Hospital–Radiologist Alignment: Together, but Separate

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Alignment increasingly occupies the thoughts of health-care stakeholders—insurers, legislators, and regulators, but especially hospitals and physician groups. Because alignment sets the stage for service and quality improvements, as well as for the implementation of cost-control mechanisms, the interest is warranted. Hospitals have sought to employ both primary-care and specialty physician practices for the ability to impose quality and cost uniformity through top-down policies, procedures, and cultural mandates. Although hospitals have yet to make radiology practices a focus of their alignment designs, that has not stopped some imaging providers—especially those who savor their independence—from striving to achieve alignment of their own design with the hospitals they serve. Many radiology groups, in fact, recognize alignment as both a noble and a desirable aim. For this reason, Radiology Associates of Canton (RAC) in Ohio recently entered into a contractual arrangement that delegates to the group certain roles and responsibilities that were formerly the exclusive domain of the hospital. Specifically, RAC is now comanaging the radiology department at Canton’s Aultman Hospital, with responsibility for strategic planning and radiology-related capital investments, as Syed Zaidi, MD, president and CEO of RAC, explains. RAC and Aultman Hospital formed this comanagement agreement at the beginning of 2013, after two years of discussion. The idea was initially sparked when the parties realized that such an arrangement represented the most flexible (and potentially powerful) means of helping each other satisfy their business needs. Zaidi says, “Each side basically wanted more responsiveness. The hospital wanted faster turnaround time on imaging studies and reports, while my group wanted to eliminate certain inefficiencies built into he radiology department. Both of us were stuck in a status quo of mutual dissatisfaction. Despite that, there was a sense that things could be better, if only we each would give the other a chance to improve, and that’s what our comanagement agreement seeks to do: give each side the ability to improve.” The Essential Difference Comanagement/shared-management agreements are different from exclusive-provider contracts, according to attorney Thomas W. Greeson, JD, of Reed Smith LLP. “Comanagement entails managing the radiology department with the hospital, not for the hospital,” he explains. “Comanagement agreements allow radiology groups to have a positive impact on care—and give them an additional source of compensation. These agreements can also be a valuable tool to help radiology groups achieve longer-term security in their contractual arrangements with their hospitals.” Greeson continues, “For example, a hospital that issues tax-exempt bonds to finance on-campus capital projects involving radiology is likely to have, with the radiology group, an exclusive provider contract lasting just two years (or possibly three). That is done to satisfy IRS requirements surrounding the issuance of those bonds. Now (although hospitals typically don’t use tax-exempt bonds to finance outpatient imaging centers), if the radiology group has both a two-year exclusive provider contract and a separate 10-year contract for shared management of the outpatient imaging center, the hope would be that the hospital will naturally be inclined to keep renewing its two-year on-campus contract with the radiology group because of that off-site companion 10-year contract.” The comanagement agreement between RAC and Aultman Hospital took effect relatively recently, but Zaidi says that the benefits already are accruing. “It’s giving us more control, more participation, and more cohesiveness with the hospital,” he says. “We turned our relationship toward the positive.” Greeson notes that in almost all instances, the radiology group acts as the suitor, when it comes to initiating these arrangements. “It is incumbent upon the radiology group to make the first move,” he says. Indeed, that is precisely how the RAC–Aultman Hospital deal came to be. In late 2011, Zaidi says, “I decided to reach out to the leaders of Aultman Hospital. At the same time, the CEO of Aultman Hospital had temporarily taken charge of radiology after the vice president of radiology was moved to cardiology, and a leadership vacuum in radiology was temporarily created. It was by chance, then, that our interests coincided. It helped that the hospital’s CEO and I were, in a way, departmental outsiders. Looking at our mutual interests from the perspective of outsiders afforded a much clearer view of what needed to be done to remedy things and how best to go about achieving it.” Zaidi adds, “The more we talked, the more it made sense that some kind of comanagement arrangement would be the best course of action to improve the relationship. For radiologists, obviously, if you don’t have a good relationship with the hospital administration, you have a chance of losing the contract. For the hospital, if it doesn’t have a good relationship with the radiologists, then—by definition—it’s not providing good service to clinicians and their patients.” Common Goals Greeson says that the starting point for negotiations is a mutual understanding of the purpose and objectives behind such an agreement. “In other words, why should you do it?” he asks. “Beyond that, the radiology group needs to be able to articulate