1. Department Ownership of Imaging Centers Mark D. Domalewski Corporate Director, Imaging Fairview Health Services/university of Minnesota Minneapolis, MN 9-17-03

2. Too Much Month at the End of the Money Radiologist salaries increasing 6-12%/yr. Increased Malpractice Premiums. –Physician groups faced an average rate hike of 53.15% in malpractice premiums between 2002 and 2003. This comes on top of a 36.38% increase between 2001 and 2002, the survey found. Increased Health Insurance Premiums (10+%/yr).

3. Where to Find the Money? Donor Funding Grant Funding Teleradiology/Remote Reading Dean’s Office Support Direct Hospital Support Outpatient Technical Revenues/Imaging Centers

4. Fixed Costs, Fixed Costs, Fixed Costs Cost of the aircraft Cost of the fuel Cost of the pilots Cost of the flight attendants Fill every seat before you fly the next one

5. Fixed Costs, Fixed Costs, Fixed Costs Cost of the scanner Cost of the service contract Cost of the technologists Cost of the schedulers/receptionists Fill every slot before you buy the next one

7. Net Present Value (NPV) Net Present Value (NPV) is a way of comparing the value of money now with the value of money in the future. A dollar today is worth more than a dollar in the future, because inflation erodes the buying power of the future money, while money available today can be invested and grow. Calculating NPV is difficult, in part, because it isn't clear what discount rate should be used, nor is it clear how to project future changes in the discount rate.

8. The Hurdle Rate The discount rate should be the APR of the highest risk- adjusted rate of return the you can obtain by investing your money, or the lowest rate at which you can borrow money, whichever is higher. 19%!!

10. Step 1 Determine you own Departmental “Hurdle Rate” and then apply that rate to any new ventures you evaluate, including owning imaging centers

11. What Are the Variables That Determine an OP Center’s Success? Reimbursement Rate Exam Volume

12. Reimbursement Rate

14. Step 2 – “If You Can Make There, You Can Make It Anywhere” Start with Medicare reimbursement rates to determine viability of the venture, then do a more robust payer analysis to determine actual reimbursement rates.

15. What Are the Variables That Determine an OP Center’s Success? Reimbursement Rate Exam Volume

16. The Advisory Board Company, in a 2002 briefing, cited the following five criteria as critical to keeping outpatient volumes high –Adequate, convenient parking –Appointment availability (10% rule) –Convenient location –Effective marketing and promotion –High patient comfort and satisfaction

18. Technical $Professional $ HOSPITALRADIOLOGISTS

19. Technical $Professional $ HOSPITAL/RADIOLOGISTSRADIOLOGISTS

20. Orthopedic Timeshare Professional $ Company A Neuro Timeshare Family Practice Timeshare Company A, Orthopedic Group, Neuro Group, Family Practice Group Radiologists? Technical $

21. Scan Leasing “One of the latest wrinkles in the group practice arena is the creation of legal joint ventures that allow doctors to “share time” on equipment they have collectively purchased” Self-Referral: The New Gold Rush? Decisions in Imaging Economics, April 2003

22. The Effect of Scan Leasing

24. Step 3 Make every effort to ensure that your volume assumptions are correct and that the stream of referrals is not at risk

25. Think Like a 4-year Old Why?

26. Why?? Why do our professional revenues not cover our professional expenses? Why do we think there are incremental outpatient imaging exams available? Why will patients be referred to our site? Why can our department manage an outpatient imaging center?

27. Why?? Why is this our best opportunity to generate additional revenues? Why are we doing this alone as opposed to a joint venture? Why have we selected the modalities we have? Why would I want to be a radiology department Chair?