When Elephants Dance
Curtis Kauffman-PickelleOver the past year, I have written about some of the key indicators pointing to a maturing of the medical-imaging marketplace. Among these is the fact that consolidation is accelerating across virtually all sectors of the profession: radiology groups, hospitals, health systems, vendors, and payors. Consolidation not only is a factor that affects business decisions in these segments, but is an overarching issue that is changing the already-complex health-care landscape in ways that are having a significant impact on the imaging executive’s ability to stay ahead of the game. A case in point is an emerging situation in Pittsburgh, Pennsylvania, that was the subject of an article¹ in the March 27 issue of the Wall Street Journal. The article focuses on the impact on patients of a major turf battle between the University of Pittsburgh Medical Center (UPMC) and Highmark; the provider–payor relationship that is under major stress due to Highmark’s efforts to acquire West Penn Allegheny Health System (Pittsburgh). There are significant patient-access and care implications, but there are just as many business implications for those who happen to be in close proximity to these dancing elephants. Indeed, there can be a destructive element to such consolidations—even more so when consolidation includes a major realignment of forces, as is the case when payors and providers align, when health systems acquire physician practices, or (most especially) when partners suddenly become competitors. Highmark’s former CEO, Kenneth Melani, MD, and UPMC’s CEO, Jeffrey Romoff, squared off in a high-stakes battle for turf that is having a profound effect on all health-care stakeholders in the region. Highmark is now seeking a replacement for Melani (fired on April 1 for gross and willful misconduct), but the battle is likely to get a lot worse before it gets any better, if it ever does. These two giant organizations are in a dance that is going to crush those who are caught unaware, with no strategy in place to deal with the consequences of a major realignment. What can we learn from this real-time drama? First, consolidation is now an integral part of the health-care arena, and realignment will continue to affect radiology practices and imaging providers. It is here to stay, and your attitude about it will largely depend on how you end up: either participating in or facing off with a consolidated organization in your market. Second, while the eventual outcome might prove fruitful and a smart business decision, consolidation is often untidy at best, and it sometimes ends up being destructive. While consolidation is often an important part of a maturing marketplace, when dominant players become involved in unhealthy or monopolistic behavior—or when there is no advantage to the consumer—then the situation calls for regulatory remedies. The point, for imaging executives, is that there is a great deal to learn from the strategic health-care consolidations that are unfolding around the country. Pay close attention to each of them, and learn everything you can from the motivation, strategy, consequences, structure, and stakeholder impact of each. As you develop the strategic plan and five-year outlook for your enterprise, it is best to anticipate where and when you, your hospital partner, or your competitor will be faced with the opportunity for such a realignment. You will want to be as knowledgeable as possible about the nuances of these tectonic shifts in the marketplace and how your organization is likely to be affected. Whatever you do, don’t be caught by surprise—and in a vulnerable position—when the elephants begin to dance. Curtis Kauffman-Pickelle is publisher of ImagingBiz.com and Radiology Business Journal, and is a 25-year veteran of the medical-imaging industry. He welcomes your comments at ckp@imagingbiz.com.