Andrew Colbert, Senior Managing Partner & Founding Member, Ziegler's Healthcare Investment Banking

The pandemic was a significant challenge for many radiology practice groups. However, it also provided an opportunity for them to take an honest assessment of their operations and find ways to improve, innovate and maximize efficiencies to remain competitive and thrive in a post-pandemic climate. Radiology practice groups are seeing increased imaging demand as patients are catching up on missed care over the last two years.

There are a few core questions practice leaders must ask themselves. How can we learn from the last 24 months to best position the practice for an uncertain future? What investments can we make today to maximize opportunities to grow our business? Radiology practice leaders need to be making decisions to not only thrive in 2022 but be well positioned five, 10, and 15 years into the future.

In order to create an effective strategic plan, we must first analyze the impact of four recent trends that will bring significant changes to health-care delivery. Accordingly, let us take a closer look at key takeaways for radiology groups to consider as they develop strategies and seek ways to innovate their offerings to position themselves optimally in an ever dynamic marketplace.

What You Know Should Know About the Migration of Volume from Inpatient to Outpatient Settings

Health-care services, and often diagnostic imaging or radiology services, that can be administered outside of the hospital environment in a freestanding site are becoming more attractive to patients and insurance companies. This is largely due to cost and convenience. In addition, Medicare is continuing to expand its coverage of outpatient procedures, which will only further accelerate this site of service shift. Further, the COVID-19 pandemic has only accelerated the shift in consumer preferences towards the outpatient setting. We can expect these volumes to increasingly shift into the outpatient setting over the next five to 10 years.

To handle this expected increase in volume, radiology practice groups should consider innovating their outpatient offerings to run more efficiently. The practices that best prevent long wait times and provide maximum ease of scheduling and high-quality care will be best positioned to experience the greatest success with patient care. If practices do not have established outpatient sites or partnerships with an outpatient footprint, they should strongly consider avenues toward establishing those care environments whether via partnership, new investment or otherwise. Many physician groups will need to reevaluate their outpatient and broader consumer strategies. If they do not offer outpatient care settings, it may be time to consider creating one.

How Will Sweeping Changes with Medicare Affect Your Reimbursement?

The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, has signaled it is shifting financial resources from speciality care fields to primary care providers while keeping overall spend budget neutral.

 Procedure-heavy specialties are expected to receive reductions in Medicare reimbursements while consultative specialties will likely see reimbursement increases.

Radiology practice groups need to factor in these expected Medicare rate reductions into their 5-year forecast. The big question is: will commercial payers follow the reimbursement reduction decisions of CMS? If yes, this could be an even bigger impact on the bottom line. Groups with a higher Medicare patient concentration will most likely see a more profound impact than groups that are predominantly focused on commercial patients. Regardless of reimbursement mix, physician groups need to be proactive in planning for and investing in new sources of revenue and cost efficiencies to help offset these future revenue cuts.

What Kind of Impact Will the No Surprises Act Have on Reimbursement?

The No Surprises Act took effect on January 1, 2022, and is intended to help control unplanned out-of-network costs, which help curb unscheduled “surprise” out-of-network health care charges for patients. A study published in September 2020 in the 

found that a comprehensive federal law to rein in surprise billing could reduce overall health insurance premiums by 1 to 5 percent.

 While the majority of the law addresses emergency care billing, it also covers non-emergent care when patients are unknowingly treated by an out-of-network provider.

 While the legislation benefits patients, it also has ramifications for radiology practice groups as it may reduce their negotiating leverage with managed care. Radiology practice groups will also no longer be able to threaten insurers with “going out of network,” which has historically allowed physician groups to secure better rates. The radiology practice group’s loss of this bargaining chip will likely shift more leverage towards the managed care entities.

