Seven Top Growth Models & Their Impact on Physician-Hospital Partnerships

March 30, 2017

In the rapidly-changing radiology world, these practice models are impacting physicians and their hospital partners.

Radiology, as a profession, is growing and changing. And, with those shifts, said industry experts at the Radiological Society of North American annual meeting, comes a fair amount of uncertainty. “Regulatory, environment, and economic changes have caused massive insecurity growing within radiology groups,” said Patrick Free, McKesson’s vice president of radiology, who currently works with almost 400 radiology groups of various sizes and classifications nationally. “There is a concern with where these changes are going.” Concern stemming from non-imaging entities creating competition, hospitals shopping for radiology services, and increased scrutinization of overall imaging utilization, Free said, has created a trend where groups are forming stronger relationships with both external and internal partners. To do so, they’re implementing a variety of prevailing growth models. Sharing examples of each model, Free acknowledged radiologists want to understand where they can provide the most value. Independent model. The most common model today, it exists either as a one-to-one individual or group relationship with their hospital. Positives include a high level of autonomy, the ability to easily navigate issues and set strategies, market-forces based income, and work/life balance. Negatives are groups owning all their own risk, difficulty being the best at everything within a complex setting, and difficulty managing strategic disputes over the long haul.  “There are a lot of dynamics in this model that can create stickiness with their own hospital partners,” Free said. Aggregation model. This model is seen with larger groups who create a consortium agreement, such as Strategic Radiology.  “The quality of care is their mantra and what started as a think tank evolved into an entity to share best practices,” he said.  Positive features include cross collaboration, group purchasing with expense savings, leveraging management talent across groups, and providing benchmarks combined with data analytics. Drawbacks include the need to guard shared data more closely. There is also difficulty leveraging national payer markets in areas that have been historically more regional. W2 Employment model. Seen more often within academic centers, as well as integrated health care delivery markets, W2 employment models also serve smaller, rural areas. Positive characteristics from the hospital side include more control in the overall care continuum, ease in participating in broader hospital initiatives as they relate to radiology. On the group side, this model also provides income protection from market forces and makes it easier to recruit certain specialties and avoid turf wars.  Negative characteristics include a mal-alignment between pay-and-performance from the hospital perspective while groups may suffer a loss of autonomy or be underpaid. Clear and concise expectations along with fair compensation practices must be set and understood, Free said. Forced-takeover model.  The forced-takeover model is most commonly seen where a hospital system mandates a merger of several groups to service their patients. Benefits include a singular service agreement and easier marketing abilities with a consistent standard. Drawbacks include lack of synergy between groups and hospitals, as well as the inability to leverage the system.  Accountable care model (ACO).  Growing in popularity, Free used Advocate Health Care as an example where 10 or 11 groups serving the hospital were approached and told they needed to merge. By creating a contracting arm, groups can look merged from a contract and payer standpoint, but maintain autonomy from a group perspective. Positives include one service agreement and one quality standard, while the group maintained income autonomy. The group also had the strength to garner better pay rates, as well as manage risk through alignment. Negatives include a heavy administrative burden to keep cash flowing in through one tax ID, but then distributing it out to the respective identities. The model can also come under scrutiny if affiliations are crossed.   Acquisition model. A model entails an entity buying a practice, and it is seen most often in smaller groups who are struggling to meet hospital expectations or sub-specializations. Typically, the partner is grandfathered for a period, and all non-partner members become W2 employees or are contracted into the agreement. Rad Partners is one such example. Positives offered are the gained confidence that a group can achieve higher quality and increase strength while removing stipend commitments. Negatives include alienation of medical staff and lack of reception towards outside change making it difficult to assess risk and cultural fit. Corporatization model. It is not very common, but one example would be Radnet. This option is prominent in the outpatient market, offering the opportunity to become a turnkey alternative within the hospital space. This model works when hospitals do not want to manage their own radiology department. The entity provides technology and management, Free said, to take over the day-to-day running of the department. Positives include relief from IT investment, ease of leverage data by the entity, and in some cases, they can provide a higher level of service because of the broader group that comes in. On the downside, hospitals may not want to partner with a publicly-traded entity. There may also be a reluctance to turning over management control, and both parties may not agree on how to manage departments.  “These are the seven strategies we have seen most prominently, but I think the rapid pace radiology is going through is likely to continue to evolve. I don’t think anybody can really say where each of these strategies is going to take us,” said Free, sharing eight imperatives all groups should look at when it comes to gauging the healthiness of their hospital partnerships.  Knowing where your group ranks on clear and concise communication, innovation, visibility, quality, metrics, unnecessary spending, information sharing, and positive culture will help identify ways to remain vibrant and growing, he said. “Groups will continue to evolve and grow to diversify their risk,” he said, noting  imaging is the single most valuable diagnosis specialty in hospital. “The goal is to thrive, survive, and grow in both quality and sustainability.”