Request for Proposal: When Your Radiology Group Contract is at Risk

April 24, 2014

Hospitals are drumming up competition by presenting RFPs to their radiology group. Here, experts weigh in on how to keep that contract.

Radiology group contracts with hospitals might have been easily renewed in the past, but this might not be the case for the future. Radiologists may no longer be able to rest on their laurels and expect to keep their jobs. When a hospital sends out a request for proposal (RFP) for radiology services, it can be  a wake-up call. The group might not be providing the hospital with what it needs.

Radiology groups who are surprised to get an RFP probably aren’t aligned with their hospital’s needs, said Jordan Halter, vice president of solutions at vRad, a global teleradiology group providing supplemental coverage. The radiology group might think in a fee-for-volume mindset, but the hospitals want to measure quality, value, performance and service, he said.

Getting an RFP for your own job can result in mixed emotions. “Obviously when an RFP is being considered by a hospital, a radiology practice feels that they’re not appreciated. This is usually followed by anger at the hospital administration for not realizing how valuable the group is, and then obviously fear sets in as to what will be happening to your livelihood,” said Lawrence Muroff, MD, CEO and president of Imaging Consultants Inc. in Tampa, Fla. “Groups understand that others are losing their contacts but somehow they don’t believe it can happen to them.”

Who’s the competition? Another local radiology group, a national entrepreneurial radiology company or a medical school or academic entity, Muroff said.

Why is the Hospital Doing this?
There are three reasons hospitals submit an RFP, Muroff said. The first is that the hospital has no intention of replacing the group, but the group isn’t complying with a provision the hospital sees as essential. That could be a clean sweep provision, where radiologists will lose their medical staff privileges if they lose their contract for any reason. Or there’s a no-compete provision with freestanding imaging centers, or the hospital wants greater physician coverage or subspecialty expertise. “Whatever it is, the hospital is using the threat of an RFP to get their incumbent group to comply, and most often they do. It’s a heavy-handed negotiation ploy, but one that tends to bring the results that the hospital desires,” Muroff said.

The second reason is that national entrepreneurial companies are frequently cold calling hospitals for their business. The hospitals are curious to see their capabilities. The third reason is that the hospital believes replacing the group will increase quality, service or alignment with hospital values. “Groups that replace incumbent groups are often less capable, it’s just that the hospital is so fed up with the incumbent practice that they’ll accept almost anything,” Muroff said.

Even if you think the hospital’s intention is to hire another entity, treat it as a genuine opportunity. “Given what’s at stake, put your best foot forward. You might be able to change the outcome,” said Teri Yates, founder and principal consultant for Accountable Radiology Advisors in Columbus, Ohio.

While the hospital should clearly outline its needs, the radiology group must also “step up to the plate,” Yates said. When working with hospitals and radiology groups on contracts, “I tell both parties, I don’t want to be the divorce attorney, I want to be the marriage counselor.”

What the Hospital Wants
The radiology group must understand the hospital’s needs. Consider the contract from the hospital’s point of view, so you can respond appropriately. Start with the 3cs, said Yates, cost, coverage and competition.

On the cost side, hospitals are looking at radiology in terms of economics. “It used to be the big revenue generator for the hospital,” Yates said. “Hospital administrators are starting to think about what life will be like when it’s more of a cost center.” Stipends guaranteeing radiologist’s income are going away, said Yates.

In terms of coverage, the hospital may want final reads 24 hours a day. While there’s still a role for night support, “if the radiology group is covering 24 hours a day but deferring patient X-rays to be read in the morning, that’s not the coverage the hospital is looking for,” she said.

As for competition, hospitals going into risk-based contracts want to keep referrals in the system, using providers in the accountable care organization (ACO). “That’s frequently a big point of contention in these negotiations – competition from imaging centers owned by the imaging group,” she said.

We Got an RFP – Now What?
If your hospital sent out an RFP, you might enter panic mode. “The group has to be prepared for an emotional rollercoaster,” said Muroff, even if the process is successful and the contract retained.

