Interventional Radiology: Dynamics and Business Model Implications

The interventional radiologist (IR) has become a critical player in the care of patients with ever more complex diseases. From accurately assessing the nature, stage, and progression of disease, to delivering the right therapy at the right time, the IR sits at a critical intersection where the best diagnostic and therapeutic capabilities must converge. In this perspective piece, BCE looks at the shifting role of the IR, the nature of their practice, and the market forces that impact their business model.

Background: The Interventional Radiologist

System-driven cost pressures, increased need for diagnostic efficiency, enhanced demand for patient quality/satisfaction, and the push for lowered risk-reward ratios in medical procedures are all influencing the attention, opportunity, and growth that IR practices and physicians are experiencing. Historically, IRs within a large hospital setting focused mostly on traditional diagnostics and basic procedural responsibilities such as biopsies and fluid drainage, but had limited clinical responsibilities. Over time, as the efficacy of minimally invasive procedures to deliver drug therapy (e.g., ablation therapy in oncology; angioplasty or stenting in cardiology, thrombectomy in vascular disease) has improved, IRs have become increasingly responsible for clinical decision making and providing comprehensive longitudinal care to patients.

As these IRs expand into clinical care delivery and management, many are branching out to form their own independent IR clinics where they pursue greater control of patient outcomes and more favorable reimbursement dynamics. As such, they are learning how to engage with, seek referrals from, and be an integral part of care teams incentivized and accountable for value-based care aims throughout the patient journey. This means that the traditional diagnostics capability of the IR is now a means to an end – no longer a transactional, episodic event, but a critical pre-cursor for enabling therapeutic interventions across a continuum of care.

The IRs evolving practice model require other enabling capabilities and technologies. Some key ones include:

• Ability to couple minimally invasive diagnostic techniques with a variety of novel therapeutic modalities such as embolization, ablation, and brachytherapy that demonstrate greater efficacy and lower risk
• Maximizing the usage of and return on large capital equipment such as C-arms and RF ablation systems across a variety of applications and disease states
• Within a value-based care environment, the ability to harness real-time data capture, analysis, and reporting capabilities from sophisticated capital equipment to support longitudinal care and aims reporting

Market & Business Model Dynamics

The dynamics of the interventional radiology market mirror those seen in the broader healthcare landscape today, namely the shift to outpatient and post-acute care settings, the push towards value-based care, and tightening reimbursement in the midst of technological innovation. Below we further explore these factors.

1. The volume of diagnostic imaging procedures has been steadily shifting from hospitals to the outpatient space, namely independent facilities or outpatient-based labs (OBL), a fragmented space with approximately 500-700 in the U.S. These OBL’s are being created with full infrastructure to support interventional radiology diagnostics and procedures. These clinics have the benefit of being a lower cost of care center relative to the hospital setting, and CMS policies along with more efficient site-of-care reviews during the prior authorization process has catalyzed the migration of these procedures to these independent facilities.
2. Because declining CMS reimbursement is a growing factor in the health economic equation for interventions, practitioners aim to capture a better “net” reimbursement by shifting toward outpatient procedures. In hospital settings, both hospital and physician reimbursement exist, with the majority directed to the hospital per case. In the OBL setting however, majority of the reimbursement is directed to the owner of the OBL or the physicians themselves.
3. An IRs ability to effectively integrate their diagnostic and therapeutic offerings to patients will influence how well they can differentiate from diagnostic imaging centers or other IR clinics within a geography, how well they can compete for referrals from the physician community, and their ability to draw patients away from the traditional hospital settings and into an outpatient environment. Additionally, integrated practices that are now accountable for health outcomes beyond an episode of care will seek hardware/ software solutions and technologies that better track, monitor, report, and inform on longitudinal care of patients, and that offer input into the health economic benefits of their IR practices. As a result, IRs branching out into independent clinics may seek partnerships on the technology and administrative side to ensure that they are providing optimal care that achieves critical value-based aims.
4. Continued emphasis on value-based care means that ACOs (in the US market) are adopting more services that benefit the payment-for-value paradigm and that improve quality metrics. The IR model of care has been shown to support both quality and cost components of care. However, for the IR field to expand and evolve, it will need to continue to generate long-term comparative effectiveness data on procedures in order to drive enhanced reimbursement and market differentiation.
5. From an administrative standpoint, IR billing can be more complex than billing for the average diagnostic radiology procedures, requiring the use of CPT codes that are not commonly used in other areas of the practice. The ability to understand and harness existing reimbursement codes, as well as the opportunity to expand novel CPT coding in this space will lead to an optimization of patient and procedure mix and diseases state focus, ultimately driving the financial success of these practices.
6. The continued advancement of precision medicine – especially in the field of cancer – will continue to expand options for patients and will open opportunities for IRs to marry therapeutic treatments with minimally-invasive tools and techniques. The ability to quickly establish clinical norms around the use of new precision medicines will help to further validate the IR model and entrench the markets perception of IR as the go-to approach for care.

