The literature is full of case studies detailing how business lifecycles at varying points in the maturity of markets affect growth curves and levels of sustainable profitability. This is an exercise that goes well beyond analyzing the impact of the DRA on MR and CT profitability and plays to the essential composition of our free market system. The message: Markets change and businesses figure out ways to adapt or die. And, the guy who loses today just might become your nemesis somewhere down the road.
Within this inevitable cycle is the microcosmic sub-cycle, the essential ebb and flow of the phenomenon known as market consolidation. Consolidation is such an important part of our business fabric that it might be one of the only true constants in business today. We love it when it benefits us and we hate it when we think it makes the playing field uneven. Whether or not you think the playing field is about to be tilted in an unfair direction likely depends on where you are positioned on the issue of consolidation. Are you a consolidator or a consolidate(e)?
The DRA is already pushing some fence sitters in one of these two directions.
As I talk to those running imaging centers in various markets around the country, I am struck by the differences in their points of view on the likely impact that the DRA will have on their businesses. Make no mistake, I have heard very few who actually think that this will be a good process for radiology to work itself through. However, more than a few have mentioned the opportunities created for those with the resources to consolidate in their respective markets, to become bigger and stronger, acquire, and merge with or extinguish competitors.
As we have noted from examples in other markets, the long-term impact of consolidation contains less obvious inherent opportunities that are created when the strong become even stronger. It is somewhat paradoxical that those who could bulk up through consolidation now could themselves become vulnerable downstream during the next inevitable cycle in which smaller, more nimble players will seek their opportunity. Then the cycle will begin again with entrepreneurs nibbling away at the margins of large organizations that let their customer service whither away.
Where does this leave you? The bottom line is that DRA or no DRA, the outpatient imaging business of today and tomorrow will be one in which constant vigilance and attention to the competitive landscape will be among the most important of leadership tasks. If you are likely to benefit now from consolidation in your catchment’s area, consider yourself fortunate—for now—and get your organization ready for the next round.
The best lesson to take away from the current chaos created by the upcoming cuts in reimbursement is that market forces, not the legislators, regulators, and private payors alone, will determine the success of imaging organizations. It is in their reaction to the payment environment that leaders and winners will emerge.