Collaboration Series Part I: Evolving Business Models

Within the past ten years, physician leaders and hospital executives have seen more consolidation in the healthcare industry than ever before. As the industry transitions to a value-based care model, efforts are underway by leaders across the board to reduce costs, improve results and increase hospital-physician alignment. A recent report by Deloitte, “2015 Health Care Providers Outlook United States,” states:

As patient rolls lengthen and networks narrow, providers may need to adapt to this realignment of market forces. Smaller players (e.g., single hospitals, independent physician groups) may be in danger of exclusion from more narrow networks. In contrast, market-dominant players are likely to be immune from exclusion and can negotiate from a position of strength. Dominance comes partly from being big, and the need to be big is driving sector consolidation. (3)

Changes in regulation, technological innovation and financial pressures are all contributing to this push toward market consolidation—toward “being big” in order to survive.

But it is important to examine physician practices’ options in today’s rapidly changing environment. The multitude of possible models that lie on the spectrum of consolidation prove that there is no one way to align with hospitals and become a stronger market player. On one end of the spectrum lies traditional merger and acquisition (M&A) activity, while beyond that exist joint venture models, clinical integration networks (CINs), affiliations and collaborations as potential solutions to avoid sacrificing practices’ independence.

Below are three examples of the different options available to radiology groups in the current landscape:

Collaboration of Large Groups

Collaborations of large practices are becoming more popular in the specialty of radiology. An example is

Strategic Radiology, which strives to provide its network of 1,300 radiologists shared access to data, clinical information and certain consolidated expenses in a collaboration-based model. Although its goal is to deliver higher quality, cost-effective care, Strategic Radiology focuses on practices with fifty or more providers, essentially ignoring smaller regional players. Though collaboration provides the tools necessary to succeed in such a model, it is an exclusive model which has not focused on the independence and survival of smaller groups across the U.S.

Acquisition by Management Company

Single-specialty and multi-specialty national management companies are also on the move within the radiology market (see MEDNAX’s acquisition of vRad spring of 2015). One example is Radiology Partners (RadPartners). The group’s approach resembles the traditional M&A model of acquiring practices to join its expansive network of over 100 locations. Though it positions its services as “partnering” with radiology practices, RadPartners primarily acquires local groups and promises health systems greater stability. This corporate-sponsored management company has over 200 radiologists who share technology, quality data metrics and economies of scale in order to hope to succeed in the era of consolidation, yet simultaneously cede to this trend as they lose their independence.

IRP’s Model of Small Group Collaboration

At IRP, our collaborative model is built to support regional radiology practices’ sustained independence. We provide radiology groups of all sizes the resources they need to survive in the age of value-based care. IRP’s model helps transform practices into more nimble organizations that allow for faster, more efficient decision-making in a rapidly moving market. We prepare our collaborations for the future of healthcare; for example, as CMS moves its 2018 Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) initiative forward, we equip our groups with the data submission capability and metrics necessary to evaluate the assumption of greater risk as these models come to fruition.

It is critical for radiology leaders to examine the emerging and evolving practice models and make an informed decision regarding their practice’s future. As the current regulatory environment fuels increased demands and pressure on physician practices around the country, what is your plan to solidify your independence and ensure your success?

–By Keith Chew, MHA, CMPE, Managing Director of Strategic Positioning and Consulting Services

Stay tuned for part two of the collaboration series next month, where we will discuss the various benefits a collaborative model brings to radiology practices nationwide.