Financial ratios in diagnostic radiology practices: variability and trends.

PURPOSE

To evaluate variation in financial ratios for radiology practices nationwide and trends in these ratios and in payments.

MATERIALS AND METHODS

In 1999, the American College of Radiology surveyed radiology practices by mail. The final response rate was 66%. Weighting was used to make responses representative of all radiology practices in the United States. Self-reported financial ratios (payments, charges, accounts receivable turnover) were analyzed; 449 responses had usable data on these ratios. Comparison with results of a similar 1992 survey and combined analysis with Medicare data on billed charges provided information on trends.

RESULTS

All measures of payment collections declined sharply from 1992 to 1999, with the gross collections rate (revenues as percentage of billed charges) decreasing from 71% to 55%. Average payment for a typical radiology service decreased approximately 4% in dollar terms or approximately 19% in inflation-adjusted terms. In 1999, nonmetropolitan practices appeared to fare better than others. Among insurers, Medicaid stood out as a low and slow payer, but neither managed care nor Medicare had a consistent effect on financial ratios. The gross collections rate varied substantially across geographic areas, as did, in an inverse pattern, the level of billed charges. One-quarter of practices had accounts receivable equal to 90 or more days of billings.

CONCLUSION

The opposing geographic pattern of billed charges and gross collection rate suggests that geographic variation in the latter is driven more by variation in billed charges than by variation in payment levels. Radiologists saw a substantial decrease in the real (inflation-adjusted) value of payment per service during the 1990s. The large fraction of practices with accounts receivable of 90 or more days of billings-a level considered potentially imprudent by financial management advisors-suggests that many practices should improve financial management and that state prompt-payment laws have not had a substantial positive effect.