Life After Sutter

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When news spread that Sutter Health (Sacramento, California) planned to cut loose its long-time radiology provider in Sacramento in favor of a captive model, some observers wondered how Radiological Associates of Sacramento (RAS), a 76-radiologist practice founded in 1917, would survive. Not only has it sustained the blow, but not one partner has left to join the new hospital practice. Anyone who has heard the practice’s CEO, Fred Gaschen, MBA, speak at RBMA, ACR®, and RSNA meetings during the past decade knows that RAS has been preparing for this eventuality for a dozen years. Consequently, what could have been a devastating blow to another practice is merely cause for belt tightening at RAS. The story is a cautionary tale for all radiology private practices, in these times of change.
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“In mid-October, we announced that a local medical-oncology group that was having some managerial and financial challenges was going to join RAS. Three weeks later, we got our letter of termination.”
—Fred Gaschen, MBA, CEO,
Radiological Associates of Sacramento, Sacramento, CA
RAS and Sutter Health should have spent 2009 negotiating a contract for coverage of five hospitals (Sutter Davis Hospital; Sutter Memorial Hospital and Sutter General Hospital, which are parts of Sutter Medical Center Sacramento; Sutter Roseville Medical Center; and Sutter Auburn Faith Hospital). The old contract expired March 31, 2010, but communications stopped completely in the fall of 2009, Gaschen reports. “In mid-October, we announced that a local medical-oncology group that was having some managerial and financial challenges was going to join RAS,” Gaschen says. “Three weeks later, we got our letter of termination.” Meanwhile, after notifying RAS that its contract would be allowed to expire, Sutter Health announced its intention to build an in-house practice. According to an article¹ in the Sacramento Business Journal, Sutter Health hired radiologist Patrick Browning, MD, to serve as chair of Sutter Medical Group’s Division of Medical Imaging, founded in January of this year. The article notes that as of April 1, Sutter Health had hired 12 of 21 planned radiologists, and it is using locum tenens and a national teleradiology provider to fill the gaps. Gaschen believes that the point of departure for Sutter Health was competition in the outpatient market, where RAS operates 16 imaging centers. According to Cecilia Hernandez, director of medical affairs at Sutter Medical Center Sacramento, the decision was about cost and quality. “The focus is to improve effectiveness, make us more affordable, and get quality outcomes,” she told the Sacramento Business Journal. The same article quoted a March 5 letter to staff physicians sent by Tom Gagen, CEO at Sutter Medical Center Sacramento, reassuring physicians that the same level of quality would be met. “Our commitment as of April 1 is to provide at least the same level of coverage and quality as you have received in the past,” he wrote. Breaking Up Is Hard While the loss of Sutter Health represents a blow to income for RAS, the practice’s 16 freestanding imaging centers account for the vast majority of the group’s imaging volume, Gaschen says. “The impact of losing the hospitals was something we did not want to happen, but it is far from sounding a death knell, or even having a serious impact,” he states. RAS is the sole provider of outpatient imaging and radiation-oncology services under a managed care contract with Hill Physicians in San Ramon (Northern California’s largest independent practice association, serving 300,000 covered lives). Hill Physicians provides inpatient services at Mercy General Hospital in Sacramento. Under the same contract, RAS is the designated provider of inpatient services at the Sacramento-area Sutter Health facilities. RAS partners’ incomes inevitably will decline. “Nobody left, and we have less money, so physician salaries are going to go down,” Gaschen acknowledges. Dissolving a long-term relationship that some track back to the 1920s is complicated, so in order to be as nondisruptive as possible, RAS radiologists have agreed not to go into the hospitals unless necessary, and instead, to have all studies transferred to their PACS. “There are certain procedures that must be done in the hospital,” Gaschen says. “One of the hospitals, Sutter Roseville Medical Center, is a trauma center. If there is a Sutter Physician Alliance patient at 2 am who needs interventional radiology, we’re there.” Meanwhile, living up to Gagen’s statement that Sutter Health’s medical staff will still receive radiology services of equivalent quality could be a challenge. Both the medical staff at Sutter Roseville Medical Center and the medical executive committee voted unanimously to keep RAS, but this was a request that Sutter Health did not honor, the Sacramento Business Journal states. It also reported that in the days following the transition, a new radiologist assigned to Sutter Auburn Faith Hospital could not read mammograms and a neuroradiologist at Sutter General Hospital could not perform a myelogram. “We wish the severing of our relationship had not happened,” Gaschen says. “We think the local employers are going to suffer, the patients are going to suffer, and we’re going to suffer.” Looking Ahead It is by design that RAS is positioned to survive the loss of the Sutter Health business. Large, horizontally integrated hospital systems have been a hallmark of the Northern California hospital market since the late 1990s, when RAS recognized that Sutter Health had become a dangerously large part of its business. “We have spent the past dozen years or so bringing in new business,” Gaschen says. “It has worked. We started taking steps years ago, and I am going to say we are far from being done.” RAS is among few practices in the nation that have kept radiation oncology in their folds. RAS counts vascular surgeons, medical oncologists, urologists, a gynecological surgeon, and a thoracic surgeon among its partners. “I think all radiology groups need to start thinking differently,” Gaschen says. “I see us moving more and more into areas of symbiotic relationships with what we do. Imaging continues to be our foundation, and radiation continues to be our foundation. All of these other services are being pulled together to provide a better continuum of care for the patients, so that we have the physicians working cooperatively. The main issue is taking care of the patient, since we are all in the same group.” Gaschen sees the potential for physician organizations to contract directly with insurers to provide integrated care for a variety of conditions, competing on quality and price. He says that RAS might break new ground in providing integrated services, be they in orthopedics, neurosciences, or cancer care. “When you start talking about accountable-care organizations (ACOs), in some specialties and some areas of expertise, outpatient care rules and inpatient care picks up the pieces,” he says. “We would contract directly with payors (who, by the way, are very interested in contracting with physicians), putting RAS in charge of the total care dollars. Some of my physicians have started working with me on it. It’s the future, and how it comes about will be interesting.” He adds, “ACOs want to save money. I think there is opportunity out there.”