The cost of quality diagnosis

Operating a high-end diagnostic center in Lebanon may be  life saving, commendable and personally rewarding, but the financial returns are unlikely to match those from a plastic surgery outfit. 

Imbalances in the public and private sector reimbursement systems for diagnostic exams have distorted yields, conclude the partners of Doctors Center Radiology (DCR), a $10 million dollar facility established in 2000 in Beirut’s Hamra district.

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“Some months we are in the negative, and some months we are in the positive,” says Dr. Anis Nasser, the center’s co-chief radiologist and founding medical strategist. “We are overall positive [in the financial results] but not as greatly positive as everyone imagines, due to the policy of the Lebanese government and the insurance companies.”

He tells Executive that inflation, expanding overhead costs and capital expenditures have weighed down the center’s bottom line. Meanwhile, compensation rates from the National Social Security Fund (NSSF) and commercial insurers have remained the same over many years, or have even decreased.

The financial compensation of diagnostic centers is not necessarily correlated to the quality of their physicians and equipment, adds Dr. Sami Faddoul, medical partner with Dr. Nasser in the venture and an assistant professor of radiology at Columbia University in New York. 

“Unfortunately, in Lebanon nothing is standardized. You could have a [magnetic resonance imaging] machine that costs $50,000 and a machine like ours that costs $1.5 million. You can imagine the difference. But both [scans] are called an MRI and both are paid at the same rate by insurance companies and the NSSF; the reimbursement is the same.” 

Nasser and Faddoul say that Lebanon is home to “hundreds” of diagnostic centers. 

By their self-assessment, Doctors Center Radiology is the busiest center in the country and one of very few that have a full range of advanced radiology machines. They did not disclose to Executive the average daily number of patients at the facility, which employs four specialists and 45 staff members.

Healthy competition

The business model of Doctors Center Radiology is built on two pillars: quality diagnostic machinery and physicians, and strong customer service. 

DCR also benefits from a favorable address. Since its inception, the center banked on locating its premises near to the American University of Beirut Medical Center (AUBMC). Nasser says he is well known to the doctors at AUBMC and has drawn referrals from them since he opened the center. 

The relationship between the center and AUBMC is more one of collaboration than competition, Faddoul adds. Patients who would have to wait days for a radiology exam at AUBMC can expect a faster treatment at DCR because its customer service is more flexible than the bureaucracy of the quasi-public university hospital.  

Competition for business among radiology centers nonetheless appears intense and the impending creation of a rival center in a new building next door on Bliss Street is not a cherished arrival, judging from subdued comments by the two doctors. 

Still, the doctors describe the interplay of clustering and constructive competition among diagnostic centers  as beneficial overall because it pushes the providers to continually improve. 

When the center invests into a new state-of-the-art MRI or positron emission tomography (PET) scanner, other centers and hospitals are provoked to upgrade to the same level, according to examples cited by Nasser.   

Top dollar diagnosis…

Radiology is a “cornerstone in making an early and proper diagnosis”, says Faddoul. The discipline  employs traditional X-rays, positron emission tomography (PET), and everything in between. Faddoul adds that because radiology is dependent on technology, it is the fastest growing specialty. “Every year there is a new modality and a new way of medical diagnosis.” 

Because of this, it is imperative for radiologists to install the highest quality — and therefore highest cost — machinery to achieve the best results. 

The machines of the highest diagnostic capabilities, however, are sometimes operated at a revenue loss because the center is reimbursed at sub-par rates from commercial insurers or the NSSF, both of which are indifferent to the higher complexity of the advanced scans. 

DCR’s investments in the top machines pay off, though, because they attract patients to the center and increase the facility’s market share. The resultant higher usage rate of the entire set of radiology equipment translates into higher profitability on the balance sheet.

“We believe that quality pays, and we are not stupid,” says Faddoul. “We did not buy a $2.5 million MRI machine just because we have a lot of money and want to spend it on machines. Our philosophy is quality; so we invested in quality and are cashing in on quality. “ 

Patients are the main beneficiaries where competition on quality induces operators to invest in having top machines and top physicians. 

…pays its way

The biggest remaining problem then, is the inadequacy of fees that the NSSF and insurers are willing to pay. In being agnostic on the quality of the diagnosis, commercial insurers push their policy holders to rely on cheap diagnostic centers, both Nasser and Faddoul lament.   

According to Faddoul, the insurers are ill-advised and they risk losing large amounts by the way in which they direct their policy holders to radiology centers. “The majority of insurers push their policy holders to go to the cheapest places, and cheapest means bad quality,” he says. “If you give patients a bad diagnosis, it means bad surgery, and whatever you save on the MRI makes you end up paying big money in extra hospital costs.”

He recommends that insurers commission studies comparing hospital admission rates from cheap, mid-range, and high-end radiology centers. Variances in admission rates and hospitalization costs will highlight the long term cost-savings inherent to higher-quality radiology.

Diagnostic centers can compensate for price pressures from low reimbursement rates only to a point without jeopardizing the quality of their exams, says Nasser. He adds that investments in latest generation machines can be delayed if amortization of the equipment takes extra years.

The NSSF recently announced upward compensation adjustments for radiology scans, but raising the payment for an ultrasound scan of the kidneys from $40 to $48 was not enough to compensate the cost increases that operators have faced in the past few years, Nasser notes. 

This all notwithstanding, the business skill set of operating a diagnostic facility is in substantial demand and Nasser sees regional and domestic growth potentials for Lebanese radiology centers, despite the issues they face. He admonishes, “Things are not as bad as they may appear but what is bad is that there is no control over quality, no control over qualification of doctors and no control over prices.”