Alis Technology – How to choose a RIS System

Opening an imaging center can be an exciting yet daunting undertaking. This article highlights areas that need to be considered. While we try to address the major items, we do not profess to be all-inclusive. Perhaps however, it calls your attention to details that otherwise may have been overlooked.

Perhaps the most important step is to carefully think through what distinguishes you from the competition. Imaging is a highly competitive business and you need to identify your 'value added' - the characteristics that will make your success more likely than not.

Fast turnaround (same day reports) to referring physicians and other components of 'good service'are the norm today and while the lack thereof will guaranty failure, they alone do not assure success. Strive for superior service. Make this is an ongoing passion - constantly look for ways to improve the experience of both the patient and the referring physician. Periodic surveys of your patients, the physicians, and the office personnel that initiate the referral process are invaluable. And don’t neglect your managed care company contacts. Keep in touch on a regular basis to determine if they have any contractual or other issues that need to be discussed.

Look for features or niches that make you unique and truly distinguish you from the competition. Here are some things to consider. a) Talk to potential referring physicians and find out the +’s and -‘s of the competition and under what circumstances they would refer to you. b) Pick the right location (see below). c) Contract with a well respected radiology practice, preferably a group with a variety of sub specialists. Make sure the group is totally committed to the success of the center d) if managed care is prevalent; be sure that contracts with companies covering the majority of lives in your service area are open and available to you with rates that are acceptable. e) Consider giving up part ownership in the center if it will enhance your chance to succeed i.e. form a partnership with a hospital or with a radiology group. e) Determine whether choosing a particular piece of equipment or offering certain services not offered by the competition will enhance referrals f) can imaging be justified, both legally and as a profitable center standing on its own, as an extension of your practice (i.e. orthopedics, oncology, cardiology).

Select a law firm well versed in health care. You may want to interview several firms and be sure and meet the senior attorney responsible for your project. Ask what are their hourly rates, their expected budget for the project and how they plan to staff the job. You want a senior attorney supervising the project but the routine work performed by juniors or paralegals when possible to control costs. Don’t be afraid to try to negotiate rates or set a cap for the project although a cap may be difficult to obtain if the scope of the work is not clearly defined at the offset. The attorney you select should be business savvy and practical as well as legally proficient. And you want an attorney that will be proactive in calling your attention to things you may have overlooked. Among the other areas he should be well versed in are: a) Federal and state laws regulating health care, such as, Certificate of Need, Stark and baby Stark laws, anti kick back and other fraud related laws, licensing requirements, HIPAA, Medicare and Medicaid b) securities laws c); real estate d) managed care, e) contracts (the Radiology reading agreement, managed care contracts and purchase and sale agreements re the equipment) f) intellectual property (software licensing arrangements),) and g) setting up and structuring your venture.

With your attorney, determine the appropriate legal organization ( LLC, corporation, limited partnership, etc). Tax and other considerations will be relevant. Regardless of the type of entity that is formed, you need to consider, among other things; a) to whom you plan to offer ownership, (and there can be different classes of owners with different rights attached to each class), b) the terms of ownership, (i.e. percentage, cost, limitations on disposing of shares and other restrictions) c) buy - sell arrangements among owners d) non competition provisions e) governance issues such as who will manage the operations, how the managers are initially chosen, how can they be changed, and what are the limitations and checks and balances on what the managers can do without additional approval e) the procedure for resolving deadlocks f) under what circumstances you need an offering memorandum to sell shares and what must the offering memorandum contain. And remember, while all the participants generally start off on the same page, more often than not, relationships change; factions can arise which if not managed properly, can adversely affect the business. Your structure should include a method to resolve conflict among owners; hopefully one which is fair to all parties, will prevent litigation and will preserve the value of the enterprise.

