Affiliations—a small practice owner’s alternative to corporatization

Consolidation is beginning to intensify in the U.S. radiology market, according to recent analysis published by Current Problems in Diagnostic Radiology. But owners of smaller practices have an option that doesn’t involve giving up power to corporate entities: work together.

Douglas Green, MD, department of radiology at the University of Washington in Seattle, and colleagues explained that the U.S. diagnostic imaging market is highly fragmented, which is unusual because of the market’s size. (It’s currently valued at $80-100 billion, and should continue to grow in the near future.)

However, the authors noted, that could change soon due to the recent downward trend of reimbursement rates.

“Now that reimbursement rates are falling, the pressure is building for practices to grow larger,” the authors wrote. “The larger a practice is, the better suited it is to take advantage of economies of scale. Larger groups have proportionally lower overhead costs and more negotiating clout with vendors, hospitals, and payers. These advantages enable them to remain profitable as margins erode.”

Corporations also benefit from the fact that larger practices have a lot to offer the owners of smaller practices: freedom from the stresses that come with running your own business, the opportunity to focus more on your preferred subspecialty, less calls, and a more physician-friendly schedule.

Green et al. compared the United States’ current situation to what took place in Australia in 2000, when the percentage of corporate-owned radiology practices grew from 10 percent to 72 percent in just five years.

Is something similar going to happen here? Technically, according to Green and his colleagues, it has already started.

“The wave of corporatized radiology has reached our shoreline,” the authors wrote. “There are now approximately 8-12 national corporate-owned radiology groups, which are actively seeking to expand their geographic footprint. These practices pair teleradiologists with on-site radiologists to provide hands-on services such as fluoroscopy, diagnostic mammography, and interventional radiology procedures. These practices can provide 24/7/365 access to subspecialty reads, the largest of which can interpret more than 15,000 studies a day with an average turn-around-time of 15 minutes.”

To stop this momentum, or at least slow it down, the authors wrote that owners of smaller practices must work together through affiliations. Practices taking part in these affiliations get to consolidate certain expenses and benefit from the expertise of other members. They grow larger and more valuable without losing power.

“Affiliations may be the rare win-win scenario; radiology groups maintain some autonomy while hospitals and managed care organizations get the quality of service that they promise their patients,” the authors wrote.