Subsidy Support in Radiology

By Kirk Reinitz
Strategic Advisor for Radiology

Once rare, this financial tool is an emerging approach to maintain appropriate radiologist staffing levels.

A perfect storm in the U.S. radiology market is creating a significant shortage in trained radiologists. The national shortage is clearly visible everywhere one looks today, and it is having a dramatic impact on the specialty.

The crisis is brought on by the convergence of several market factors:

What does this mean for hospitals, radiologists, and the patients they serve? The bottom line is, in a significant and growing number of cases, the reimbursement generated by a practice no longer supports a market level of compensation for the radiologists serving the facility. These dynamics make recruiting new radiologists difficult, if not impossible, and cause older radiologists to retire early, leading to extended turnaround times and burnout. This should be a concerning paradigm shift for every health system.

In today’s environment, both hospital systems and radiology practices need to rethink how they approach radiology staffing at their facilities, partnering together to develop innovative approaches to staffing, financial incentives, and optimal compensation structures that will enable timely, quality care. One tested way is for health systems to provide direct financial support to their contracted radiology group through a subsidy, which allows the radiology group to earn and offer competitive market compensation to new recruits.

Subsidy Strategies for Radiology Groups

Overall, subsidies may be the most efficient and economical way to ensure quality, timely imaging at medical facilities. While they ultimately benefit radiologists and hospital systems, the initial burden often falls to the radiology group to present a clear compelling argument for the need for the requested support.

When approaching the hospital for support, radiology groups need to thoroughly document the financial drivers supporting the amount to be requested, including the overall group financial position, exam volume, and revenue dynamics. Given the current window of opportunity, this needs to be a well-thought-out process led by radiologists.

“Do not wait until there is a crisis to make the hospital aware of the issue,” says David Langdon, CEO of Radiology Professionals. “This makes a group problem, a hospital problem.”

Be prepared to share a lot of financial information with the hospital, as well. Subsidies represent a significant amount of financial support, so expect to open your financial records to a considerable extent. From a fiduciary and compliance standpoint, the hospital must vet the proposals to ensure there is valid documentation for the support requested. Justifying a subsidy payment to a contracted radiology group typically requires a clear, data-driven rationale to demonstrate the value of the arrangement to the hospital.

The data needed to justify such a stipend can vary depending on the specifics of the agreement, but the following categories of information are crucial:

  • Practice exam volume by site, by modality (different modalities require specialized staffing, training, and expertise)
  • Revenue by site, by modality
  • Work RVU’s by site, by modality
  • List of payer contracts with contracted reimbursement rates
  • Pay class distribution by site, by modality
  • Valid comparable benchmarks to compare to. The benchmarks for each data element can be obtained from many reputable sources, including the Radiology Business Management Association (RBMA), the Medical Group Management Association (MGMA), your RCM provider, and the American College of Radiology (ACR).

Once the core data is generated, you will need to assemble a proposal in a logical fashion to illustrate the problem and how the subsidy will resolve the issue.

“We have found that the most effective approach is to construct a financial analysis that includes relevant internal and external data that supports the specific dollar amount the group is requesting,” says Lisa Cooper, Practice Manager at Ventra Health. “Each data element presented should have a valid outside benchmark for comparison, and any deviation from the benchmark should be explained.”

The proposal should include:

  • A narrative of the national radiologist shortage and how it is directly impacting the group and the hospital system. Do not assume the hospital knows the radiology market. Include the industry dynamics stated above, as well as the clear documentation of other avenues the group has attempted to remedy the situation.
  • Based on the data gathered, prepare an analysis that shows work RVU’s generated per radiology full-time equivalent (FTE), per modality and per site. Make sure to emphasize any hospital staffing requirements that cause radiologist scheduling inefficiencies, such as mammography coverage, stroke coverage, outside location on-site coverage, volume of night cases, and ED utilization issues. Then compare work RVU’s generated per radiology FTE to national and regional equivalents. The goal is to demonstrate that revenue shortfalls are not caused by a physician productivity issue.
  • Next, prepare an analysis comparing current RCM results and related data to national and regional benchmarks. This analysis should include AR turnover and aging, percentage of bad debt, denial rates by payer, net collection rate, and information supporting proper exam coding. Be sure to include the list of payer contracts with contracted reimbursement rates, practice pay class, and modality distributions, by site. This will demonstrate that the group’s RCM system is generating the appropriate revenue based on the volume and unique inputs to your hospital system.
  • In addition to the amount of the subsidy, include the structure of the subsidy you are requested. Some examples of different forms of support include:
    • Salary guarantee, through which the hospital provides enough support for the group to reach a target revenue per work RVU
    • Hospital-provided physician retention bonus
    • Support in purchasing labor-saving AI
    • Payment for night coverage service
    • Allowing more remote reading

All in all, the goal is to illustrate that you have addressed every group-controllable factor, and the only option left is for the hospital to provide the requested support. It should also be noted that subsidies are subject to fair market value and may be reviewed by an independent valuation firm. By comparing the actual numbers to the verifiable benchmarks, it should become clear how much support is warranted and the specific aspects of your practice and the hospital system that necessitate the support requested, i.e., volume of self-pay, poor market rates for your services and Medicare cuts over time. There is a real need for subsidies in radiology today. If you approach the process in a professional manner with the proper documentation, your chances of success will be greatly increased.