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A Feasibility Analysis for a Fixed MRI Unit. Amy Everage Hendrickson University of Kentucky Martin School of Public Policy and Administration Masters of Healthcare Administration Capstone Project Spring 2008. Overview. Product Review Literature Review Purpose of the Study

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a feasibility analysis for a fixed mri unit

A Feasibility Analysis for a Fixed MRI Unit

Amy Everage Hendrickson

University of Kentucky

Martin School of Public Policy and Administration

Masters of Healthcare Administration

Capstone Project

Spring 2008

  • Product Review
  • Literature Review
  • Purpose of the Study
  • Managerial Question
  • Background and Retrospective Analysis
  • Methodology
  • Data Sources and Collection
  • Prospective Situational Analysis
  • Limitations
  • Recommendations
product review
Product Review

Magnetic Resonance Imaging (MRI) is a noninvasive diagnostic technique that produces computerized images of internal body tissues and is based on nuclear magnetic resonance of atoms within the body induced by the application of radio waves*

*Merriam-Webster (2008)

product review4
Product Review

*Iglehart (2006)

literature review
Literature Review

Financial Feasibility and Future Success of MRI Services

  • Optimal success in the capture of imaging revenue tied to appropriate staffing and technology.
literature review6
Literature Review
  • Imaging revenues have historically been one of the two most profitable business lines for hospitals*
  • All hospital in this study reported strong MRI volumes contributed to volume growth and financial success*
  • MRI Technology is offering physicians precisions in surgery and accuracy of diagnosis, particularly Cancer

*The Advisory Board Company (2005)

literature review7
Literature Review
  • Future of MRI Technology*
    • 1.5T vs. 3.0T
      • Spine and breast images are inferior to the 1.5T
      • Coils not yet available for some services
    • Open vs. Closed
      • Limited image quality due to lower magnetic strength

*Tannenbaum (2005)

literature review8
Literature Review
  • Competition for MRI Services
    • Hospitals, radiologists, non-radiologists physicians and independent testing facilities*
    • Hospital did have greater capture of services over others.*
    • Importance of CON Law and application of the Stark Law


literature review9
Literature Review
  • MRI Market Potential
    • 6% of all outpatient imaging volume and 30% of all imaging profits come from MRI*

*Advisory Board Technology Watch (2005)

purpose of the study
Purpose of the Study

To analyze the feasibility of establishing a permanent, fixed MRI service at Newco Hospital

managerial question
Managerial Question

Can the organization anticipate revenues adequate to justify this new service?

