Radiology Groups Face Pressure to Consolidate: Survey

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michael_zawadzkiRadiology-practice consolidation has become more than just a trend: It’s an imperative for future survival, according to Michael Brant-Zawadzki, MD, Ron and Sandi Simon endowed executive medical director chair at the Hoag Neurosciences Institute (Newport Beach, California). “Scale is becoming much more important,” he notes. “Smaller groups are looking for help and are being overtaken by corporate entities like national teleradiology groups—or by larger, independent group practices. Under that model, they can distribute subspecialty services more efficiently and can realize economies of scale.”

In a survey of 32 private practice radiologists conducted by Zotec Partners at the November 2012 annual meeting of the RSNA in Chicago, Illinois, the movement toward consolidation was clear: 56% of those surveyed said that their groups were actively considering merging with another group or acquiring another group. Further results from the survey gave fairly clear indications as to why, with changes to groups’ reimbursement, hospital relationships, and procedural volumes abounding.

Reimbursement Shifts

Of survey participants, 53% said that their practices have been approached by their hospitals or health systems about participating in alternative payment models (whether accountable-care organizations or some form of bundling); fully 72% anticipate that their hospitals will pursue one of these initiatives in the future and will require them to participate. Brant-Zawadzki says, however, that much of the conversation about bundled payments might turn out to be little more than hype.

“There’s a spectrum of what bundled payments can mean,” he observes. “You could have a corporate entity like Kaiser Permanente, which works entirely through a bundled-payment system and pays its physicians a salary. Other entities could pay some physicians on a salary basis and others on a fee-for-service basis. I think true bundling of radiology services is still pretty far away; as health-care reform was evolving, and the thought of a single-payor system loomed large, people talked about it more and more, but as insurance exchanges have evolved, they look more like traditional insurance companies. The threat of bundling radiology services into a single payment isn’t as imminent.”

Brant-Zawadzki adds that even in Canada, which has single-payor health care, individual physicians are still paid on a fee-for-service basis until a budget cap is hit. “What we’re seeing is a transition to capitated payments—meaning bundled payments—but the way that money is subdivided to the individual physician providers will still be traditional, in most cases,” he predicts.

Relationship Changes

Of those surveyed, 19% said that their practices had been approached by their hospitals or health systems about becoming employed. Among the 81% who had not been approached, however, 35% saw it as a possibility in the next three years. “The employment landscape for radiologists really varies by geography,” Brant-Zawadzki observes. “In Phoenix, Arizona, for instance, 50% of radiologists are employed by hospitals. There are places where radiologists are coming under employment—either by hospitals or by foundation models—but with the consolidation that has already been happening, there’s a minimal difference between being employed by a Kaiser Permanente medical group or by an 80-person private radiology practice.”

In the past, radiologists might have been concerned about maintaining their independence, but Brant-Zawadzki submits that the very term independent deserves some reconsideration, in light of recent reimbursement changes. “Radiologists may feel independent when they are employees of a large group, as long as the group owns itself. If they have stakes in a 30-person practice, they will feel independent, even though they are really employees,” he says. “The distinction is a nuance, and more than anything, it relies on the size of the entity for which one works.”

As private practices continue to grow in size, the distinction between being employed by a private practice and being employed by a hospital or health system might grow even fuzzier. “I really don’t think there’s a role for the two- or three-person group anymore,” Brant-Zawadzki says. “In this reimbursement environment, practices have to be very efficient managers; they need very efficient billing services—and it’s much easier for larger entities to provide quality-improvement services as well. It’s easier