Change is coming to radiology in ways the profession could not have anticipated in a pre-Affordable Care Act world. The forces driving the change are many and varied—economic, regulatory, technology-enabled—but one common denominator has emerged as the “cardiopulmonary system” of the transformation: hospitals under intense pressure to perform in order to survive.

In more than a few cases, this spells an existential threat to clinical practices serving hospitals on an outsourced basis. A cursory review of local business headlines over any 12-month window will show that hospitals are ready and willing to hire new practices, although the press releases rarely mention the underperforming groups that got replaced.

Radiology is not immune, as 1 in 4 hospitals that outsource any patient-care services include medical imaging in the mix. And the ratio is rising, according to a 2012 study commissioned by Waller, the Tennessee-based law firm, and conducted by Modern Healthcare Insights.

The good news is, other specialties have blazed these trails, learning the hard way how to compete for, and win, hospitals’ business in increasingly tight fiscal times.

To find out what radiology might learn from their experiences, imagingBiz turned to Robert Johnson, MBA, principal of Florida-based Enhance Healthcare Consulting, which advises hospital and physician leadership on practices’ financial, clinical and operational performance. Prior to joining Enhance, Johnson was a vice president at Hospital Corporation of America (HCA), the largest for-profit operator of healthcare facilities in the world. There he had a hand in evaluating, operating and leading negotiations with anesthesia, emergency, radiology and pediatric physician programs.

“The most significant change for independent physician practices in the last several years has been the consolidating of practices,” says Johnson, adding that the trend is a logical extension of hospitals themselves consolidating and expanding. “Practices command more attention and respect from hospitals, and appear as more serious business partners to hospitals, simply by having a larger footprint than their competitors.”

Practice consolidation can take many forms, Johnson points out, from “handshake pacts” to work together at various levels, to signed agreements on sharing administrative resources, to joint ventures, to outright mergers and takeovers. He says the most important ingredient in establishing and sustaining a successful strategic partnership is “likeness of mind” among and between participant groups.

“Until recently, these combinations have mostly involved physician practitioners joining with others in the same specialty—anesthesia with anesthesia, radiology with radiology and so on,” he says. “But now we’re seeing more groups coming together as part of multi-specialty practices.”

Observe anesthesiology

What has been pushing practices to consolidate, including with groups that have historically been their competitors? To answer that question, Johnson homes in on anesthesiology. Throughout the specialty, he says, the need to consolidate is no longer just a notion. “It’s real,” he adds. “It’s already happened.”

Johnson says the primary driving force for anesthesia practice consolidation was falling reimbursement. He believes the specialty was among the first to feel the need for greater girth in the marketplace because it has the highest disproportionate payment from Medicare. For that reason, anesthesia practices were among the first to realize that they would have to make previously unconsidered business compromises. 

In order to meet the service levels the hospitals wanted them to provide, the groups needed to hire and manage more clinical and support staff, Johnson explains. They couldn’t build anything on shrinking revenue streams, so many had no choice but to ask the hospital for financial support. “Accepting a subsidy clearly puts a group, especially a smaller group, in a very difficult position,” says Johnson. “In exchange for that subsidy, the hospital wants a lot of control over how your physician group operates.”

Along with control, hospitals and health systems began demanding that the practices align with them on big-picture, leadership matters such as mission, vision and values.

“In fact, alignment is really too soft a word,” says Johnson. “If I’m a hospital and you want to be my partner, I want to see your wherewithal in black and white. I want to see how you will deliver the goods, financially and otherwise. I want to see you accepting risk to promote and expand and enhance this hospital’s financial and operational performance.”

Look out for the ‘L’ word  

Nor is such tight coordination an easy thing to achieve. Hospitals have become discerning shoppers when it comes to selecting practices to partner with, and their selection-by-elimination often begins by weeding out candidate practices that lack one essential quality—leadership.

Johnson tells how, of the last 30 RFPs issued by HCA to find replacement practices for hospital clients while he was working there, 20 traced to leadership failures. “You have to show that you can get your group’s physicians to work in a manner that puts the hospital’s interests first,” he says. “Plus you have to lead your group such that it responds as a group, not as individuals, to the needs of the hospital’s other medical staff.”

Johnson is quick to point out that hospitals use both formal RFPs and informal RFPs, and that the latter are much more dangerous. When a formal RFP goes out, the incumbent at least has a chance to change its behavior, improve its performance and otherwise have a shot at staying.

“The threat you always need to be on the lookout for is the informal RFP,” says Johnson. Just because you haven’t heard anything, he adds, doesn’t mean the hospital hasn’t been making phone calls, scheduling business lunches and searching the Web. “Everything can take place without your knowing it, up to the point where you’re called in as a group and told, ‘We’re exercising our Termination Without Cause clause in our contract. You have 180 days before another group moves in to replace you.’”

Take charge of change

Asked to offer a word to the wise among independent radiology practices, Johnson replies: “I can say in just three words what you need to do: Get big fast.”

Small groups in most specialties are at tremendous risk, he adds, and efforts at trying to maintain survival all on one’s own are wasted. “Find others, combine and get big fast,” he says, stressing the importance of likemindedness among practice partners. “By being big, you not only command more respect and attention; you’re also better able to meet coverage needs.”  

“Of course, the first thing you can and must do is to be the best and most efficient you can be—clinically, operationally, economically,” Johnson concludes. “But then you need to find other practices with the same philosophies that are able to conduct business with these same priorities. Combined with them, you can achieve the goal of becoming a larger entity and having a larger footprint.

“You don’t need to be swallowed up. You don’t need to sacrifice your autonomy. You don’t need to lose your practice of medicine. You can maintain all of that by being the best you can be and then combining with others who share your philosophies, interests and goals.”

So it is that, in a post-ACA world, independent radiology practice finds that its opportunities are as exciting as the existential threat hovering over it is real.