With insurance premiums and out-of-pocket expenses continuing to escalate for most healthcare consumers, one company is trying to make MRI scans more accessible and considerably more affordable -- at $600 or less per scan.
Smart Choice MRI, based in Milwaukee, is offering MRI exams for $600 or less at six locations in Wisconsin. It has also begun a nationwide expansion to bring four low-cost MR imaging centers to the greater Chicago market and eventually to more states in the Midwest.
"Everything we do in life -- whether we buy a car or a sweater -- we ask, 'How much is it?' 'How much is the sales tax?' and 'Can I get free shipping?' " said CEO Rick Anderson. "We have learned to be educated consumers with everything we do, except healthcare. We are standardizing the care, the quality, and the pricing, so the consumer can understand it."
Good timing?
Given the rising cost of health insurance and the four-figure average cost of an MRI exam, the company's entrance into the imaging services arena could come at the perfect time.
Rick Anderson, Smart Choice MRI CEOSince 2005, insurance premiums have increased an average of 5% annually, following an 11% gain each year between 1999 and 2005, according to a recent study by Kaiser Family Foundation/Health Research and Educational Trust. Over the past five years, there has been a 67% increase in deductibles, which has outpaced the rise in single premiums (24%) and is approximately seven times greater than growth in workers' wages (10%) and general inflation (9%).
In Smart Choice MRI's home state, the average cost of an MRI scan is $2,948, according to the Wisconsin Hospital Association.
So, how can Smart Choice MRI afford to scan patients for $600?
"All we do are MRIs. We don't have the bloated overhead costs of a health system," Anderson said. "We are not trying to get into a bunch of different imaging modalities that are not as profitable, so we are very lean."
The company is so lean that each imaging center has just a receptionist and an MRI technologist on staff.
"That is our whole overhead -- two people," he added.
Reading all of the results is Smart Choice's radiology partner, the Cleveland Clinic. Smart Choice has partnered with the Cleveland Clinic for the past five years, and the site does 100% of the company's reads.
From a dollars and cents point of view, the business model makes sense. A patient with a $2,500 deductible must pay a substantial amount for the exam.
"The fact that you have to pay $2,500 for an MRI when you could go to Smart Choice MRI for $600 or less seems to be a no-brainer," Anderson said.
The $600 rate is the same whether the patient is paying out of pocket or an insurance company is taking care of the expense.
National rollout
The concept of a $600 MRI scan and Smart Choice's business model was the brainchild of a surgeon and two radiologists back in 2006. The three individuals are no longer affiliated with the company.
The idea initially "struggled for a while, because no one really had a reason to do it," Anderson said. "There was no high-deductible health plan; no self-insured employers."
The venture stayed active, however, and Anderson was hired about two years ago to launch a national rollout after some success with the low-cost MRI clinics in several Wisconsin locales.
Anderson's background includes 22 years in digital health and consumer wellness. He was a senior vice president at Sharecare at its founding in 2009, where he oversaw the company's hospital markets and provider solutions team. This venture is Anderson's first foray into the provider side of healthcare.
Currently, Smart Choice has six facilities in Wisconsin, and it is expanding with the introduction of four facilities in the greater Chicago market, scheduled for February.
"By the end of March, there will be 10 imaging centers up and running," Anderson said.
To fuel its national expansion plan, Smart Choice MRI in December completed $6.5 million in additional capital and has been approached by other investors to help fund future opportunities, he said.
Expansion plans
After the four Chicago openings are complete, the company would consider opening an additional four or five MRI centers in Illinois, perhaps in Chicago's western suburbs, Anderson said. Smart Choice is also pondering locations in the Minneapolis-St. Paul area.
"We have 19 markets where we believe our model can work," he said. "Realistically in 2016 and 2017, you will see us in places like Salt Lake City, Denver, and Indianapolis."
The company looks to locate its centers in approximately 1,500 sq ft of space in safe retail environments, such as strip malls, for the convenience of potential customers. The imaging centers are open six days a week from 5:45 a.m. to 9:45 p.m.
While Anderson declined to disclose volume data, he said some of the centers are at or near capacity.
"We have capacity at some clinics that have open more recently, so you can draw some numbers from there," he said. "Every clinic we have opened through this expansion, which started two years ago, has been profitable in its first full month. So our model is working."
When moving into a new state, Smart Choice MRI performs its due diligence, such as certificate-of-need requirements. Anderson said the company would not avoid a state with a certificate-of-need statute, but the approval process to locate an imaging center might take longer.
"For example, we would love to go to Michigan, but it is a certificate-of-need state," he said. "If it were to take us six months to get approval, maybe we will go to Indianapolis first because we don't have that hurdle."
Available services
Musculoskeletal MRI accounts for approximately 35% of Smart Choice MRI's business, followed by the spine at approximately 30% and neurology making up most of the remainder.
The imaging centers do not perform cardiac, breast, or functional MRI.
"Nothing that you would, frankly, be better off doing at a hospital," Anderson said.
Approximately 40% of Smart Choice's patients come to the clinics through a referral from their physician. The balance of the business comes from consumer-targeted marketing, which includes 15% to 20% directed at self-insured employers and municipalities.
"We are not trying to strengthen our referral pattern by making sure that Dr. Smith sends us more of his or her patients," Anderson said. "It's more about educating the consumer that they have a choice."
And that education comes back to cost. For example, while an employee can choose where to go for an MRI scan, an employer might suggest Smart Choice MRI because of the lower cost and might offer the employee a cash rebate for helping the business keep its health costs down, Anderson said.
"We don't go into a market and say we are going take away 'X' amount of market share from a health system or an independent facility," he said. "We believe there is a way to work together with these health systems. If we all focus on what is right and best for the patient, we'll all be fine."
