The business of medicine is in the throes of tectonic change, with profound implications for the way physicians practice medicine. From pay for performance to bundled payments to other new models of financial risk-sharing—not to mention falling reimbursement, rising regulation and transparency on pricing and quality—radiology has all it can handle just to maintain its footing. Who will still be standing when the shaking stops? Radiology Business Journal spoke with leaders of five practice models to talk about relative strengths, potential weaknesses—and how they are preparing for the future.
The academic medical center: JVs and readiness
William Bradley, MD, PhD, has seen the future of academic radiology and it is patient care. Not that medical schools and their affiliated hospitals were ever not about patient care, but, says the chief of radiology at UC San Diego, Calif., the balance between research and teaching on the one side and clinical work on the other has been tilting toward the latter—at least as measured in focus and emphasis.
It’s important to understand, however, that the shift has developed not in spite of academic activities but because of them, Bradley emphasizes. “My marching orders from the dean who hired me out of private practice 12 years ago were to take us from number 39 in National Institutes of Health (NIH) funding to the top 10,” he explains. The department hit that goal about four years ago, along the way expanding the department from fewer than 10 researchers to more than 50—and from 30 or so radiologists to nearly double that number. “Hiring all those researchers has paid off,” he adds, “and paid off in many ways.”
The ways include not only improving patient care but also advancing it, Bradley says. He gives as an example a new imaging technique pioneered by UC San Diego’s Anders Dale, PhD, the noted neuroscientist and radiology professor. Dale has developed what he calls restriction spectrum imaging (RSI) to localize and biopsy tumors in the prostate with great precision, greatly reducing pain from multiple blind biopsies while also cutting treatment and recovery times.
“This is one of the things we’re very excited about right now around here,” Bradley says, because it shows that, throughout the department, “it’s not just about being in the top 10 in NIH research—it’s about helping patients. This has been a big move for us, and obviously it’s going to be very good for everybody.”
Having multiple revenue streams provides academic medical entities with a more stable financial footing in the healthcare-provider universe, enabling scale in business growth and clinical innovation. Radiology practices under the academic umbrella, however, are not immune to the same forces bearing down on all practice models across all specialties, from still-shrinking reimbursement to pay-for-performance pressures to increasing regulatory oversight.
Moving forward, UC San Diego Radiology will need to come up with enterprising ways to stay strong and get stronger, Bradley says. “This is the first time we’re working with a magnet that’s not owned by the medical center,” he says of a pre-owned 3T MRI unit that UCSD acquired for research. “The dean of the medical school, the head of neuroscience and I [went three ways] on buying what we’re calling a translational magnet. This is a joint venture within the system.” As such, the cost sharing represents a new approach to business for UCSD San Diego.
“What I’m seeing is an integration of what were classically two parallel paths, school of medicine and medical center. We’re now becoming, much more, one single entity,” Bradley says. “We’re doing this partly to save money—there’s no way you can run an academic medical center on Medicare rates.”
And yet, like everyone else, they have to find a way. UCSD is working on, for example, coming up with new compensation models for radiologists that stress RVU bonuses over salaries. Meanwhile, as capitated payments come to coexist with fee-for-service over the next few years, the medical center may form “pods of expertise” in which, as Bradley puts it, “head and neck radiologists will hang out with the head and neck surgeons. There won’t be one big reading room like we’ve always had; radiologists will work closer to where the clinical activity is. Then these pods will coalesce to form new ACOs.”
Another possibility under consideration is combining the five University of California medical centers into one big ACO covering the whole state. “This would have a lot of bargaining power,” Bradley says. “We’ve talked about UC-South, which would be UCLA, UC Irvine and us. So there are discussions like that going on.”
Lots of other cost-containment measures are on the table, Bradley adds, such as using PACS to share fewer mammographers among and between campuses, replacing clinical department business-office personnel with “core services” people who work for the entire system and, possibly, making hard decisions on heartbreaking cuts to graduate medical-education payments for residents and fellows.
