Building Lasting Partnerships: A Review of Hospital–Radiology Alignment Models

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Advisory Board Co. research reveals that there are multiple avenues through which to pursue hospital–radiologist alignment.

Alignment is an elusive term. It can mean many different things, and pinpointing an exact definition is essentially impossible. At the very least, however, imaging leaders seem to agree that it is good thing, and something for which to strive.

Physician alignment typically refers to the strength of professional, cultural and/or economic relationships between physicians and hospitals. In imaging, this typically refers to the degree of coordinated integration between radiologists, hospitals, and referring physicians—regardless of whether radiologists are independent, employed, or otherwise affiliated with a health system.

While the definition is broad, a significant number of health systems have increased their efforts to improve radiologist alignment in recent years. Evidently, the time has come for radiologists and other imaging leaders to take a critical look at how they can best align themselves with their care partners to be sustainable in the long run. In the face of a healthcare system that demands better coordination, and a regulatory landscape that isn’t particularly favorable to imaging, radiology professionals simply need to work together to demonstrate their value.

One of the best ways to solidify the radiology group–hospital relationship is to formalize it. There has been increasing interest on both sides about establishing performance metrics, co-management agreements and other official partnerships. Some groups already have negotiated successfully these contracts.

Choosing which alignment model is right for your organization, however, is the wrong place to start. In imaging, there is no standard template for alignment, nor is there a manual or menu indicating how to establish these models. Like most things in health care, alignment isn’t that simple.

As it turns out, the most successful radiology alignment models didn’t follow any set approach. Rather, radiologists and administrators collectively identified their goals, came together to discuss potential options for integration and established alignment models unique to the relationships and culture in each situation.

My team at the Advisory Board Co., the Imaging Performance Partnership, has actively researched radiology alignment for some time and recently released our findings to the Advisory Board’s membership of imaging providers. Here is an inside look at some of the alignment models we uncovered.

Conventional alignment models

Many alignment strategies in effect today aren’t particularly novel, but current pressures warrant a review nonetheless. One example is an incentive-based professional services agreement (PSA). A PSA can include financial incentives (or penalties) for radiologist performance on predefined quality and service metrics. This model is a low-risk way to align hospital and radiologist goals without pursuing any sort of structural integration. In a 2014 survey conducted by The Advisory Board Company, about one-third of both hospital and private practice respondents reported having a radiologist PSA in place.

Another way to align without formal integration is to enter into an exclusive provider contract, an agreement that prohibits a health system and/or radiology group from formally contracting with a different radiology partner. The same Advisory Board survey indicated that this model is quite prevalent in imaging. The majority of hospitals contract with only one radiology group, and many hospitals associate with a single group but do not have a formal contract. The vast majority of radiology groups surveyed are the sole contracted provider of radiology services for a hospital—and usually to more than one. In other words, providers without any sort of exclusive provider agreement are a minority (Figure 1).

Joint ventures also are not new to the imaging industry, but they can play an especially important role in today’s financial and regulatory environments. Radiology joint ventures usually take the form of outpatient imaging centers developed as separate entities with shared assets, in which both parties (the hospital or health system and the radiology group) contribute equity.

One advantage of joint ventures is that they can provide price flexibility, depending on whether they are set up on the Hospital Outpatient Prospective Payment System or the Medicare Physician Fee Schedule. As our health care system shifts to a value-based model, risk-bearing providers like accountable care organizations (ACOs) will be responsible for medical costs, and leaders will be incentivized to send patients to the lowest-cost sites of care within their own networks. Many hospitals are now considering joint ventures to be that low-cost site of imaging care.

This scenario is often appealing to radiology groups as well, as they have the potential to gain a new investment, increase professional revenue and strengthen relationships with their health system partners. Of course, outpatient market dynamics play a critical role in establishing a joint ventured imaging center; any overlap in center ownership and market penetration that would position a partner as a competitor is likely to undermine the ultimate goal of strengthening alignment.

Co-management models

While the term “co-management” can have fairly specific implications in other service lines, imaging leaders have been using the term as a broader classification for collaborative management models between hospital administrators and radiologists. There are many benefits to a co-management agreement for radiologists. Applying clinical expertise outside the reading room can improve care delivery while allowing radiologists to demonstrate value (and sometimes even get paid for it).

Co-management models vary but generally adhere to one of two basic paradigms. The first is a direct contract for management services. The second is a designated radiology co-management organization, which is often used to contract with physicians from multiple independent practices.

A management services agreement (MSA) is a contract between a hospital and a radiology group whereby radiologists agree to assume management responsibilities in a radiology department or outpatient center in exchange for a flat fee and/or incentive-based compensation.

Our survey data tell us that many organizations already have such an arrangement in place. One of our Advisory Board members created an MSA with their radiology group as a compromise to prevent the radiology group from opening a competing imaging center. Their contract includes a base management fee plus annual incentive payments on three to five initiatives that align with the hospital’s strategic goals.