(Editor’s note: A variety of physician groups, including the American College of Radiology (ACR), have filed lawsuits to 

challenge the independent dispute resolution (IDR) process of the No Surprises Act

, which emphasized the insurer-set qualified payment amount (QPA) in resolving disputes over out-of-network charges.

a federal judge in Texas vacated the controversial IDR provisions of the No Surprises act

Shopping for Health Care: A Renewed Emphasis on Price Transparency and Convenience

In today’s market, consumers want to shop for health care in the same way they shop for a car. Prospective patients want transparency in price and quality. They are also demanding a higher level of convenience that has not historically been available in healthcare.

Further, with the explosion of telehealth and telemedicine, patients have become accustomed to digital health care that provides much more convenience than going to in-person appointment. Patients are no longer willing to put up with long waits to see a doctor. They are now accustomed to on-demand health care that is as convenient as opening an app on their phone.

Radiology practice groups would be wise to make investments to meet these new consumer realities and expectations. Those who do so will be in a position to market how the practice is delivering outstanding patient service in a highly convenient and affordable manner. Practices able to clearly articulate that they are delivering high-quality, high-touch patient care while leveraging cutting-edge technology will maintain a competitive edge.

Performing a SWOT Analysis and Emphasizing Strategic Investments

As radiology practices consider how to best strengthen their positioning for 2022 and into the future, we recommend conducting a SWOT analysis (see above) to identify areas for investment and fortification.

Once a SWOT analysis and strategic plan are formalized, it is vital to execute on that plan and make the necessary investments in a prudent fashion. The success of that plan is dependent on its execution.

There are six common innovative and strategic investment avenues to drive success in the post-pandemic environment. Each of the investment decisions should be analyzed based on a radiology practice group’s unique circumstances: practice type and industry pressures, cash flow profile, competitive forces, legislative policy updates, forecasted patient demand, staffing, capabilities, and technology.

For radiology practice groups seeking to grow their business into a “platform” group (as opposed to joining an established platform via acquisition or a merger), it is critical to be aggressive in adding service lines, gaining market share, and building scale, which equates to investing in IT, management, and personnel. Of course, these investments may result in a decrease to owner income distributions in exchange for more favorable long-term practice positioning.

One other avenue to achieving scale is partnering with regional or national groups that offer new resources without sacrificing initial short-term owner distributions. National group models typically allow the clinical control and governance to remain with the local groups, while the partner brings valuable capital, administration, technology, and operational capabilities to quickly scale and achieve immediate success in this environment emerging from a global pandemic that has upended the health-care delivery system.

While coping with external challenges such as reimbursement pressures, industry consolidation can be daunting. Creating a long-term strategic plan that deepens competitive differentiation and builds scale is critical for ensuring long-term sustainability.

It is not practical to make all investments at once. The key is to outline a one-year, five-year and ten-year investment plan and execute. Incremental growth is best as it is most manageable, demonstrates practice momentum and helps ensure your practice is nimble and agile to adjust for changing competitive dynamics and future market changes.

The radiology practice groups that will most likely fare best in 2022 and beyond will be those that have conducted the necessary SWOT analysis and made strategic investments in their platforms as a result of that analysis. This analysis along with strategic investments bolsters a practice’s ability to scale and address whatever challenges the future might bring.

Editor’s note: Mr. Colbert is a senior managing director and founding member of Ziegler's Healthcare Investment Banking practice. He has represented 27 radiology groups on innovative transactions. Colbert specializes in advising physician groups on strategic and financing alternatives including mergers and acquisitions, joint ventures, capital raising transactions, and partnership development. For more information, visit 

1. Daly R. Medicare shifts payments toward primary care physicians in PFS final rule. Available at: https://www.hfma.org/topics/news/2020/12/medicare-shifts-payments-toward-primary-care-physicians-in-pfs-f.html . Published December 3, 2020. Accessed March 9, 2022.

