Four-and-a-half years ago, Greensboro Radiology (Winston Salem, N.C.) sought to expand its roster of IT consulting, PACS, voice recognition, workflow integration and other solutions. Instead of following a conventional route, it officially spun off Canopy Partners, a management-services organization (MSO) that today serves 12 hospitals, five imaging centers, and several dozen physician practices—and is still in expansion mode.
At the same time, Minneapolis Radiology Associates (Plymouth, Minn.) has in recent years, rolled out new service lines that do not fall into the category of radiology subspecialties. It also is involved in at least one unique joint venture agreement.
Welcome to the new era of diversification—one in which radiology practices are not stopping at the addition of traditional service lines (e.g., staple subspecialty services) and acquiring outpatient imaging centers in an effort to generate additional revenues. Today, “diversification,” within the context of the radiology specialty can be defined as, “providing a variety of services to an array of consumers and clients so that no one single consumer can significantly alter our business objective and belief—which is the independent private practice of high-quality radiology services,” says Bill Ziemke, JD, LLM, MBA, CPA and CEO, University Radiology Group (East Brunswick, N.J.). Under this umbrella, radiology practices continue to build upon new means of expanding their reach, on the operational and clinical sides alike.
“At a time when financial pressure is coming from all sides and practices are being bought up right and left, diversification (initiatives) must remain on the list,” notes Troy J. Roovers, CEO, Minneapolis Radiology Associates and Minneapolis Vascular Physicians. Summing up the views of several administrators and physicians contacted by Radiology Business Journal, Roovers notes that although it is neither possible nor advisable for radiology practices to capitalize on every diversification opportunity, they should probably pursue some of the newer avenues if they are to thrive, remain independent and decrease their reliance on professional fees.
A significant portion of new diversification lies within the operational space, and Canopy Partners—which CEO Worth Saunders, MHA, says was created as a separate brand with an independent structure and governance in order to best support its growth—constitutes a key example. The company’s scope of services has grown to span four areas built around Greensboro Radiology’s core competencies: enterprise imaging workflow (including, but not limited to integrated PACS, VR, and worklist solutions); revenue cycle management; business intelligence (through a real-time Web analytics platform), and clinical IT solutions.
Among Greensboro’s newest attempts at branching outward is what Saunders calls a diversification-within-a-diversification, RezHealth, LLC, a next-generation vendor-neutral cloud-based healthcare data archive. RezHealth is a joint venture of Canopy Partners and Varrow, a vendor of cloud services, mobility and security solutions and services.
Minneapolis Radiology Associates and Triad Radiology Associates (Winston Salem, N.C.) have also taken a deep-dive into the MSO space in a push to diversify. The former has expanded its Medical Billing Services (MBS) medical billing arm to provide assistance with credentialing and provider enrollment, initial practice setup, fee schedule analysis, contract negotiations, technology services and more. These services are available a la carte or in bundled form.
Triad Radiology Associates’ MSO Radiant Healthcare Solutions also has an IT focus, offering hosted radiology solutions (PACS and RIS, among others). In addition, it provides HL7 consulting and development, for the purpose of building interfaces between physician office electronic medical record (EMR) systems, laboratories, imaging centers and hospital information systems. Custom healthcare technology solutions and services offered by Radiant encompass unified worklists for multiple PACS, code critical reporting, meaningful use attestation, radiology workflow analysis and design, radiology systems reviews/needs assessments and RFP consulting.
“A lot of this work is facilitated by collaborative efforts with vendors, and the backbone is a highly skilled staff,” observes Triad Radiology Associates CEO Theodore C. “Ted” Kerner, Jr., MD.
‘Tool and die shops’
For some radiology practices, diversification in the MSO means taking a highly active role in the actual management of hospital radiology departments. University Radiology ranks among them: In addition to promoting management services to individual practices, it is exploring opportunities to assist hospitals with radiology department operation.
“I firmly believe more hospital boards and CEOs eventually will realize that specialists like us are far better at managing the entire hospital radiology departments than they are,” Ziemke asserts. “We can do it more cost effectively than they can. The future will be similar to the manufacturing industry, where the automakers send out their work to specialists, like tool and die shops.”
