Change is coming to radiology in ways the profession could not have anticipated in a pre-Affordable Care Act world. The forces driving the change are many and varied—economic, regulatory, technology-enabled—but one common denominator has emerged as the “cardiopulmonary system” of the transformation: hospitals under intense pressure to perform in order to survive.
In more than a few cases, this spells an existential threat to clinical practices serving hospitals on an outsourced basis. A cursory review of local business headlines over any 12-month window will show that hospitals are ready and willing to hire new practices, although the press releases rarely mention the underperforming groups that got replaced.
Radiology is not immune, as 1 in 4 hospitals that outsource any patient-care services include medical imaging in the mix. And the ratio is rising, according to a 2012 study commissioned by Waller, the Tennessee-based law firm, and conducted by Modern Healthcare Insights.
The good news is, other specialties have blazed these trails, learning the hard way how to compete for, and win, hospitals’ business in increasingly tight fiscal times.
To find out what radiology might learn from their experiences, imagingBiz turned to Robert Johnson, MBA, principal of Florida-based Enhance Healthcare Consulting, which advises hospital and physician leadership on practices’ financial, clinical and operational performance. Prior to joining Enhance, Johnson was a vice president at Hospital Corporation of America (HCA), the largest for-profit operator of healthcare facilities in the world. There he had a hand in evaluating, operating and leading negotiations with anesthesia, emergency, radiology and pediatric physician programs.
“The most significant change for independent physician practices in the last several years has been the consolidating of practices,” says Johnson, adding that the trend is a logical extension of hospitals themselves consolidating and expanding. “Practices command more attention and respect from hospitals, and appear as more serious business partners to hospitals, simply by having a larger footprint than their competitors.”
Practice consolidation can take many forms, Johnson points out, from “handshake pacts” to work together at various levels, to signed agreements on sharing administrative resources, to joint ventures, to outright mergers and takeovers. He says the most important ingredient in establishing and sustaining a successful strategic partnership is “likeness of mind” among and between participant groups.
“Until recently, these combinations have mostly involved physician practitioners joining with others in the same specialty—anesthesia with anesthesia, radiology with radiology and so on,” he says. “But now we’re seeing more groups coming together as part of multi-specialty practices.”
What has been pushing practices to consolidate, including with groups that have historically been their competitors? To answer that question, Johnson homes in on anesthesiology. Throughout the specialty, he says, the need to consolidate is no longer just a notion. “It’s real,” he adds. “It’s already happened.”
Johnson says the primary driving force for anesthesia practice consolidation was falling reimbursement. He believes the specialty was among the first to feel the need for greater girth in the marketplace because it has the highest disproportionate payment from Medicare. For that reason, anesthesia practices were among the first to realize that they would have to make previously unconsidered business compromises.
In order to meet the service levels the hospitals wanted them to provide, the groups needed to hire and manage more clinical and support staff, Johnson explains. They couldn’t build anything on shrinking revenue streams, so many had no choice but to ask the hospital for financial support. “Accepting a subsidy clearly puts a group, especially a smaller group, in a very difficult position,” says Johnson. “In exchange for that subsidy, the hospital wants a lot of control over how your physician group operates.”
Along with control, hospitals and health systems began demanding that the practices align with them on big-picture, leadership matters such as mission, vision and values.
“In fact, alignment is really too soft a word,” says Johnson. “If I’m a hospital and you want to be my partner, I want to see your wherewithal in black and white. I want to see how you will deliver the goods,