2. Duffy EL, Ly B, Adler L, Trish E. Policies to address surprise billing can affect health insurance premiums. 

 2020;26(9). Available at: https://www.ajmc.com/view/policies-to-address-surprise-billing-can-affect-health-insurance-premiums  . Published September 11, 2020. Accessed March 9, 2022.

3. Hall J. Challenging the IDR process of the No Surprises Act. 

https://www.diagnosticimaging.com/view/challenging-the-idr-process-of-the-no-surprises-act

 . Published February 1, 2022. Accessed March 11, 2022.

4. Hall J. Federal judge vacates IDR Provisions of the No Surprises Act. 

https://www.diagnosticimaging.com/view/federal-judge-vacates-idr-provisions-of-the-no-surprises-act

 . Published February 25, 2022. Accessed March 11, 2022.

Articles

A proactive approach to addressing four emerging trends in health-care reimbursement and revenue may enable radiologists to solidify and enhance the standing of their practice in their local communities. 

Keys to Maximizing Your Share of the Local Radiology Market

Radiology practices have a tremendous opportunity in 2021 to grow and invest in their businesses, and most importantly, to drive meaningful cost and quality improvement to the broader health care industry and to be a leader in providing value-based care.

2020 was a challenging year, with the healthcare industry fundamentally altered by the COVID-19 pandemic, forcing radiology practices to quickly adapt. The pandemic served as a wake-up call for radiology leaders to innovate and evolve how they operate to build stronger and more resilient models. In many cases, groups were able to identify opportunities for cost efficiencies that will serve to reduce unnecessary overhead and infrastructure.

What considerations should radiologist practice leaders be making in order to position their practices optimally in 2021 and for the future?

Radiology leaders have a sizable opportunity to drive value-based care into the 21st century, but that value creation will not happen overnight. Practices must be proactive and make critical platform investments to capture forthcoming opportunities.

A proactive mindset must consider key factors affecting the radiology and healthcare landscape today. Here is an overview of today’s radiology practice landscape, outlining the top considerations, opportunities and factors all radiologists must understand in order to be best positioned for success:

Today’s Radiology Landscape: Critical Factors

As practices adjust to 2021, here are the top themes affecting radiology practices in the upcoming year:

Federal Government Healthcare Policy Changes

Center for Medicare & Medicaid Services (CMS) announced the new Medicare 

, which was finalized on Dec. 1, 2020, and projects to cut Medicare reimbursement for radiology practices by approximately 7 percent over the next two years. The reimbursement cut will be phased over two years, which helps lessen the burden on practices. Groups with a higher Medicare patient concentration will most likely see a more profound impact than groups that are predominantly focused on commercial patients. Regardless of reimbursement mix, radiology groups need to be proactive in planning for and investing in new sources of revenue and cost efficiencies to help offset these future cuts.

RadPartner’s $885-million acquisition of Mednax Radiology adds 800 radiologists, bringing the company’s total enterprise to more than 2,400 radiologists nationally. This consolidation continues a recent consolidation trend in radiology: there were 23 practice transactions in 2018, followed by a record-high 25 in 2019, and, then, 11 in 2020. While the pandemic reduced the amount of consolidations in the first three quarters of 2020, we saw activity in Q4 2020 returning back to 2019 levels.

Groups of all sizes should pay close attention to increasing consolidation and the possible benefits that come with greater scale, including clinical research, technology, expanded services and greater geographic reach. While joining a larger national platform may not be ideal for every group, those that wish to remain independent should certainly make investments today to bolster potential gaps and increase competitiveness in the market.

Push to Outpatient Services and Consumerization

In 2020, outpatient volume increased about 10.5 percent, and early trends show this shift continuing in 2021. Patients prefer to visit outpatient environments and managed care is certainly aligned in steering patients to lower-cost outpatient imaging centers over higher cost hospital sites.

COVID-19 has certainly driven a higher “retail” consumption of healthcare with patients being accustomed to services being offered in a much more convenient fashion. Gone are the days of waiting for hours for care in a crowded waiting room or filling out paper forms. Even after the COVID-19 recovery, patients will continue to demand a higher touch, more digital and streamlined experience.