Changing the way hospital CEOs and boards of directors think will be a prerequisite for practices like University Radiology to successfully diversify into hospital radiology department management, Ziemke concedes. He says these players must be made to understand that just as McDonald’s is one of the largest real estate companies in the world—rather than simply one of the largest fast food franchises—University Radiology and its ilk “can not only provide high-quality reads,” but the revenue cycle, management, and IT services hospitals require. Ziemke recently visited a hospital at which procedures are coded manually—a procedure he deems archaic, inefficient and prone to error.
Chip Hardesty, Radiology Ltd.’s COO, would like to explore the management of inpatient imaging departments, as well as support other practices, particularly small ones whose management prefer that they not be “absorbed” by a hospital system (as is frequently the case today). “We’ve had some high-level conversations about managing inpatient departments, and we see a lot of potential in doing this for rural providers,” the executive states. “We would definitely accept the opportunity if the right one [presented itself].”
In the meantime, Radiology Ltd. is using hospitals as another type of diversification lynchpin. The practice currently owns seven imaging centers and maintains two more under joint venture agreements with Tucson Medical Center and Ascension Health. Harnessing the talents of its own professionals, it provides IT development services, including software development, to its partner hospitals’ inpatient radiology departments.
Although radiology practices continue to add traditional lines of service through joint ventures and via other initiatives, the new face of diversification also involves some pushing of the clinical envelope. For instance, Minneapolis Radiology Associates has entered into a joint venture agreement with a subspecialty ambulatory surgery center that is part of a group of nephrologists.
“We feel this is a great way to improve access to quality care, at a lower cost,” while opening the door to a new source of income, Roovers explains. To an identical end, Minneapolis Radiology Associates is attempting to bring a cardiologist on board, and Triad Radiology is taking a multidisciplinary approach to the therapeutic and interventional radiology paths, bringing vein surgeons and radiation oncologists into the practice, according to Kerner.
Similarly, University Radiology, in addition to such traditional diversification moves as acquiring an expected four imaging centers by year-end (for a total of 19), ramping up its interventional radiology services (including treatment for varicose veins), and offering round-the-clock sub-specialty reads 365 days a year, is now providing reads for pharmaceutical research and consulting for the defense in medical malpractice cases. Ziemke believes the pharmaceutical business eventually could account for 5% to 10% of the practice’s business.
Strategies For Success
No matter the appeal and focus of a diversification initiative, careful vetting of new service lines and other opportunities has proven imperative to success. This means investigating a wide breadth of issues and addressing a multitude of questions, starting with the viability of the offering at hand given the need or desire for it. In addition to conducting pro forma business analyses and formal market research (e.g., to scope out geographically promising areas), Saunders and Eric Mansell, MD, PhD, president, Greensboro Radiology and Canopy Partners, advocate querying potential end-users for their perspective—without which they believe practices run the risk of making an introduction in a vacuum.
They share an example: At one juncture, Canopy Partners was considering the development of an application programming interface that would provide radiology reports on their mobile devices. Executives within the organization were enthusiastic about the project, with several convinced that the company had a “home run” idea physicians would rapidly embrace. After consulting the latter, they quickly changed their minds.
“Most of them said they would never use it, so that was the end of that,” Mansell says. “It goes to show that you may assume you know what potential clients are thinking and what they want, but sometimes nothing could be further from the truth, so it’s better to just ask.”
He adds that Greensboro Radiology and Canopy Partners leverage networking to learn what needs may be met by diversification, but have yet to be fulfilled, as well as to obtain a read on prospects’ desires. A large team attends local and national industry events, including meetings of the RSNA and ASR, to interface with vendors and representatives from other radiology groups.
Additionally, Canopy Partners has formed a committee of high-level executives from various radiology groups. The committee meets periodically, sometimes with guest speakers present (the next meeting, on October 15, will feature the administrative director and physician director of a local Accountable Care Organization). Mansell and Saunders refer to the gatherings as “another great way to learn what (prospects) are thinking and where they’re going.”
The next step for all practices whose diversification efforts are profiled is to determine whether adequate internal human resources exist with the right core competencies to handle the proposed new line of service or business. If not, practices must investigate whether the end product will render such resources worth acquiring and what would be required to do so.