This latter potentiality “will change the character of our program if it happens,” Bradley says. “And in this environment, anything can happen.”
Multispecialty practice: Change hardiness
In Maine, Spectrum Medical Group is finding safety—and a future—in numbers. Employing more than 250 physicians across nine specialties, including 61 radiologists covering nine subspecialties, the group has the negotiating leverage it will need to maintain its independence no matter what economic storms may hit in the years ahead.
At least, that’s the confident hope of Spectrum CEO David Landry. He notes that Spectrum launched in the mid ‘90s with the modest merger of two radiology groups, two anesthesiology groups and a pathology practice. Today the multispecialty player provides more than 50% of all radiology services in the Pine Tree State. It also has a footprint in New Hampshire and northern Massachusetts, along with a teleradiology enterprise involving like-minded practices in Indiana and Tennessee. And it has grown to employ a nonphysician staff of more than 600 people strong.
Landry says the steady growth has had as much to do with the strength of the multispecialty model as with the sheer size of the overall operation. “Our diversification creates market leverage with hospitals, insurance companies and others,” Landry says. “In many of our hospitals, we might have three, four or five specialties that we provide services for; those hospitals can’t easily say, ‘We’re going to throw out Spectrum Radiology’ without affecting the rest of their Spectrum relationship.”
Landry adds that Spectrum’s clinical diversification—combined with its bargaining power with payors and economies of scale with vendors—makes it less vulnerable to undesirable business outcomes than small, single-specialty groups. In fact, those kinds of practices are susceptible to becoming part of Spectrum—which may or may not be high on a given little guy’s wish list. “We don’t technically acquire practices in the traditional sense,” Landry says. “It’s more of a type of integration that we do.”
On the other hand, commonality of vision for a practice that includes both radiologists and orthopedic surgeons can be tricky when it comes to issues such as self-referral. ‘It becomes a bandwidth issue,” he says. “How do we collectively address the issues that are common while recognizing that there are some unique issues to each group?’
So far, Spectrum has drawn no antitrust accusations, although that’s not a major worry for Landry. He says the biggest challenge facing Spectrum’s radiology division is the commoditization of radiology services. Technical innovations over the past several years, particularly in digital image management and information analytics, have greatly improved radiologists’ productivity and efficiency. He points out that the advancements also have raised expectations for cookie-cutter radiology services among referrers and, increasingly, patients.
“For now we are still paid on a fee-for-service basis, so we can’t be inattentive to generating billable units and RVUs,” says Landry. “But we need to be doing things that place greater value on what we bring to our local communities beyond just delivering quality and timely interpretations. Someone can always do that better and faster than the next guy.”
Spectrum has a number of radiology-specific projects under way to both quantify radiology’s value and improve quality. “We are looking at how many times we change orders from ordering physicians and what the impact of that is, either on cost or reduced radiation exposure,” he shares. “We’re building some data on that. We’ve implemented a system of what we call prospective peer review. Most radiology groups do their over-read program retrospectively, after the fact. We’ve put in a program by which a certain percentage of our cases gets two sets of eyes looking at it before a report is issued. And that is as much a marketing tool as it is a quality improvement tool.”
Landry describes how Spectrum leadership has consciously watched and learned from other-than-healthcare industries that have gone through transformative change. Along the way, he says, he has increasingly found himself talking to physicians and staff members about “change hardiness.”
“As with any industry that gets transformed, we don’t know what things are going to look like even in the relatively near future,” he notes. “If we think that the way we’re structured today is the way we’re going to look in two to three years—both with the physicians and the support staff—we’re going to be a dinosaur.”
Part of rolling with the changes will entail figuring out how to divvy up a shrinking pie among specialties whose differences can be as striking as their similarities. “If you’ve got a group of 60 or 70 radiologists, you are at least herding cats of a similar stripe,” Landry says. “Just because we’re all in this together doesn’t mean that we don’t have to figure out how to not only share in [financial risks and rewards] but also agree on a commonality of vision.”
