The Twin Cities market for MRI tests has drawn an out-of-town operator that’s backed financially by hospital systems in Illinois and Wisconsin.
Based in suburban Milwaukee, Smart Choice MRI opened a center in Richfield this week. The company plans next month to launch a second clinic in Woodbury, with two more in the Twin Cities expected by year’s end.
The firm offers MRIs at a price of no more than $600 per test, hundreds of dollars less than many rates in Minnesota, and is betting patients will respond due to the never-ending trend of health plans passing along more out-of-pocket costs via deductibles.
Studies have shown that prices for MRI scans in the Twin Cities are high compared to national averages, said company CEO Rick Anderson.
“I think the quality is very good [in the Twin Cities], but we’ve combined the cost and quality, and most importantly the convenience of being in the neighborhood where people are shopping,” Anderson said. “If you look at our Richfield location, we’re literally next to SuperTarget, Caribou Coffee, Noodles & Company, Qdoba.”
Officials with the Center for Diagnostic Imaging (CDI), a St. Louis Park-based MRI operator that’s one of the region’s largest, say they aren’t worried about the competition.
Across the Twin Cities, CDI currently operates 14 imagining centers that include MRI scanners in medical office buildings with plenty of convenient parking, said Steve Richter, senior vice president and general manager.
In the past year, the group opened centers in Lakeville and Roseville because patients want their scans in nearby outpatient settings, said company spokesman Matt Malloy.
CDI says it’s fairly close to Smart Choice MRI on price — the big difference, the group says, is with hospitals that provide MRIs.
“They’re competing primarily on pricing,” Richter said. “We work very closely with the referring providers.”
Magnetic resonance imaging (MRI) is a widely used diagnostic procedure in which a large magnet and radio waves generate images of organs and structures inside the body. The MRI business is capital intensive, with operators saying the cost of an MRI machine and related equipment easily runs about $1 million.
The Twin Cities is the fourth market for Smart Choice MRI, which anticipates operating 18 clinics overall by year’s end. The company provided MRI scans from a single location in the Milwaukee area from 2006 to 2013, but has significantly since then via funding from outside investors.
Among other investors, Edward-Elmhurst Health, a hospital system based in suburban Chicago, has invested $7 million, while another $3 million comes from ThedaCare, a health system in Wisconsin.
Images generated by Smart Choice MRI are read and interpreted by radiologists at the Cleveland Clinic.
The company can perform nearly all varieties of MRI scan, Anderson said, although a few are better suited to hospitals.
“The rise of high deductible health plans has fueled consumers who understand their options and demand a higher level of service from their providers,” Anderson said in a statement. “Quality, service-focused care at a fair, transparent price has never been more important.”
The price tags for health care services are tough to gauge, since contracts between insurers and providers are confidential, but there’s growing evidence that some health plans and their subscribers pay high prices in Minnesota.
Data from the Health Care Cost Institute, a nonprofit backed by the insurance industry, looked at data from large national insurers and found the national average cost for an MRI scan of the lumbar portion of the spine is $716. That contrasts with a Minneapolis average of $900, and a Minnesota average of $1,471.
Hospitals have criticized the data source in the past, however, since it doesn’t include rates paid by some local health plans that have a large share of the Minnesota market.
Numbers from MN Community Measurement, a Minneapolis nonprofit that draws on data from local plans, put the 2015 median cost for an MRI of the lumbar spine at $696.
The price tag isn’t the only thing consumers should consider when scouting MRI options, said Jim Chase, the nonprofit’s president. If a low-cost MRI provider is not in the network of a consumer’s health plan, it’s possible that their out-of-pocket costs could be lower at an in-network provider, Chase said.
“There is some real advantage to having some lower cost options, but you have to be sure they are in your health plan provider network,” he said in an e-mail.
Another key factor, Chase said, is for patients to understand “where your doctor is willing to refer.”
Minnetonka-based Medica said it would consider bringing Smart Choice MRI into its network after reviewing both cost and quality. Whether the addition of a low-cost MRI provider will help lower health care costs overall is complicated, said Larry Bussey, a Medica spokesman.
“A lower cost provider could put some downward pressure on pricing,” Bussey said. “On the other hand, there is a lot of imaging capacity in this market. Adding additional capacity can have the effect of driving up demand to fill that capacity.”