Controversial body scan centers are showing healthy bottom lines
About the best bet for getting an up-close view of the interior of the human body in the 1960s was to check out Fantastic Voyage, the classic sci fi drama about a miniaturized submarine crew that navigates its way through the hero’s blood stream to eradicate a life-threatening blood clot.
While miniaturization hasn’t improved all that much in four decades, science fiction has, in a sense, turned into reality, courtesy of a new wave of CT scanning centers that are popping up across Los Angeles and the country.
The centers offer unrivaled 3-D pictures of the interior of the human body that can detect cancerous tumors, arterial plaque and other conditions that proponents say would escape notice during traditional check ups.
And despite questions about the medical necessity and effectiveness of the procedure, as well as potential X-ray dangers, the scan facilities are becoming huge profit centers even though scans are not covered by insurance and in some cases cost more than $1,300.
There are a half-dozen centers that have opened their doors in the area in the two and a half years since this new type of computed tomographic scanner suitable for full body scans came on the market. Several more clinics are planned in an apparent replay of the race to open laser vision centers in the 1990s. “There is money to be made,” acknowledges Dr. Stephen J. Shapiro, a former attending chief of surgery at Cedars-Sinai Medical Center, and chief executive of InsideTrac, a Beverly Hills scanning center.
The center, which is owned by a limited partnership Shapiro formed in December 1999, has been open only about a year, but already the partnership is opening an Encino office next month.
The original plans for a modest two- to three-center regional operation have been scrapped. Instead, the plan is to expand into eight markets, including Orange County, the Bay Area, Dallas, Chicago and New York, within 16 months, an expansion financed by the partnership and the profits its centers can make.
The partnership is also searching for angel, venture capital or private placement to finance an expansion into 25 national markets over the next five years.
Shapiro and other scan-center executives won’t talk specific numbers, but claim that the centers can break even doing 6 to 8 scans a day.
“I would say the profit margin is on the high side of what you would look for as a return on an investment,” agrees Philip Voluck, who runs CT Screening International, a competitor to InsideTrac. He notes that it costs only about $250,000 to open each center.
The centers require wide advertising in print and broadcast, since they do not receive referrals from other physicians. That, in turn, is partially responsible for the aggressive expansion plans.
“You’ve got to market, and when you market you have to have enough locations to support the market to generate business,” Voluck said. “If you are advertising in the L.A. market and you don’t (have a center) in the Valley or enough of the market area, you are wasting advertising.”
Technology isn’t new
CT scanners have been around for decades, and nearly every hospital owns one. They are powerful tools traditionally utilized as a second step, for example, in confirming whether a mass detected by a traditional lung x-ray may be cancerous. The final diagnostic step would be a biopsy.
More recently, faster CT scanners gave rise to centers that specialized in checking for cardiovascular disease. But it wasn’t until a new generation of machines called “multislice detectors” came on the market in the late 90s that this new industry was born.
The machines, which look like giant front-loading washing machines, take continuous multiple “slice” pictures of the human body that are read as data points and reconstituted by computer, offering 2-D and 3-D views of internal organs that can be jaw dropping as are the prices.
InsideTrac’s top of the line “LifeScreen PLUS” evaluation costs $1,325. It offers a full body scan, as well as something called a “virtual colonoscopy,” a 3-D recreation of the colon that a radiologist can navigate through a la Fantastic Voyage.
InsideTrac has done several hundred virtual colonoscopys since it opened its doors, but its bread and butter has been its regular full body scan, which costs between $650 or $795 depending on whether a patient wants to review the results with a center radiologist or his own physician.
The company’s poster boy is Richard Stone, a 49-year-old Santa Monica resident. He had a scan done last September on the advice of his cardiologist. It turned up a malignant kidney tumor that he had removed. (Shapiro said there are 14 others like him.)
“I am living proof that this (test) works,” said Stone. “It saved my life.”
FDA questions
But just last week, officials with the Food and Drug Administration questioned whether the benefits of the full body scans outweighed the risks posed by the dosage of radiation, a worry the industry claims is overblown.
The report was only the latest in a series of questions critics have raised, especially concerning the cost benefit for healthy people who are not currently displaying any disease symptoms.
Dr. Howard Hodis, an assistant professor of medicine and preventive medicine, at USC’s Keck School of Medicine, argues that even healthy people have abnormalities, but most are not medically significant, much less life threatening.
“If you scan me from head to toe, you are going to find something,” he said. “It can create a lot of grief, and if you take it to your doctor there is a legal obligation (for him) to respond.”
InsideTrac, which is located out of a traditional imaging center Shapiro operates for area physicians and hospitals, started out conducting one or two scans a day. Within six months it was up to 8 and now it completes 13 or 14 each day, he said.
(The scans take less than 10 minutes, but the consultation process is slower.) Each center only needs a receptionist, one or two technicians and a radiologist. And while the machines cost $1 million or more, the companies that manufacture them arrange internal or third-party financing, which Shapiro says costs him about $25,000 a month.
Bill Kulp, manager of CT marketing for Marconi Medical Systems, a leading manufacturer of the machines, said that while some body scanning centers pay cash, many lease from the company’s finance arm.
“There were 1,250 scanners sold (by all manufacturers) in the U.S. last year, and I would bet that scanning centers accounted for no more than 40. But that is a very fast growing segment,” Kulp said.
CT Screening International opened its original scanning center in Newport Beach in January, and already has opened an Encino center, with other locations in Pasadena, the San Francisco area, northern New Jersey and New York under construction.
The company, a limited liability corporation, hopes to open a total of 15 locations, including Santa Monica and the Riverside area, with nearly $3 million it has raised internally and generated profits.
Voluck, a former president of Jenny Craig Inc., moved from Boca Raton, Fla. to Newport Beach to start the business. He doesn’t want to talk specific numbers acknowledging he doesn’t want others to know just how profitable the business is but says he “wouldn’t disagree” with Shapiro’s assessment that it takes only 6 or 8 scans a day to achieve profitability.
Most of CT Screening’s patients are choosing its $800 full body scan, and the company estimates its centers will treat 20 patients a day, five days a week. That’s potentially $4 million or more in gross revenues per year, with a breakeven point of perhaps $1.5 million.