Determine whether you plan to lease space or buy a building. Regardless of your choice, the right location is critical. The location should be conveniently located to referring physicians, easily accessible with adequate and convenient parking and well delineated with good signage so patients will have no trouble finding your center. A site near a hospital or a medical office complex might be ideal. If you plan to lease, make sure the landlord has a good reputation, is financially sound, maintains his properties, provides good services and treats his tenants fairly. Make sure the vendor and your architect are satisfied that the space can accommodate the equipment you plan to acquire (weight, power, cooling, magnetic interference, etc) and if it can’t, what are the costs to rectify the situation. The space should be adequate for your needs with room for possible growth, but be careful about renting excessive space. Work with an architect that has experience designing imaging centers with which you are familiar. Bid out the construction on a fixed price basis to reputable, financially stable contractors who have built imaging centers and remember the cheapest bid is not always the best choice. While price is important, you want quality workmanship with the project completed on time and within budget. What you do not want is major surprises during the construction phase so make sure that you plan carefully at the front end to limit change orders while construction is in process. If you have any questions regarding the financial condition of the contractor, insist on a payment and performance bond. Look at other projects the contractor has done, preferably medical related, and check references. The contractor and architect will need to coordinate with the equipment vendors to ensure the site meets the vendor’s specifications, to minimize costs and to avoid delays. For example, you want the telephone and data wiring done while the walls are open. And don’t abdicate responsibility to the contractor and architect while construction progresses. We suggest weekly meetings to review what has been accomplished to date as well as discuss any problems that have arisen or may possibly arise.

If you are leasing the property, the start date for lease payments ideally should not occur before you are open for business and are able to see patients. Consider negotiating for reduced rentals for several months, escalating as your cash flow kicks in. The term of the lease should be at least 5 years with options for renewals. Be aware of what prevailing rents are in the area - a good tenant broker should be able to help you find the appropriate property and assist with all the lease negotiations. Other things to address in the lease are the services that are to be provided by the landlord, prominent signage, parking, whether the landlord will finance the leasehold improvements, how much the landlord will allow you per square foot for a build out allowance, what you can reasonable expect in the way of annual increases for taxes and operating expenses ( the building should be able to provide you with a projection), whether the landlord will grant you the exclusive right to provide imaging services in the building (and in any nearby buildings he may own) , the return conditions at the end of lease, rights of first refusal on other space in the building if that is a consideration , and a broad 'use' clause that will permit you to conduct your business as now configured or to accommodate any changes envisioned for the future.

Equipment Selection

Decisions on major items of equipment and major items of software should be made with input from the radiologists and, if possible other users such as techs and key administrators. Radiologist input does not imply ceding them carte blanche authority however, unless cost is no object and this is seldom the case. The best scenario is to come to a meeting of the minds that both parties feel comfortable with taking into consideration your budget and the needs of the community you will be serving. For example, if your market research indicates a need for an open magnet and a 16-slice CT, this gives you a starting point and the choice boils down to manufacturer. Obtain quotations from several manufacturers. As with any purchase, make sure the vendor is strong financially and committed both to health care and the product line you are considering. Try and determine that you are not looking at a product that may be 'medically' obsolete within a short time, replaced by new or more advanced technology (Consider what the development of the spiral CT did to the prior generation of CT scanners). On the other hand, be careful if this is the first product of its kind on the market. You may not want to be a guinea pig. Ask the vendor for a list of users in your geographical area and you pick the sites you would like to visit without the vendor. This process avoids the dog and pony shows. Take a radiologist and perhaps a tech to the sites. And talk to their radiologists and techs that use the equipment (or software) you are considering. Ask how smooth the installation went, down time, quality of the manufacturer’s service and as well as what the users like and do not like about the product. Obtain and compare quotes from several vendors and negotiate terms and conditions. Once the manufacturer says he has no further room to negotiate price, remember there are other ways he may be able to sweeten the deal, such as by extending the equipment warranty, reducing the cost of service or, if the vendor is providing the financing, by reducing the interest rate or making other financial concessions. Don’t commit to the equipment until the entire package ( warranty, financing, etc.) has been negotiated. If you are developing more than one location, cross training of techs and coverage is simplified if the equipment in each location is, to the extent feasible, alike.

Financing sources include banks, independent finance companies specializing in imaging center financing and equipment vendors with captive finance companies. The terms of the financing will be determined by lender’s assessment of the risk inherent in the transaction. The more risk perceived by the lender, the more onerous the terms (higher rates, requirements for personal guarantees, additional collateral, strict covenants, shorter financing periods, etc). Start up transactions have a presumption of risk that must be overcome. Factors that mitigate risk in the lenders view are an in depth feasibility study and sound business plan, experienced personnel with a track record of success in other like ventures, a willingness to put substantial equity in the business, a willingness of the principals to personally guaranty all or some of the debt, your ability to raise additional equity if needed, and limiting the borrowing to cover the purchase of hard assets such as the equipment. Leasehold financing and working capital loans are perceived as riskier.

