly Revenue |
$134,332 | $134,332 | $134,332 | $134,332 | $134,332 |
| Monthly Cost | $139,078 | $108,157 | $98,858 | $117,049 | $129,778 |
| Profit (Loss) | $(4,746) | $26,175 | $35,474 | $17,283 | $4,554 |
As it turns out, Service 3 in our example does provide the best return to the practice, producing a profit of $35,474 as compared to a loss of $4,746 if Service 1 were selected. With this type of analysis, it becomes possible to calculate the profit or loss for each procedure and then negotiate and fine-tune the fee schedule based on the types of exams that will be read most often by the service.
Conclusion
Whether the practice is facing a fee schedule increase or considering a change of teleradiology services for any reason, a volume-weighted analysis is essential to negotiating the most favorable contract. Don’t forget to pay attention to the other important contract terms as well. Harder to evaluate than cost is the quality of the interpretations and the “fit” of the on-call readers with the rest of the group. Other measures such as turnaround time and communication with ordering physicians must also be considered.
It takes a lot of time, effort, and some expense to make the change, so the group has to be sure the savings outweigh these factors. The current high demand for teleradiology services puts the group at a negotiating disadvantage, but with the right data a reasonable agreement can be attained. Subscribe to this blog for the latest information.
Sandy Coffta is the Vice President of Client Services at Healthcare Administrative Partners.
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