That message is more readily accepted by nonphysician staff than by physicians. “It’s hard to convince doctors that they need to think about how to change their practice,” Landry says. “We are consciously looking at that, consciously talking strategy so that our radiologists feel like they have greater control and greater understanding of what’s happening in a complex world where no one has the answers, but everyone needs some control over where they may be going.
“When we have these types of discussions and exercises, what we try to do is get at the cultural issues that can move folks from being pretty intransigent to being open to new ways, different ways of doing things. We want to always be challenging the status quo, which sometimes creates difficult and uncomfortable conversations. We try to do it in a way that I would describe as respectful truth telling. Let’s get the truths on the table, but let’s be respectful about doing it. How do we better deliver service? Are there better ways to do what we’re doing? Are there other ways we can leverage the radiologists talent beyond what we’re doing today?”
Landry believes that the practice’s future success hinges on the concept of change hardiness. “We need to be prepared so that we can pivot toward whatever direction we need to go,” he says.
Teleradiology: RFPs and price sensitivity
With U.S. groups providing teleradiology services numbering in the hundreds, the competition for business has become fiercely price-sensitive in recent years. How dollar-driven is it right now? Some buyers of professional reading services are sending out RFPs rather than calling for quotes.
Jay Kaiser, MD, president of Novato, Calif.-based National Orthopedic Imaging Associates, was surprised to find his practice on the receiving end earlier this year. It came from an orthopedic consortium in the Midwest—by way of a third-party facilitator, no less, whom the consortium hired to run the RFP process. “I think they sent it both to the local groups in their area and at least four national teleradiology providers,” Kaiser says, noting that NOIA is a niche provider of musculoskeletal, spine and neuroradiology expertise. Its nine radiologists serve imaging-facility clients in 13 states and are part of California Advanced Imaging Medical Associates, a private practice whose other divisions work locally at 11 hospitals in the San Francisco Bay area.
“For me it was a new deal,” reflects Kaiser, who also presides over 67-radiologist CAIMA as a whole. “The days of a handshake and ‘Your expertise is great; what price can you give us?’—I think those days may be gone. There’s more of a classic business model being developed in teleradiology, and that’s probably a good thing.”
Consolidation is here and under way for national teleradiology companies since the merger in 2010 of two major teleradiology companies. That sort of scenario, albeit on a smaller scale, is not in the thinking for NOIA, says Kaiser. “Because we’re part of one professional corporation and not a standalone business, we’re not looking to merge with other teleradiology businesses,” he says. “We’re a small player compared to the big people who want to make a giant national business out of it. That’s just an entirely different model. We’re a boutique subspecialty compared to them, and we want to keep it that way.”
It’s not that there’s anything wrong with building massive national practices, largely on night-reading capabilities, adds Kaiser. It’s that there’s room, and a future, for both models. “Every one of our radiologists has a direct line to the clinicians. They keep in touch with them personally,” he says. “I think there will continue to be a role for what we offer—and I don’t think the U.S. will eventually be like Australia, where they have just a couple of groups running teleradiology throughout the country.”
Teleradiology will change as radiology itself changes to keep up with the de-fragmentation of medicine, says Kaiser, whose experience with teleradiology traces to 1989, when he read diagnostic images transmitted via satellite. “Radiologists in general are going to have to be part of a system. They are going to end up being part of accountable care organizations and foundation models, where they have less independence and less control of their own income and their own workload.”
Meanwhile, in order to have more efficiency and more control, groups are going to have to be big enough to institute their own teleradiology networks and do final reads in the middle of the night. “That’s not what we do,” says Kaiser. “But I’m exploring this from my own group’s perspective, and you’re talking to a guy who set up, and has developed over the last 20 years, a very specialized network because we saw a need. I think that need still exists and that the teleradiology business will continue to grow, but I do think it’s going to be more competitive and less lucrative.”