Private practices need to re-evaluate their outpatient and broader consumer strategy, and if one does not exist, they should quickly create and implement one. Radiology groups that are 100 percent dependent on hospital revenue should assume that volume will continue shifting away from hospitals, in favor of free-standing outpatient centers. Groups should also understand that their long-term success is increasingly driven by innovative marketing departments that bolster consumer recognition in the market. Forward-thinking radiology groups are investing in digital marketing, building app-based scheduling capabilities, embracing telemedicine, and driving towards a modern consumer experience.

COVID-19’s continued spread and lasting impact has created an avalanche of challenges for the U.S. healthcare system. There have been massive reductions in elective procedures and operational changes required to deliver care safely. Many Americans have lost their health insurance as a result of job loss.

A ramification of CMS’ specialty practice ruling is the reallocation of Medicare payments that benefits general practitioners, family practice providers and nurse practitioners. This reallocation comes at the expense of specialty practices like radiology groups.

Payors are also incentivizing patients to opt for care in lower-cost settings, away from hospitals, and hospitals are responding by increasing their outpatient footprint. Lastly, payors are moving deeper into primary care, imaging, and urgent care as a means to exert greater influence in the overall flow of care across their ecosystem.

In light of these issues and challenges facing our healthcare system, radiology practice leaders must recognize that they are at a critical crossroads and must think strategically about how to position themselves optimally for the future.

As radiology practices consider how to best strengthen their positioning for the future, Ziegler recommends conducting a SWOT analysis to identify areas for investment and fortification.

Once a SWOT analysis and strategic plan is formalized, it is vital to execute on that plan and make the necessary investments in a prudent fashion. The success of that plan is however dependent the success of its execution.Ziegler has outlined below a six-step process to ensuring the greatest degree of success in the execution of any strategic plan.

While coping with external pressures, such as COVID-19, reimbursement pressures, and industry consolidation can be daunting, creating a long-term strategic plan that deepens competitive differentiation and builds scale is critical for ensuring long-term sustainability and maximizing shareholder value.

It is not practical to make all investments at once, but the key is to outline a one-year, five-year and 10-year investment plan and to stick to it. Incremental growth is best as it is most manageable, demonstrates practice momentum and helps ensure your practice is nimble and agile to adjust for previously unforeseen events, such as COVID-19 or abrupt market changes.

The physician practices that will fare best in 2021 and beyond will undoubtedly be those that have made strategic investments in their platforms, bolstering their ability to scale and ready to address whatever challenges the future might bring.

Source: Banthin et al,, “Changes in Health Insurance Coverage Due to the COVID-19 Recession: Preliminary Estimates Using Microsimulation,” Urban Institute, July 2020.

— Andrew Colbert is a senior managing director and founding member of Ziegler's Healthcare Investment Banking practice. Andrew has represented more than 20 radiology groups on innovative transactions. He specializes in advising physician groups on strategic and financing alternatives including merger and acquisitions, joint ventures, capital raising transactions, and partnership development. More information is available at www.ziegler.com/radiology.

Ziegler is a privately held, national boutique investment bank, capital markets and proprietary investments firm. It has a unique focus on healthcare, senior living and education sectors, as well as general municipal and structured finance. Headquartered in Chicago with regional and branch offices throughout the U.S., Ziegler provides its clients with capital raising, strategic advisory services, fixed income sales, underwriting and trading as well as Ziegler Credit, Surveillance and Analytics. To learn more, visit 

Information contained or referenced in this document is for informational purposes only and is not intended to be a solicitation of any security or services.” “B.C. Ziegler and Company | Member SIPC & FINRA.

The top considerations for radiology practices.



Andrew Colbert, Senior Managing Partner & Founding Member, Ziegler's Healthcare Investment Banking

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