Bank financing is usually the cheapest; however their lending requirements are generally more onerous. Also, in our experience, banks are less flexible at the front end in structuring and documenting the transaction as well as if you run into cash flow problems and require temporary relief or a restructuring of the loan at some time. And banks generally take more time to get a transaction completed because of the various level of approvals required.

Vendors can be an excellent source of financing. They are anxious to sell their equipment and can be quite flexible and reasonable if providing financing will cement the equipment sale.

Independent health care finance companies generally charge higher rates. However, since they specialize in providing financing to imaging centers, they understand the business, can ordinarily make decisions quickly and can be quite imaginative and flexible in structuring the deal.

Shop financing terms like everything else, but before you go shopping, prepare a 'package' to present to the vendors that you can be proud of. It should include, at a minimum, a brief overview of the project, a feasibility study and business plan, resumes of the key personnel, a sources and uses of funds statement and pro-forma financial statement s (balance sheet, income statements and cash flow) covering at least two years and including all assumptions upon which the numbers are based, equipment quotations, and of course the details on the amount you desire to borrow and the uses to which the funds will be put. It goes without saying that you must be very thorough in constructing the pro-forma financial statements and be conservative in your projections. Verify and re-verify the assumptions upon which you have based your revenue projections, cash flow and make sure you have included all your expenses, including start up costs. Stress your cash flow statements to see what happens if revenue is less than you expect and be prepared to discuss how you will cover short falls in a worst case scenario. Your accountant should review the plan before it is finalized.

Let’s define infrastructure as the non- diagnostic equipment and software applications that are required to operate. Among other things, consider the need for;

Radiology Information System (RIS). The RIS manages the centers workflow and captures all the essential information you need to function. It allows you to schedule and register patients, capture patient demographics, insurance information, referring physician data, track patient status, capture the study result with dictation and transcription features, bill and collect and generate a wide variety of reports necessary for managing the business. You can choose a RIS system that is housed on your hardware or out source to an ASP (alternative service provider). A number of vendors offer RIS systems and the usual due diligence rules apply.

PACS (Picture Archiving and Communication System); A PACS system will allow you to eliminate film( except for those physicians that resist change) and equips you with the ability to electronically store, recall and distribute images to multiple locations. PACS can be expensive and thought should be given to interim solutions (such as a mini PACS) with a view to adding a full PACS as the business matures. We also believe the cost of PACS will come down over time.

Accounting package; the accounting software package captures the information needed to produce the company’s financial statements.

Misc; Email, Microsoft office, anti virus software, etc.

The keys to a smooth running center are a) a well designed, well equipped, properly maintained facililty with the right IT infrastructure; b) a well trained, dedicated and proficient staff; c) written policies and procedures; c) a dedicated, well respected radiology group; d) on going communication among all the parties, e) a total on going commitment on the part of all parties to providing superior customer service to your patients and referring physicians and f) a harmonious working environment.

A comfortably furnished, clean waiting room with beverages available and a television set is the norm. The appropriate HIPAA notices should be posted and readily visible.

The front desk staff and the telephone operator are the first people your patients and often your referring physicians come in contact with. They should be sunny, accommodating and proficient - people friendly. Avoid, if you can, an automated telephone response system. Most people prefer to talk to an operator and strive to have each phone answered within three rings. All of the patient information needed to perform and bill the procedure should be collected at the front desk and entered in the RIS.

The technologists should of course be certified as to technical proficiency. Technicians, like the rest of your staff, should be empathetic, patient, sunny, accommodating to the patients and work well with the radiologists. Consider cross training if you are a multi modality center.

Policies and procedures should be in writing, readily available to all personnel and ongoing training sessions should be conducted where required by law. . There will be general policies and procedures applicable to every employee as well departmental policies that are more localized. Each employee should acknowledge receipt in writing of a copy of the center’s general policies and procedure manual and that receipt should be placed in the employee’s personnel file. Each center should have 1) an employee manual delineating the rules and regulations governing the employer-employee relationship 2) HIPAA policies and procedures covering both the privacy and security rules 3) Departmental policies and procedures (relating to billing and collection and handling of hazardous materials for example).