its value as a prospective shared-management partner of the hospital, and the hospital needs to be able to understand this value proposition. The idea is emerging that the radiologists in a shared-management agreement will ultimately be the clinical gatekeepers of appropriate imaging, consulting with referring physicians to help them understand better which diagnostic imaging service or test is right, under the clinical circumstances.” W. Kenneth Davis Jr, JD, a partner with Katten Muchin Rosenman LLP, indicates that the parties in a shared-management agreement must be careful to articulate all such roles and responsibilities clearly. He says, “Who will do what tasks, how they will be performed, and when they will be completed are questions that must be resolved.” He adds, “If you are the radiology group, and the agreement shifts the responsibility to perform or accomplish a particular thing to you, then the agreement needs to spell out adequately that you have the authority or discretion to execute it—and to control the how, when, where, and what of the actions you take in the course of executing it. The last thing you want is to be given the responsibility for something, but to have the agreement written in such a way that it allows for the possibility of having the rug pulled out from beneath you.” Another element of the discussion is financial. Davis says that the agreement should not feature any type of cost shifting without compensation. “Fair and reasonable compensation needs to be paid to the party providing the management services,” he says. “Frequently, that will be radiology. It also makes sense that some part of this compensation should be performance based. Additional compensation should be paid if radiology is hitting certain clinically based, quality-based performance objectives.” Nonetheless, some hospitals apparently believe that radiologists ought to be willing to assume added functions without additional compensation. “The attitude is that radiologists have already been compensated enough, just by virtue of possessing an exclusive contract,” Greeson says. “Their view is that anything you add with regard to marketing, administration, or decision making on capital-equipment acquisition is only to be expected—because the hospital has granted you this right to provide services, in its radiology department, on an exclusive basis.” Know the Risks Compensation is not the only issue upon which negotiations can founder. Greeson says, “Radiologists need to understand that they cannot provide illusory services. They need to give serious, extensive contemplation to what it is that they propose to do (and how they will actually deliver those services). That includes determining what the administrative-service roles are and how they are quantified, in order to make sure they are performed properly and well.” Davis advises radiologists (before approaching a hospital about shared management) to ponder whether the group can, through this contractual device, genuinely improve quality of care, improve access to that care, and reduce its costs. Even more important is whether the agreement will permit the group to become more deeply insinuated into the fiber of the hospital. If so, “The hospital might, afterward, find itself less free to invite another group to take on some or all of the outsourced reading,” Davis says. Due diligence must be conducted in order to uncover and explore the risks inherent in the proposed relationship, Davis adds. “At bottom, a shared-management agreement is a deal, so you want to build an intelligent agreement that includes mechanisms to facilitate and encourage the parties to work together, while also ensuring that each side is accountable to the other,” he says. Sometimes, though, one side or the other ends up unable to carry its share of the burden. “The biggest risk is in the failure to manage what’s been agreed to,” Davis says. “Failure can happen when you are made responsible for something without having the discretion and authority to enact change and to manage.” Failure could be disastrous because, Davis adds, “It places you at risk of losing not just the benefits of working closely with the hospital to improve quality and become more competitive in the marketplace, but also of losing the overall opportunity to read. Because an unavoidable risk of these agreements is the possibility of failure, you need to have a good mechanism, first and foremost, to try to fix what’s become broken—before you take the step of unwinding and separating.” Failure will affect two things: the agreement and the quality of the relationship that the group enjoys with the hospital. Davis says, “The relationship needs to be protected because few are the groups that can claim that the majority of their revenue comes from the technical component or from reading nonhospital exams. Thus, anything that causes the relationship to sour can potentially jeopardize future revenue.” Clarity, Purpose, and a Good Yardstick Greeson observes that the shared-management agreements most likely to succeed are those in which the radiology group can satisfactorily describe the service it intends to provide, deliver it in accordance with the plan, and demonstrate its success and ongoing value. Zaidi says that success must be demonstrated through the use of formal performance measurements—and pay for performance. “It’s a measurement of sharing the risk,” he says. “If we perform well, there will be good result. If we don’t do well, then we lose that potential income.” Under