  • Retrospective Analysis
    • SWOT Analysis
  • Prospective Situational Analysis
    • Financial Proforma
    • Breakeven Analysis
data sources and collection
Data Sources and Collection
  • Interviews
  • Direct Observation
  • Inpatient and Outpatient MRI Volumes
  • Manual Reports and Documents
  • Automated Decision Support Tools
  • National, State, and Area Development District specific data
  • Journal Articles
organizational setting description
Organizational Setting & Description
  • 96 bed, acute-care, rural hospital
  • Not-for-profit
  • 1 of 9 hospitals
  • Located in Eastern Kentucky
  • Provides services of a community hospital
  • Full-service imaging department
goals and objectives
Goals and Objectives
  • Mission: Improve the health and promote the well being of the people
  • Formalized strategic planning process for the organization and for the hospital
  • Organizations grand strategy is to be a financially viable ongoing entity
  • Support system objectives: by growing volume and market share, improving patient satisfaction, and establishing quality with staffing and technology.
  • Reports to manager of radiology
  • Administrative Responsibility/Community CEO
  • Reports to organizational president/CEO
  • Governed by Board of Trustees
profile of existing service
Profile of Existing Service
  • MRI service available
    • Mobile Contract Service
    • Two days a week
    • Maximized within the 1st year of operations in 2001
  • Patient Satisfaction 3.35 on a 4.0 scale, below industry benchmark of 3.55
  • No current marketing plan or strategy
revenue cycle management
Revenue Cycle Management
  • Established charge and billing structure
information systems
Information Systems
  • Integrated information system in place
  • Digital picture archiving system
  • No automated patient scheduling system
  • 2007 work stoppage
  • Declines in volumes, revenue cycle efficiency, cash flow
  • 2007 operating loss of $6 million
  • Non-restricted days in cash is 23
human resources
Human Resources
  • Employees represented by USW
  • Negotiated salary and benefits in market place
materials management
Materials Management
  • Centralized materials management functions
  • Member of large GPO
  • Good Leverage for competitor pricing
regulatory legal
Regulatory & Legal
  • Well established organizational policy and procedures
  • Approved certificate of need
volume and market analysis
Volume and Market Analysis
  • Current market share is 43.08%
  • MRI volume decline in 2007 due to:
    • Private physician competitor went into business
    • Work stoppage by union
    • Limitation of a two day a week service
  • National use rate is 61.5/1000
  • Socioeconomic demographics and epidemiology suggest 61.5 is a conservative estimate in this market
  • Slight population increase over next five years
community and medical staff support
Community and Medical Staff Support
  • Local Advisory committee
  • Medical Staff
  • Government officials
  • Business leaders
facility and physical plant
Facility and Physical Plant
  • No vacant space in the hospital
  • Good undeveloped space adjacent to the west end of hospital
swot analysis
SWOT Analysis
  • Strengths
    • Well Established Physician Referral Base
    • Vacant space available for development
    • Ample Parking at site for new construction
    • Location of hospital
    • 9% Imaging volume growth over the past 5 years
    • Competitive salary & benefit packages
    • Experienced manager in medical imaging
    • Existing contract with interpreting radiologists
    • New PACS imaging system
swot analysis31
SWOT Analysis
  • Weaknesses
    • No existing space available
    • Part-time mobile MRI service
    • Poor marketing and advertising for MRI
    • Congested centralized registration in imaging department
    • Congested centralized imaging waiting room
    • Expensive benefit packages
swot analysis32
SWOT Analysis
  • Opportunities
    • Increased referral potential with full time service
    • Draw commercial patients into upscale setting
    • Make services available 24/7
    • Kentucky CON laws
swot analysis33
SWOT Analysis
  • Threats
    • Unions
    • Aggressive physician practice & diagnostic competition
    • Tertiary care centers within one hour
    • Two strong hospitals in primary service areas
    • Increasing trend for physician and radiologists to compete for imaging business
    • Potential for Kentucky to Lift CON law
scope of service
Scope of Service
  • 24/7 Service
  • M-F 8-4:30
  • Nights and weekends emergency on call service
  • Population service: Cradle to Grave
  • Full-range of MRI services
capital equipment and construction
Capital Equipment and Construction
  • Construction:
    • Modular addition and renovated space
    • Completed architectural plan
    • Hard bid construction estimates
    • Total construction 1976 sq. feet
    • Cost estimate $617,089
  • Equipment:
    • 1.5 T closed MRI
    • Cost $1,307,279
workforce assessment
Workforce Assessment
  • Modality based staffing model
  • Experienced MRI Technologist candidates available
  • Training provided by vendor
  • New Marketing Director hired
  • Strategic marketing plan
  • Advertising and direct marketing visits
outcomes evaluation
Outcomes Evaluation
  • Measures
    • Volumes
    • Operational expense
    • Patient satisfaction
    • Quality
  • No information is collected by any agency relative to outpatient service statistics
  • The need to rely on experiential information from expert subjects
  • No reporting requirements for hospitals in Kentucky, Tennessee, or Virginia
    • No data sources for utilization of services in the private sector for physicians or independent diagnostic centers
limitations continued
Limitations Continued

This means that all projections, while based to the extent possible on proprietary utilization data and national use rates, required educated assumptions to be made from the experiential data


Proposal for a permanent fixed MRI service be approved and that full implementation, under the direction of the Manager of Radiology, be achieved within six months

  • Iglehart, John K., (2006). “The New Era of Medical Imaging – Progress and Pitfalls.”

New England Journal of Medicine, 354:2822-2828

  • Merriam-Webster’s Medical Dictionary. (2008). “Magnetic Resonance Imaging” http://medical.merriam-webster.com
  • Mitchell, Jean M. (2007). The Prevalence of Physician Self-Referral Arrangements After Stark II: Evidence from Advanced Diagnostic Imaging. Health Affairs, 26:3, 415-424.
  • Tanenbaum, Lawrence, N., (2006). Clinical 3T MRI: Mastering the Challenges. Applied Radiology, 35:11, 34-50.
  • The Advisory Board, H*Works: Structure and Responsibilities of Diagnostic Imaging

Departments, Original Inquiry Brief, May 24, 2005.

  • The Advisory Board, MRI: New systems, applications herald future volume growth,

Technology Watch, November 4, 2005. www.advisory.com

special thanks to
Special Thanks To:
  • Committee Chair: Leonard Heller Ed.D.
  • Committee Member: Sarah Wackerbarth Ph.D.
  • Committee Member: Adetokunbo Oluwole Ph.D.
  • Outside Advisor: Trena Hall

Clinical Director of Corporate Projects

Appalachian Regional Healthcare