Private practice: Flexibility in focus
In the realm of the private practice, size has become important. Size, however, is a relative concept geographically. Shelton-Conn.-based Advanced Radiology Consultants has 31 radiologists serving two urban hospitals in Fairfield County, which may be considered mid size by some measures. Says Alan Kaye, MD, practice president: “In our market, we are the large provider.”
If you’re large within your market, Kaye notes, you have advantages of scale on everything from holding vendors’ feet to the fire on their attentiveness (or lack thereof) to distributing risk on malpractice insurance and maintaining top-of-mind status among and between your hospital partners. (Kaye also serves as chair of the radiology department at 425-bed Bridgeport Hospital, which is part of the Yale-New Haven Health System.)
On the other hand, the bigger you get, regardless of scales of comparison, the more bureaucratic your culture and behavior are likely to become. “An important advantage of the 30-radiologist practice is that it doesn’t get to the point of being like a corporation,” Kaye says. “Midsize is, in many respects, a good model for exercising flexibility.”
Flexibility is something Kaye talks about a lot when he holds forth on the future. “We don’t know what payment models will prevail,” he says. “We don’t know if, how and to what extent fee-for-service medicine is going to go away. We don’t know who is going to control the process of care, whether it’s going to be government and/or private payors, hospital systems or physician-run entities. We just don’t know. So we have to maintain some degree of flexibility.”
As reimbursements have declined in recent years, Kaye has stretched his practice’s flexibility by, for example, holding on to equipment longer than some members of his team may have liked. “Not buying the latest thing as soon as it comes out doesn’t hurt patient care,” he says, “but it does stall advancement, in part because manufacturers are not as eager to spend R&D money without a market that’s hungry for their newest products.”
In the coming three to five years, the most formidable challenges coming to private radiology practices—be they small, medium or large within their respective markets—are no different from those faced by radiology as a whole, Kaye says. He calls out several scenarios that “keep me up at night.”
The pendulum of approval of new imaging tests for reimbursement has swung too far to the wrong side, he says, calling CT colonography the poster child for this problem. “There have been multiple trials showing that CT colonography is as good as, almost as good as, or even better than traditional colonoscopy, but Medicare has found every reason to not approve it for reimbursement,” he says. “We now have a narrowing of the pipeline, a stenosis, if you will, for new developments. Until now, that’s been the lifeblood of innovation in radiology.”
Kaye also is concerned about declining utilization, regardless of appropriateness, as a result of economic incentives, in that they reward physicians for not ordering imaging. “To the extent that you interject personal economic factors in the person who is directing care, you have the potential for doing harm to patients,” he says. The uncertainty surrounding the specialty has Kaye worried that the best and brightest medical students will not even consider radiology.
On a positive note, two major drivers brighten radiology’s outlook. One is demographics, as baby boomers comprise a health-conscious political force that will not stand for limiting their access to care. The other is the fact that, in the information age, patients want information. “Radiology is an information services business. That’s what we do,” Kaye says, adding that his practice has been ahead of the curve on providing online portals for patients to view their own radiology reports. “Referring physicians also need our information to take better care of their patients and make themselves more efficient, too. New tools keep us connected and foster their dependence on the invaluable information we provide.”
“We have enough size to have diversity of people with various skills,” he says. “As long as you’re successful, you have an opportunity to do your own R&D pipeline. We have 1,000 patients a week signing up and somewhere between 2,000 and 3,000 patients a week accessing their information on our online portal.”
“It makes no sense to plan beyond a couple years out,” Kaye concludes. “There’s too much uncertainty. Continue to maintain quality of service in whatever venue you are in, maintain your current hospital relationships and be the provider of choice for all of the alternatives. Get buy-in from staff and practice members so that you can cover all of your bases and tolerance for uncertainty. In other words, stay flexible.”