Teleradiology Agreements for Today’s Radiology Practice Environment
Today, the situation has changed to the point where teleradiology services provide final reports. Teleradiology has become an indispensable part of radiology practices and has evolved from a cost center to a profit center.
Teleradiology providers are facing the same shortage of radiologists as group practices and, amazingly, they are now asking groups to take over responsibility for night and weekend calls! Practices have become so dependent on teleradiology as an integral part of their practice that they now lack the means to respond.
At the same time, teleradiology departments want to increase their rates to cover the increased costs of maintaining salaries and benefits for their staff.
Proactive vs reactive
Now is a good time for each radiology group to review their teleradiology service agreement. Even if everything is working very well at the moment, understanding the conditions that would allow the service to change prices, service times or terminate the contract is essential in order not to be taken by surprise.
If unfavorable terms are found, consider whether it makes sense to try to renegotiate, but be aware that the ability 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’s nothing in the deal that would allow the service to unilaterally make short-term changes, then the band has an opportunity to assess its position and act with caution.
Main contractual clauses
There are several typical contract clauses that can have a significant impact on the group outside of the fee schedule.
Future Rate Increases. How often can rates change and is there a limit to increases? Using the rate of inflation (consumer price index or CPI) may be a good idea depending on the economic environment, but physician reimbursement rarely keeps up with inflation, so there is a built-in mismatch.
Matching contract rates to the annual change in Medicare’s 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 could be a good viable solution.
Annual raises are easier for both the firm and the department. We know of a group that hadn’t seen a rate change in over five years but are now facing a 37% increase, when a 2% increase per year would put them at just over 10% more than their old rate.
Termination provisions. Teleradiology contracts once provided the option to terminate with 60 to 90 days notice, but today we find that 120 days notice is common. Even this longer period is not sufficient if the service decides to suddenly terminate the agreement, considering the time it would take for the group to locate and sign a new service agreement, and then obtain the new preferred and accredited suppliers ( both can take at least 90 days if all goes well).
Guaranteed monthly minimum. When the group wishes to change teleradiology providers, they normally remove the old service while the new one comes online. However, if their contract stipulates a minimum monthly payment, then the group must be careful not to lower the volume of the old service too much during the transition or risk wasting money. This is something that can be managed, but keeping any monthly guarantees as low as possible will work in the band’s favor.
Accreditation costs. The cost of obtaining and maintaining hospital staff privileges and payer accreditation can add up quickly, so it is a good idea to try to limit the number of providers in the teleradiology service pool. It can also help ease the administrative burden of accreditation on payers. When the service does the final report, the group should be aware that they are accredited for Medicare billing in the state where the reading is taking place, so the service limiting the number of states involved can help. It is sometimes possible to negotiate a sharing of the accreditation costs with the teleradiology society.
Fee schedule analysis
A radiology group considering changing teleradiology providers for any reason will solicit proposals from a number of providers, and the initial focus will be on the fee schedule. Simply lining them up side by side won’t give an accurate picture to choose from.
Some providers may show a very favorable rate for certain procedures, but very high rates for other procedures. The analysis requires volume weighting, as we recommend for any fee schedule analysis. If there is an outrageously high rate for a procedure that is rarely done, it doesn’t matter as much as the rate for the most common procedures.
The volume data must be relevant to the work to be performed by the teleradiology department, so using the practice’s overall volume will not work. The best data will include volume by procedure for the period of coverage (eg, 8 p.m. to 7 a.m.), separately by weekday and weekend. Historical service invoices can be used to develop a monthly volume average. Applying the forecast volume to the rate schedule will allow the group to calculate its forecast cost for the service. This monthly cost can then be compared between the proposals of the different services.
Monthly cost may be impacted by hours of coverage. If data is available indicating the volume of examinations per hour, the group can assess whether it would be wise to start the teleradiology service an hour or two later in the evening.
When the teleradiology service provides final reports, another element of rate analysis is the revenue that can be generated to offset the cost and create a profit or loss for the group. It is important that the teleradiology service fee schedule aligns with billable procedures so that billing records can be used as a tool to directly verify monthly bills.
For example, a CT Abdomen & Pelvis exam should be considered as one study, not two separate studies, as billing can only be done as one bundled procedure. Similarly, when billing will be done as a full procedure, the service should not charge for two limited exams.
Consider the sampling rate table below.
|Service 1||Service 2||Service 3||Service 4||Service 5|
|CT Angiography (CTA)||$80.00||$55.00||$48.00||$58.00||$60.50|
|CTA-abdomen/pelvis with runoff||$175.00||$130.00||$72.00||$150.00||$150.00|
Which service offers the best deal? Although service 3 seems to be the lowest for most reviews, it is not the lowest for all. Applying the firm’s monthly volume to the fee schedule, along with calculating the billable amount, allows us to fully understand the impact of each fee schedule, as shown below in the table below.
|Service 1||Service 2||Service 3||Service 4||Service 5|
It turns out that service 3 in our example offers the best return of the practice, producing a profit of $35,474 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, then negotiate and refine the fee schedule based on the types of exams that will be read most often by the service.
Whether the radiology practice is facing a price increase or considering a change in teleradiology services for whatever reason, a volume-weighted analysis is essential to negotiating the most favorable contract. Don’t forget to also pay attention to the other important clauses of the contract.
More difficult to assess than the cost is the quality of the interpretations and the “compatibility” of the on-call readers with the rest of the group. Other metrics such as turnaround time and communication with prescribing physicians should also be considered.
It takes a lot of time, effort and expense to make the change, so the group should make sure that the savings outweigh these factors. The current high demand for teleradiology services puts the group at a disadvantage in the negotiation, but with the right data, a reasonable agreement can be reached.
Sandy Coffta is Vice President of Client Services at Healthcare Administrative Partners.
The comments and observations expressed are those of the author and do not necessarily reflect the opinions of AuntMinnie.com.
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