Capital Equipment Business Model Evolution

Evolution of the capital equipment model will be influenced by the dynamics between health systems, equipment manufacturers and independent IR clinics. Two competing trends influence these relationships – on one side, health systems are combatting a gradual erosion in IR procedure volume within their hospitals; on the other side, a growing number of independent facilities/IR clinics are capturing market share and expanding their practices. For manufacturers supporting these customers, it will be important to understand the capital equipment business model opportunities that could exist in either scenario.

• To stem the procedure loss to independent IR clinics, health systems may establish their own hospital-affiliated IR clinics outside the hospital walls. These outpatient clinics may look to structure joint ventures with manufacturers in order to stem the loss in procedure volume and revenue within their inpatient settings. These types of partnerships provide hospital-affiliated clinics a wider range of imaging services for their patients relative to a privately owned independent IR clinic.
• Similarly, manufacturers could also establish formalized partnerships with non-hospital-affiliated IR clinics to drive capital equipment investment and usage that meet the needs of that clinic’s market.
• A pay-per-use capital model with a service-driven (or digital) component that delivers analytics and insights could be especially relevant at the inception of new independent IR clinics given the heightened focus on patient referral and accretion. This would allow manufacturers to drive revenue while also securing a relationship with a clinic customer.
• As an IR clinic begins to thrive and approach critical mass and economies of scale, a manufacturer may shift to a subscription or leasing model in which a clinic pays a fixed rate/month with either a set volume of usage, or unlimited usage. In this model, a service-driven component can continue to add value to a clinic that requires the data to demonstrate value-based metrics.

Implications & Questions to Consider:

For capital equipment manufacturers looking to serve the IR clinic, BCE believes it is important to assess the following questions:

1. What market-driven opportunities exist to pivot around the existing capital equipment business model directly and create novel streams of revenue via service, digital, or other approaches?

• Considering the shifting dynamics and needs of independent IR clinics and hospital-based imaging centers, a manufacturer’s ability to develop and offer a flexible suite of capital equipment user agreements (e.g., novel joint ventures, equipment subscription, leasing/lease-to-buy, pay-per-use, pay-per-report, and equipment purchasing) will help establish broader and stronger relationships with customers.

2. Are there opportunities for manufacturers to strategically support the implementation of new IR clinics in an effort to expand the market for, and use of IR capital equipment?

• As the number of independent IR clinics grow, they will likely require help in establishing front-end administrative processes that align their procedure mix, capital equipment investment, and reimbursement in a way that drives sustainable revenue. Providing a consultative service could help establish manufacturers as the partner-of-choice for capital equipment.
• For integrated practices relying on value-based metrics for reimbursement, IR clinics will likely require help in establishing back-end reporting and analytics to justify reimbursement rates. The ability to help contextualize this data and present population-level analysis can help enhance comparative effectiveness measures of a clinic that would help drive its reimbursement revenue and market differentiation.
• For new independent IR clinics, developing a referral community is key to attracting a critical mass of patients that will drive a sustainable clinic business. Achieving and surpassing this critical mass of patient volume will then influence the clinic’s decisions around leasing vs. owning capital equipment. The ability to collaborate with clinics on driving referrals could help manufacturers influence the capital equipment business model that would drive the most value for them and their customers.
• As manufacturers develop relationships with IR clinics, providing ongoing case-support is a key part of vendor-physician relationship building. Developing longer-term relationships with IRs can provide avenues for sale of future capital equipment.

3. Are there opportunities for manufacturers to sponsor comparative effectiveness data studies with IR clinics that could help drive adoption of capital equipment?

• The ability to sponsor and co-develop health economic use cases represents an opportunity to not only establish its brand recognition amongst IR clinics, but also to help IR practices better leverage or even create novel CPT and reimbursement codes leading to enriched revenue streams, and further engraining specific manufacturers as the brand-of-choice in the field.

4. What types of partnerships with IR-specific therapeutic companies could manufacturers explore to establish the value of IR guidance/ imaging tools alongside therapeutic offerings?

• The ability to help drive more seamless integration between the diagnostic and therapeutic modalities of an IR can help further the development of independent IR clinics, as well as their desire to further invest in capital equipment purchases.

5. What value-based metrics can be captured from IR capital equipment and tools that would assist IRs in demonstrating the value of their integrated practices?

• Being able to harness the clinical data emerging from technologies, and to translate this into a revenue-generating analytics and reporting service that complements the physical capital equipment could establish individual manufacturers as key partners of an IR clinic for whom these metrics are a critical component of reimbursement and revenue strategy

To learn more about BCE’s management consulting practices, please visit www.bceconsulting.com.