Imaging JVs: Strategic Partners or Just One More Competitor?
Hospital-radiology group JVs are key to preserving and growing imaging market share, but failure to cement strong relationships and expectations from the start is a prescription for failure Well before legal and operational considerations of contemplated joint ventures (JVs) take place, it is of critical and increasing importance to discuss relationships between and among the JV partners. Equally important are discussions of the strategic and operational imperatives of the contemplated entity. What follows is not a warm and fuzzy couch session on relationships, but a representation of observations from multiple experiences facilitating meetings on JV opportunities. Typically, radiology groups generate JV discussions with hospitals; more recently, hospitals are generating discussions with radiology groups, as well as with other physician imagers in the community. Imaging center operators are also initiating these discussions today. Clearly, the landscape has changed substantially over the past three to five years, but the dominant JV transactions still take place between hospitals and radiology groups. If the relationship between the two parties is strong, each understands the contributions of the other to a contemplated JV. If market demand dictates a new site of service, then a JV imaging center is not only the right thing to do, but is a competitive imperative for growth. Supply and Demand Imaging continues to be one of the most significant growth segments for most hospitals. With the exception of pharmacy, diagnostic imaging crosses all business segments offered by the hospital. It is provided in the inpatient, emergency-department, operating-room (OR), and outpatient settings on and off the hospital campus, as well as in physicians’ offices and centralized medical office buildings. In spite of a number of efforts to reduce the utilization of advanced imaging (CT, MRI, and PET/CT), recent forecasts by analysts continue to point to year-over-year growth in diagnostic imaging. Clearly, growth forecasts will be different and specific to the local market, but make no mistake: Growth in diagnostic imaging will continue. Making room for the predicted increase in volume and conducting a complete, honest analysis of the local competitive landscape present the hospital with a significant challenge and a complex decision matrix. How will the hospital service the inpatient, emergency-department, OR, and outpatient populations plus referring physicians–and provide easy access and a positive, customer-friendly environment to meet demand and to differentiate the organization from its competitors? How will the hospital find the capital necessary for all of these requirements and also find the capital to invest in programs important to the strategic direction of the hospital in a hotly competitive landscape? Access to the capital necessary to growth is quickly becoming a driving force in JV considerations. The current economy has changed the landscape for many hospitals, and it is changing the decision matrix for JV initiatives. The answer that more and more hospitals and radiologists have discovered is to move the outpatient studies to an outpatient imaging center—right now—or risk losing the patient to someone else. We see more and more hospitals taking outpatient services into the community rather than making the community come to the hospital, a historically higher-cost site of service. Those who still don’t get it are seeing the market demand built by the hospital and radiology group taken over by entrepreneurial outside invaders. Many of the outside invaders have been competing hospitals setting up outposts in incumbents’ backyards, raiding parties from company-owned imaging centers that see demand going unfulfilled, or physicians’ offices placing supply in the community to meet demand and to provide the patient-service levels required to meet their own needs. The invader has a ready referring-physician base that is unhappy with anything more than instant turnaround times and one-hour wait times—perhaps an exaggeration, but to make a point. The invader has a patient population unhappy with having to go into the hospital setting, stand around while inpatients get priority, or try in vain to find a place to park. So much for medical-staff, referring-physician, or patient loyalty: It just isn’t there. Another point is the bias that payors are demonstrating in directing patients out of the hospital setting for outpatient imaging as a covered service. With nothing but turf to lose, your strategy should include:
- access, access, and access;
- continuity of care (with the same radiologists for inpatient, outpatient, and outreach services);
- prevention of loss of patients to other providers;
- a high price of entry for future competitors; and
- elimination of current competitors.