the RAC–Aultman Hospital agreement, Zaidi functions as medical director of comanagement, while four other RAC members serve as medical directors. Together, they form an operations committee. “One medical director,” he says, “presides over quality assurance; another, over the residency program (to maximize the value of residency in clinical care); the third, over patient services (to optimize the positioning of radiology in the clinical continuum, so as to maximize our value there); and the fourth, over outreach to our physician customers (in order to ensure our responsiveness to their needs—while also soliciting their cooperation, when it comes to changing ordering patterns or other issues affecting quality).” He continues, “We now have a steering committee, which oversees the operations committee: the four RAC medical directors plus the hospital CEO, the vice president of radiology, and other leaders. It meets every three months to review strategic decisions and map out plans.” An Alternative Approach The need for radiology groups to offer strong value propositions has led some groups to become affiliated as consortia. By uniting under a single banner, several area groups can offer robust capabilities and a broad geographic reach, dramatically boosting their chances of persuading a hospital to say yes to a shared-management agreement. That, however, is not the only way that comanagement and consortia can work. For instance, a short time ago, Advanced Radiology Consultants (Park Ridge, Illinois) became part of Integrated Imaging Consultants through a shared-management agreement, of sorts, between itself and seven other area radiology groups. This step was taken in order to align the groups’ interests, as a whole, with a those of a key client that they have in common: Advocate Health Care (Downers Grove, Illinois) a regional integrated delivery system of 12 hospitals and more than 250 other sites of care. Advanced Radiology Consultants, with its 21 physicians, provides the diagnostic and interventional services at Advocate Lutheran General Hospital in Park Ridge. Advocate Lutheran General Hospital is one of Advocate Health Care’s two flagship hospitals. John P. Anastos, DO, president of Advanced Radiology Consultants, says, “We’ve created something more expansive than a shared-management organization,” stressing that Advocate Health Care was not involved in forming Integrated Imaging Consultants. He adds, “It’s an integration where we retain our independence, but have structured the entity so that it can engage in single-signature contracting for hospitals, PHOs, private payors, and others. We are using the power of economies of scale to bring added value to ourselves (as individual groups) and to the Advocate Health Care hospitals we serve.” Anastos believes that the arrangement will promote opportunities to enhance the revenues of all of the participating groups in Integrated Imaging Consultants. It will also permit the consortium’s members to decide jointly on ways to reduce costs. “We’re looking at improved contracting rates—to create a tide that raises all boats, rather than just some,” he says. A driver of the groups’ decisions to share responsibilities, as a consortium, was their belief that having consolidated leadership (and a more streamlined process for making major decisions) will allow the groups to provide services to Advocate Health Care more efficiently. Responding to Market Needs Davis says that a virtue of shared-management agreements is their adaptability to the changing needs of the industry. “I’m seeing forward-thinking hospitals talking seriously with radiology groups about having the radiology group become more involved in the management of the outpatient department—because the reality is that many radiology groups will do a really good job of managing imaging,” he says. Davis also predicts that an increasing number of hospitals will want radiology groups to manage radiology utilization and, by extension, to help manage the risk—and hospitals will be more willing to pay the radiology groups to do that. “The hospitals, for their part, will bring together the support services necessary to accomplish this,” Davis predicts, including clinical decision-support software. Greeson, too, expects that providers will come to rely more on shared-management agreements. “In a changing economic climate, with declining reimbursements for both technical- and professional-component services, radiologists need to find ways to work with physicians to provide diagnostic and interventional services more efficiently and economically,” he says. “This need will not wane, but will only increase in importance. It is, therefore, incumbent upon every radiology group to engage in self-assessment, looking for ways to position itself to be the group that adds value for the hospital—while also being compensated for that and increasing the security of its relationship with the hospital.” Shared management is really all about relationships: reinforcing them and building upon them, in Zaidi’s estimation. He says, “Shared-management/comanagement agreements are a very good way to resolve those kinds of problems. In our case, both sides are taking seriously their pledges to be more responsive to each other and to work toward the same set of goals: better patient care and greater efficiency in its delivery. This bodes well for our mutual interests—the areas where we can (and need to) achieve alignment.” Rich Smith is a contributing writer for Radiology Business Journal.