Two Triangle health care providers are challenging a proposed collaboration by UNC Rex Health Care and Wake Radiology by alleging the proposed joint venture would run afoul of state rules and would raise prices on mammograms and other diagnostic procedures.
Tens of thousands of Triangle residents use radiology facilities every year – MRIs alone surpass 85,000 a year in Wake County – and the outcome of the radiology dispute could determine how much residents pay for scans, screenings and other diagnostic procedures. Even with health insurance, many end up paying for the tests because annual deductibles have increased significantly in recent years and patients are sometimes responsible for several thousand dollars in medical costs before their health insurance takes over.
The complaints, submitted to state health regulators by Duke University Health System and Pinnacle Health Services of North Carolina, were filed in response to a January application by Rex and Wake Radiology to create a joint venture involving 17 diagnostic labs in the Triangle. Duke and Pinnacle are asking the N.C. Division of Health Service Regulation to deny the application.
“Contrary to what the application states, the proposal will increase costs and therefore reduce access to existing mammography, ultrasound, and bone density imaging equipment,” Pinnacle wrote in its challenge. “It is a financial arrangement that will benefit providers, but not patients.”
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Legal challenges to proposed facility expansions are almost routine in the Triangle’s competitive health care market. But in this case, Rex and Wake Radiology are not proposing to add new diagnostic labs. Instead, the joint venture would expand Rex-affiliated radiology labs from 11 to 17 by ending Rex’s decades-old relationship with Raleigh Radiology, which has six facilities, and switching to Wake Radiology, which has 12 sites in the Triangle.
In their application, Rex and Wake Radiology say the joint venture would result in lower fees because Rex’s hospital facilities would be reclassified as out-patient labs. The dispute over realigning the Triangle’s radiology market through the proposed joint venture is scheduled for a public hearing Tuesday.
The legal challenges are part of a state Certificate of Need, or CON, review to determine that health care companies are not overbuilding services and unnecessarily driving up costs. The N.C. Division of Health Service Regulation is expected to issue a decision later this year.
Pinnacle said in its filing that the application projects that Rex’s Breast Care Center would be paid by insurers an average of $234 for a double mammogram screening, in the first year of the joint venture, which would be higher than Rex’s historical insurance payment of $190 and higher than other area facilities are paid by insurers. It would be lower than Wake Radiology’s historical insurance payment of $295 for the same screening. Rex projects the joint venture will perform more than 15,000 mammograms a year.
According to its filing, Pinnacle is paid $194 on average by insurers for the same screening. The insurance payment is the amount the patient would typically have to pay if she had not used up her deductible.
Pinnacle contracts with Raleigh Radiology to interpret diagnostic results. Pinnacle owns diagnostic sites in Wake Forest, Clayton and Raleigh, and is an investor in a site at Brier Creek, all of which are co-branded with Raleigh Radiology.
There are currently 13 diagnostic facilities in Wake County that provide MRIs, CT scans, ultrasounds, port insertions, catheter placements and other screenings, tests and procedures. Duke has nine diagnostic locations in Wake and Durham counties, while Rex has five and Wake Radiology has a dozen.
Rex said in an emailed statement that “UNC REX Healthcare and Wake Radiology are forming a partnership that will improve access to imaging services and reduce costs for all patients.” Wake Radiology, Pinnacle and Duke could not be reached or were unavailable.
In its filing, Duke said the application should be rejected because Rex is out of compliance with the original CON issued for a mobile imaging lab. State rules require mobile labs to be moved at least once a week, but Duke says Rex has kept its lab at its Wakefield diagnostic facility for at least four years.
Pinnacle notes that federal law requires nonprofit hospitals like Rex to provide charity care and other community benefits as part of its tax-exempt status. As part of the joint venture, Rex would transfer $1.2 million of imaging equipment to Browning Equipment, an entity to be owned by Wake Radiology, a for-profit business.
But Pinnacle charges that the proposed joint venture would be under no obligation to serve the needy.
In their CON application, Pinnacle says, “the applicants checked ‘No’ in regards to the question of whether the [Rex Breast Care Center] has an obligation under federal regulation to provide uncompensated care, community service, or access to minorities and handicapped persons.”
Rex spokesman Alan Wolf said the Breast Care Center’s charity care policy will not change under the radiology joint venture.
The Division of Health Service Regulation has until June 30 to review the application. The case could drag on for months, as all parties have the right to appeal any CON decision in court.