You’ll need to develop a response team. Consider getting help from an outside consultant or healthcare attorney who understands medical staff and hospital needs, for both the response and negotiations. “If it’s gotten to an RFP, your in-house resources haven’t been effective at convincing the hospital,” Yates said. “It’s time to throw the kitchen sink at the problem.” If you don’t want to hire someone, Yates recommends networking with radiology groups who have been through a similar situation.

Read the RFP to understand the hospital requirements. Can the group comply with the provisions and live with the hospital demands? Consider what your options will be if you lose the contract.

When writing your proposal, “be specific not just aspirational,” said Yates. For example, instead of saying you’ll put together a robust peer review program, give details. “You’ve been working with the hospital, they know your capabilities. If you say something is going to change, you should be specific about how it’s going to change,” she said.

If you’re partnering with an entity providing night or weekend coverage, bring them into the proposal process early. Hospital radiology groups come to vRad during the proposal process for the wrong reason, said Halter, asking them to lower their price because the group is getting squeezed financially. In addition to radiology services, vRad provides groups with a technology platform with analytics, which provide data and insight to help the radiology group understand its financials and operating plan. 

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With different demographics and payer mixes in the three radiology shifts, especially in the deep hawk (midnight to 7 a.m.) shift, “the math doesn’t work for most local groups to take over reading during the night shift,” Halter said. “They need to understand their operating plan at a granular level.” This is where the analytics are helpful. If a group wins the contract without using or understanding this data, they could lose money on the contract.

Once your plan is in place, use the right negotiator. “The negotiations are emotional. People get angry,” said Yates. The negotiator should recognize that it’s an adversarial process, and how it’s handled can affect the outcome and hospital’s perception of the group.

An incumbent group should convince the hospital to look at the group in a new light, showing that they have the expertise and capabilities, and are performing in ways that the hospital administration didn’t realize or understand, said Muroff. “That’s the essence of preserving or maximizing your chance to preserve your tenure at your hospital.”

How to Prevent a Future RFP
If you just won your contract back or may negotiate it in the future, prepare the group by proactively aligning your interests with the hospitals and making your group indispensable. There are two main principles for ensuring your group’s value: quality and integration.

Quality
Radiology groups need to demonstrate their quality to the administration. “Most hospital administrators don’t know how to measure quality, and we do a poor job in radiology in showing what quality is,” Muroff said. “To a hospital administrator, a quality group is one that doesn’t give him or her problems.”

Quality includes utilization, safety, communication and accuracy, said Yates. And contract renewals are a natural time for hospitals to increase quality requirements, and it’s something the group should be prepared to supply. “If they aren’t leading when it comes to quality, it falls to the hospital which imposes their expectations,” Yates said. “Do the radiologists want to lead or follow?” Whether someone in the group is responsible for measuring and monitoring quality, or they hire a consultant to do it, the group should be proactive about it.

Bringing quality data and other informatics to the group and hospital is also important. “The radiology group who can bring that to a hospital system in an open manner and who can share and act on what the data is telling, is the practice that adds value to the hospital,” said Ray Montecalvo, MD, a medical director at vRad. “If you’re presented with an RFP and you can’t do that, you will not get that contract renewed.”

Integration
Hospitals are more frequently looking to replace the incumbent group, said Muroff, because it’s a buyer’s market for radiologists. “You can hire excellent radiologists without too much effort,” he said. Plus the outsourcing trend gave hospitals the subliminal message that relationships are less important, and that a study can be read by any radiologist at any time, from any place. “When you are making people fungible and replaceable, you’re making them a commodity and far easier to replace.”

Doctors should form relationships outside of the reading room. “You have to integrate into not just the medical, but the political and social fabric in the communities,” Muroff said. A replacement group won’t be able to show a history of deep relationships and commitment to the hospital and community.

Joining committees is a strategic opportunity to ingrain yourself into the system. “It’s hard to fire your trusted business partner,” Yates said.

By providing excellent service to referring physicians, you’ll develop a cadre of loyal, as opposed to satisfied, physicians, Muroff said. “Loyal referring physicians will go to the mat to make sure you’re not replaced. Very few radiology practices have a significant number of loyal referring physicians who put their jobs on the line for your jobs.”