Choose your radiology group carefully as they will always be one of your most important assets. We prefer a local group with sub specialists and a group that understands what is required of them to be successful in the competitive, for profit outpatient environment. The group should be well respected by the referring physician community. Ideally, your prospective referring physician community should recognize the radiologists at your center as preeminent in their field and therefore, the physicians of choice for their patients. If possible, a radiologist should be on premises at all times and spend some time with the patient answering any questions they may have. If the reading radiology group is large, determine which physicians are most committed and suited to an outpatient practice and try and schedule them at the center as often as possible. Continuity helps everyone. Make sure your radiologists do not and will not compete with your center by requiring a written, enforceable non compete agreement. It goes without saying that the more committed your radiologists are to the success of the center, the better your chance of success.

Weekly staff meetings, including a representative of the radiology group (who does not have to be a doctor), give people an opportunity to discuss issues, resolve problems and keep everyone informed of center happenings. Keep the meetings short and to the point. Written agendas, distributed in advance, help. The meetings should be constructive - avoid finger pointing. Assign responsibility for action items and track progress from week to week. Include representatives from all areas in your staff, if possible. You are a team and input from all areas should be encouraged. We also recommend, at least monthly a meeting that includes the medical director of the center, the center manager and the director of marketing.

Finally, I do not believe that you can provide superior service unless your employees enjoy their work. The goal is to retain good employees and avoid costly turnover. Here are a few suggestions; a) choose your employees carefully and make sure they are committed to your culture and they are the kind of people that will work well in your environment - up beat, cooperative, a team player, responsible, skilled, flexible and willing to extend that extra effort when needed. b) Do what you can to promote a team concept and show that you appreciate your employees (staff meetings, intra company news letter, staff luncheons, holiday events, etc) c) set high standards and let your employees know how they are doing with annual reviews; if a problem develops, confront it immediately with the employee d; treat everyone equally - don’t play favorites e) insist that everyone be treated with respect f) compensate your staff fairly and this may include a carefully crafted incentive plan g) let people do their jobs - if you need to micromanage, you have the wrong person. h) continually strive for excellence; people enjoy being apart of something they can be proud of; i) consider sharing your financial results of the results with staff so they can see how you are doing.

A few words about marketing. If possible, we prefer hiring a marketing person who has had a connection to the medical community and is knowlegable about imaging. If that person has a good reputation and is liked, it is easier for them to access doctor offices and they can relate to the needs of the doctor and the doctor’s staff more effectively. In addition to 'selling' your service, a marketing person with these skills can be your customer service representative.

Always remember you have four markets that need consideration; patients, referring physicians; the office staff who actually schedule where the patient is referred and finally, the entity actually paying for the service (managed care provider, workmen’s compensation or private insurance carrier).

I believe the best way to market to patients is to turn what could be an unpleasant experience (a visit to a doctor) into as pleasant an experience as possible. In addition to the things we have already mentioned, this may involve arranging transportation to the center and back home when needed, seeing the patient as close to the time scheduled as possible (no one enjoys waiting), explaining what the procedure involves and providing an opportunity to ask questions or express concerns to the radiologist. If you treat each patient as 'special' the word will spread to the referring physician. Put yourself in the patient’s shoes and treat them exactly as you would like to be treated. Trite but true.

Doctors are generally busy and it may be difficult for your marketing person to spend much if any time with them. You should have much more success if you involve your radiologist in the process. Doctor to doctor marketing is more effective. Radiologists that are truly committed to the success of the center and realize the importance of marketing in the outpatient environment should be willing to participate in your marketing efforts. Presentations by the radiologists on topics that would be of interest to referring physicians in the evening or over lunch also should be encouraged.

While the doctor’s order the exam, it is often the front office that decides where the patient is sent. Obviously insurance coverage is important. They won’t send a patient to a center that does not accept their insurance plan. Try and contract with all the managed care companies so the referring physician’s office staff does not have to check coverage each time a patient is referred with the caveat that you need to read the contracts and understand all the important terms. Don’t sign a contract if you are going to lose money or if the terms are otherwise onerous. Negotiate with the managed care company, pointing out why certain provisions, including the rates are unacceptable. Often times you can soften or eliminate some of the more objectionable provisions.

