Cutting the cost of an MRI is the focus of Robert Cloutier (pictured below), who runs RPN of California, a low-cost MRI services network headquartered in Ontario, Calif. As a startup, RPN is offering an MRI for $295 at its office in San Diego, a cost savings of over 50% when compared to the Official Medical Fee Schedule (OMFS), California’s official price list, which is very close to Medicare pricing. We were introduced by a mutual acquaintance, and Robert agreed to describe his work. Here is a list we compiled of MRI providers and prices in Southern California.
1. We always hear that Medicare pays the lowest of any payer. How can it be that Medicare pays over $400 for an MRI, and you can do it for $295?
Medicare has historically paid towards the low-end but there are currently national payers that pay the same or a little bit below Medicare. RPN has an innovative model with a lower cost structure than your traditional MRI clinic and those lowered costs allow for our significant drop in price. [Editor’s note: We asked him to describe his innovative model and he declined, saying that’s RPN’s “secret sauce.”]
2. O.K., but quality: cheap doesn’t mean good.
Agreed, and we never say cheap! RPN uses the words, “cost-effective” to describe our model because our lower price is not an indicator of quality. As a matter of fact, faculty members in the radiology educational space built RPN’s core and quality is at the forefront of the business. Our reports, images and customer care remain the most important differentiator in our market. We talk to people about price second.
3. When did you start up, and what’s the current state of play for your business?
RPN was started over a year ago and we are starting to gain traction with local physicians, patients and health insurance brokers and executives.
4. Who are the people or entities who are interested in an inexpensive MRI, and why?
Patients are interested because it impacts their out-of-pocket expense. Self-insured companies are interested because it saves on health dollars for their covered employees. Third-party intermediaries are realizing larger margins in arranging injured worker’s care at RPN clinics. Physicians are interested in the high-quality reports, images and efficiency tied to those deliverables. Finally, companies such as ClearHealthCosts, Castlight Health and other firms looking to put a spotlight on transparency in health spending are taking notice.
5. Who are the people or entities who are interested in expensive MRI’s, and why?
Expensive MRI exams are not bad for all stakeholders. Currently we have thousands of referring physicians in the Untied States profiting from the arranging of MRI exams at select clinics. With the larger reimbursements from payers, there is enough money to go around and influence referral habits.
6. Explain to us the doctor referral system — you mentioned that a doctor you know sends someone for an MRI 33 miles away, in order to reap a $75 “referral fee.” Could you talk about that a little more?
Sure, there are several programs that can facilitate this. A physician can be involved in a block-leasing program, a fair market value equipment/real estate lease or an out-of-state passive investment program. All of these are clever ways for imaging clinic owners to influence referral habits with money. These arrangements carefully navigate the Stark Laws [which govern physician self-referrals] and anti-kickback statutes which have been implemented to abolish these types of arrangements.
7. You mentioned that your business is kind of like Wal-Mart–low rates, high traffic. Can you talk a bit more about that?
RPN is similar to Wal-Mart in that we have a cost leader model. We have lowered our price point to the level that requires a steady volume of patients to remain viable. Wal-Mart could not sustain $1.88 sticks of deodorant if they did not have high traffic consumption. However, we do not call ourselves a cost leader because we refuse to believe that radiology is a commodity business. We service ill/injured patients that require expert care and a gentle touch. RPN utilizes the top technologists in the United States, advanced-level trained radiologists, high-end, 1.5 Tesla MRI technology (the gold-standard in MRI) and we do it with a Nordstrom-like customer care. So for those reasons, we are proud to be a hybrid cost leader/differentiator.
8. Sounds great — why wouldn’t everybody in the state want a $295 MRI? In other words, do you have opponents or competitors? Or is the existing system your biggest opponent/competitor?
Great question, forget $295, we are moving to $250, where nobody plays. Everyone wants it and I do not have competition that are anywhere close, I am competing with a broken system which still allows physicians to dictate where patients go. This is a large problem as we are not dealing with a true free market.
9. Anything else you’d like to say?
I am trying to implement a solution to a broken system—health dollars are 18% of our GDP. My area of expertise is in MRI and supply chain management, so I am starting with RPN as my small part towards the repairing of our healthcare system. I believe that there are some innovators out there looking to meet the true provider experts in the United States to bring the transparency and cost containment that we all speak about. I look forward to meeting those persons and I am excited to be doing my part.
Editor’s note: RPN has closed, as of fall 2013.