While this case involves a direct payment model, it is also possible to set up a shared-risk agreement, where imaging administrators and radiologists are able to earn certain incentive payments only if they both hit previously established metrics.

A designated radiology co-management organization is an intermediary LLC used to compensate a collective body of physicians for management duties in a hospital imaging department and/or outpatient center. Despite low adoption, there is quite a bit of interest in implementing this model, and some organizations have started using their existing management services organizations for this purpose.

One Advisory Board member founded an LLC with 50% of shares owned by the health system and 50% owned by various physicians, including but not limited to radiologists. They selected specialties involved with interventional cardiovascular care to foster strong working relationships between cardiovascular physicians and their regular care partners. There are even performance metrics that all physicians must hit—a strategic move designed to drive collaborative performance improvement.

Clinical integration network

A clinical integration (or clinically integrated) network (CIN) is a legal arrangement allowing physicians and hospital leaders to collaborate on improving quality and controlling costs while remaining separate entities. These networks often invest in IT infrastructure, create committees for various aspects of performance improvement, analyze data to develop evidence-based care guidelines, and negotiate with payors to receive more favorable rates, shared savings or other performance-based incentive structures.

These complex entities provide a ripe opportunity for imaging to demonstrate value on quality and cost indicators. While it is not uncommon to have radiologist representation in CIN leadership, it is worth noting that a radiology program itself rarely initiates its formation. Imaging leaders should generally consider clinical integration to be an alignment model to take advantage of, rather than one to develop independently.

Clinical integration is especially appealing in today’s healthcare economy because it can provide benefits in both fee-for-service and risk-based payment environments. Improving quality, reducing cost and strengthening alignment are all prime ways to demonstrate imaging’s value, regardless of reimbursement structure.

We’ve seen many of our members work to place radiologists in leadership positions within their CINs. Having a radiologist at the table in high-level strategic decision-making, both ensures radiology’s interests are protected and conveys how radiology can contribute value.

Health system employment

Hospital/health system employment of radiologists, either directly through an affiliated medical group or indirectly through a designated foundation, is a hot topic in the radiology community.

Remarkably, despite concerns about a widespread trend of employing radiologists, not a single hospital or radiology group respondent to our survey indicated that they are considering moving to an employment model in the next two years (Figure 2).

There are many pros and cons to radiologist employment, for both the hospital and the radiologists. Employment may provide radiologists with more secure, comprehensive compensation, a built-in referral network and access to hospital resources. On the other hand, such arrangements could result in the loss of autonomy, financial stakes in their own business and the administrative benefits of a small, nimble organization.

Hospitals may gain tighter control over radiologist activities, better coordination of physicians and patients and less outpatient competition. They also could face cultural conflicts, a risk of lower productivity and high salary/benefits costs with no guarantee of a high volume of referrals to compensate.

It is important to recognize that employing radiologists should be a two-way conversation. If health system leadership is eager to employ radiologists, it is critical to first determine why. Once a practice knows the rationale, it will be easier to determine if employment is in fact the best solution or if there may be other ways to reach the same end goal.  

Discussion

Alignment is no longer a benefit—it’s a requirement. Those who fail to align may face (and have faced) the loss of hospital business to competitors. Ultimately, though, the variety of these models suggests that, while alignment may predict the success of a radiology partnership, there is not one way to strengthen alignment.

In fact, the alignment model should be seen only as a component of a broader alignment strategy. Close alignment is not contingent on having a formal model; the alignment models presented earlier are simply tools to create a framework that fosters productive collaboration. Overall, radiologists should commit to adopting health system goals, identifying specific strategic initiatives and figuring out how radiology can contribute.

As healthcare providers look for radiology partners who will contribute the most value, relationships are on the line. More and more healthcare providers are putting out RFPs for radiology services, and the transition to risk-based payment means that radiology’s ability and willingness to ally with an ACO will likely play a significant role in institutional sustainability.

Some radiologists even have begun to assert their commitment to partnership by assuming financial risk for utilization management. One Advisory Board member, a radiology group, reviews all outpatient orders for appropriateness and takes responsibility for any costs that exceed the per member per month allocation negotiated with a local risk-based physician group.

Another member, a multispecialty physician group, negotiated with local payors to self-manage advanced imaging utilization with clinical decision support. Because the group agreed to absorb costs in excess of the negotiated range, the payor waived its preauthorization requirement.

The key to hospital–radiologist alignment is structuring the partnership such that radiologists can anticipate their health systems’ needs and proactively serve their care partners. Ultimately, regardless of what the contract looks like, successful alignment means that radiologists have successfully responded to the needs of their care partners and, in doing so, positioned themselves as a valued partner in healthcare delivery.