Radiology’s Big Three

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon

Curtis PickelleI have written, in the past, about the converging trends that illuminate, when viewed together, where the imaging profession finds itself in its life cycle. A somewhat mature marketplace is defined by certain characteristics that mirror these three ubertrends: tightening of profit margins, some measure of commoditization, and accelerated consolidation of key entities. This third trend is now being played out across the country and in virtually every segment of the health-care supply chain.

Illustrating this in a significant way is the news of the recent merger of three radiology groups in the greater Dallas–Fort Worth, Texas, marketplace. According to a March 2, 2011, press release, the merger of Radiology Associates of Tarrant County, Southwest Imaging and Interventional Specialists, and Grapevine Radiology Associates has resulted in the creation of the nation’s second-largest private radiology group, as measured by the number of radiologists and as ranked in the 2010 survey of the largest radiology practices published by Radiology Business Journal.

According to the announcement, the new group will operate under the name Radiology Associates of North Texas (RANT), with headquarters in Fort Worth. The new entity will employ 110 board-certified radiologists.

The scale of this consolidation is a harbinger of what is likely to come, and this convergence of trends points toward strategies that smart organizations will use to mitigate the impact of decreasing profit margins and commoditization. It’s all about scale, and it is clear that the shareholders of these three prestigious groups feel that the combined organization will be much stronger than the respective former practices were on their own.

RANT is most likely to be in a better position to control its destiny in the face of diminishing reimbursements and increased payor scrutiny. Indeed, this Texas three-step will certainly increase the group’s viability with the 18 hospital customers served by the merged practice. The group will also control a similar number of outpatient imaging centers, and it will continue to provide subspecialty interpretation and imaging-management services to other health-care providers in the Dallas–Fort Worth area.

What are the implications of this consolidation for groups in other markets? I know of a number of groups that are in discussions with other entities, exploring the benefits of a combined footprint and market scale. Likewise, groups such as Strategic Radiology (St Paul, Minnesota) and National Imaging Network (Brentwood, Tennessee) have created federations, of a sort, in an attempt to reap the benefits of a larger organization without mergers. Indeed, even smaller groups that would not be candidates for such a megamerger are eyeing ways to combine with other entities as a way to bulk up their defenses against threats to their continued success—and, in some cases, their continued viability.

The caution for RANT, and others that have tied the knot, is that the difficult part of any merger of independent organizations lies in melding distinct cultures into one culture that reflects the best of each. This is no easy or small task, and has proven the Achilles heel of more than one unsuccessful merger. Among the major implications of a deal this size is that attention must be paid to issues beyond finance, operations, and clinical quality. In order to enjoy the full benefits of the envisioned market strength, a common culture needs to be created that everyone in the enterprise will endorse, support, and enthusiastically embrace.

As we usher in the new realities of operating in a more mature marketplace, it is important to keep an eye on the lessons that can be learned from those who are early adopters of these new trends. It will be interesting to watch these new organizations as they pave the way for what just might be the new success models. The devil is always in the details, and time will reveal the wisdom of such moves.

Curtis Kauffman-Pickelle is publisher of ImagingBiz.com and Radiology Business Journal, and is a 30-year veteran of the medical-imaging industry. He welcomes your comments at ckp@imagingbiz.com.