In adding the technology component to Medical Billing Services, Minneapolis Radiology opted to hire a third-party IT group, to implement and manage all technology and interface services. The roster includes network design, server administration, RIS/PACS and billing interfaces, system integration, IT project management and consulting support and voice-over-IP (VoIP) telecommunications technology.
A closely related activity is to assess whether the opportunity under scrutiny would, if deployed, suit the practice’s purpose, including—but not limited to—decreasing its dependence on professional service income and contributing consistently to the bottom line. Not long ago, Minneapolis Radiology Associates was approached by a vendor that was attempting to develop new contrast media for use in MRI and CT exams. The vendor wanted the practice to purchase a stake of ownership in an entity that had been set up for this purpose.
Roovers and his colleagues were intrigued by the idea, and there were individuals within the practice whose skillsets made pursuing the venture a viable possibility. Moreover, a contrast media shortage had created a market for the product. Nonetheless, the team opted against signing on the dotted line in part because the long-term cost/benefit analysis seemed less than optimal.
Similarly, Radiology Ltd. has pulled away from real estate deals. As Hardesty explains, billing and IT services, like those provided for the joint ventures, are in its wheelhouse, but the practice has neither the human bandwidth nor the expertise to play heavily in real estate.
Management of Canopy Partners has explored the idea of acquiring other business services to foster its growth, and has discussed it with several suitors, only to subsequently pull back from further negotiations based on the belief that the company can better attain its goals through organic expansion. On the clinical side, Greensboro Radiology has declined a few opportunities to provide radiology services to entities that offered little or no input into how these services would be delivered.
“We feel very strongly about taking an active role, not a passive one, in all of our diversification efforts,” Saunders says. “We don’t want to just invest and sit back; it’s our (mantra) to involve our talent to shape the future.”
Equally important is ensuring a close match between the culture of a radiology practice/MSO and the culture of the joint venture partner or entity to which it will provide services. “If (practices) don’t really explore that culture ahead of time—looking at everything from the personalities involved to the way things are going to be done on a day-to-day basis—they may find themselves closing down an otherwise” viable diversification venture,” Hardesty warns.
This happened to Radiology Ltd. when it entered into a joint venture with another practitioner. “It was not a great personal fit, and we had to divest out of the relationship,” Hardesty says.
Cultural clashes are, of course, not the only rationale for abandoning a diversification initiative. Sometimes, the expected volume simply does not materialize, as occurred when Greensboro Radiology expanded its interventional radiology services to clinics in the region it services. “We did a pro forma, and our due diligence, but we couldn’t grow the volume, so we pulled the plug,” Mansell states.
Both Greensboro Radiology and Canopy Partners attempt to avoid such situations by setting parameters. “If we aren’t sure something is valid and sustainable, we give it a shot, but not before we agree that we will re-assess in ‘x’ amount of amount of time and end it if it doesn’t measure up,” Saunders explains.
Still, in some instances, doggedly pursuing or supporting a diversification initiative rather than walking away from it before or after can pay off. Several years ago, Minneapolis Radiology Associates began discussions with a local physician group about a possible a joint venture agreement under whose terms the two entities would operate a freestanding center.
The center was to be the first of its kind, anywhere, and Minneapolis Radiology’s physician leadership firmly believed that pursuing the project was the proper course of action because there was a need for the services the center was envisioned to provide. Yet despite such optimism, neither entity’s board of directors was entirely comfortable with the idea of moving forward with the endeavor.
“That it hadn’t been done before was a real sticking point,” Roovers recalls. However, instead of abandoning the project, the parties involved continued to communicate in an effort to win over the decision-makers involved. Six years later, they did—and the center is flourishing.
One diversification opportunity also may lead to another—which is why keeping one’s eyes open, rather than seeking out diversification paths in more sporadic fashion—proves worthwhile. RezHealth started out with a vendor-neutral archive.
“Then, we noticed that there was a call for application decommission, and things grew from there,” Mansell says. “Diversification is not static. It’s a moving target.” Considering the rate at which the discipline of radiology and the health care landscape continue to evolve, that is likely to hold true into the foreseeable future.