Stay in touch with the staff - donuts, cookie and candy drop offs, etc. Make sure you are meeting their needs and make it easy for them to refer to you.

Give the referring physicians and their staff an opportunity to see your center; Schedule a lunch at the center and give them a tour of the facility and an opportunity to talk to your radiologists.

A few other marketing ideas; sponsor community charity events (the run for the cure, etc), holiday baskets for your best referrers; a well done web site that is clear, concise, easy to navigate with information that is useful to both the patient and the referring physician. Consider the use of the media (radio, TV and print).

Finally, make sure you have the tools to track your marketing results. You should be able to track who is referring, the volume of the referrals, what modalities they are referring, when the referral was made and be able to compare that data to prior periods so you can measure any meaningful changes, either positively or negatively. Obviously, if referrals drop off from a particular practice, you need to quickly determine why and take action to correct the situation.

Referring physician relationships

Good marketing should get patients in the door, at least once. The challenge is to develop relationships with the referring physicians who control the patients so that you are the center of choice for all their referrals. To reiterate, make the experience of their patients as pleasant as possible so the word gets back to their doctor. Listen carefully to the needs and wants of the referring physician and try desperately to meet them - if you don’t someone else will - and the only way you will know what they want is to stay in touch. As we have said before, your radiologists need to participate in this relationship building. Make sure you show your appreciation from time to time, but be mindful of any legal prohibitions that may apply both at the Federal and state level (such as anti kick back and other fraud and abuse laws).

Every good business puts together a budget forecasting monthly revenues, expenses and cash flows for the coming year. The starting point is the actual performance of the center for the prior year. Budgeting should be taken seriously. The budget should be reviewed monthly against the actual performance of the center for that month. If there are variances, and there always are, the reasons for the variances should be analyzed to see if corrective action need be taken. Sometimes major events occur which were entirely unexpected and which completely obviate the original budget. In that case a revised budget for the remainder of the year should be developed which becomes the benchmark against which performance is measured.

Billing and Collecting

Regardless of how successful you are at bringing patients to the center and developing long-term relationships with referring physicians, if you can’t bill and collect for your efforts, all is for naught. Billing and collecting can be done in house with your own staff or contracted out to specialists. Either way, you have to capture the appropriate information and get the necessary authorizations up front if you expect to be paid when you submit the bill, and you must ascertain whether the service you provide is reimbursable by the 3d party payer. For example, certain PET indications are reimbursable by Medicare, others are not. If the bill does not contain all the information the 3d party payer requires, payment will be rejected. Sometimes, you can re-bill within a specified period of time by providing the appropriate information. In other situations, there may be no way to rectify the situation (for example if the insurance company did not authorize the procedure in advance). Bills must be 'coded' properly. Each procedure that you perform has a code attached to it that determines the reimbursement amount. Over billing can be fraud and under-billing costs you money, so proper coding is critical. Whether you establish your own billing company or out source, bill electronically when the payer requires such (and comply with HIPAA) or your bill will not be paid. Even if the payer does not require electronic submission of bills, bill electronically if you can as this should expedite payment. If you outsource billing, I suggest selecting a firm that does an outstanding job billing and collecting for other outpatient imaging centers. Note. Managing the billing and collection of your accounts receivable is arguably the most important business function of your center. The goal is to maximize collections as well as minimize the days such receivables remain outstanding. Claims need to be submitted cleanly and you need to implement follow up procedures to ensure that there are no impediments that would prevent the payer from processing and paying your claim. Any co pays or deductibles that are due from the patient should be collected by the center when the patient checks in for the procedure.

The doctors and the technicians need to be insured against medial malpractice. Usually the doctors pay for their own insurance coverage while the center pays for its techs. You will also need workmen’s compensation insurance, general liability insurance, physical damage insurance covering the equipment and other coverage may be appropriate depending upon the situation. Consult with a knowlegable insurance agent for guidance.

We have highlighted some areas to consider when opening an imaging center. It is important for the reader to note that this material is derived from and based on our experience as owners, developers and operators of multi modality imaging centers. We realize each situation is unique and not all our ideas and suggestions apply across the board. However we are confident that there will be some benefit for all.