Squeeze play: Radiologists face pressure to consolidate

Consolidation in U.S. healthcare has been increasing for some time and is only accelerating, according to Paul Ginsberg of the Brookings Institution. While some comes from mergers and acquisitions, a surprising amount stems from larger organizations eating the market share of smaller practices, a testament to the strength of economies of scale.

Independent physicians are being caught between these increasingly large payors and ever-growing health systems and some specialties are rapidly consolidating: A 2012 American Hospital Association survey found that nearly 60 percent of family physicians and 50 percent of internists identified themselves as employees.

“These [payors and hospitals] are so incredibly large that they can dominate a particular market,” said Radiology Partners’ VP of Clinical Services Richard E. Heller III, MD. “They have negotiating leverage, so physician service groups can be squeezed out.”

Radiology has consolidated at a slower pace than these specialties, but rapid advances in technology and a pressure to reduce costs have made joining a large physician practice group an attractive option for some radiologists, according to Heller.

“My father was a radiologist,” he said. “When he went to work, he had to go in and read film. Now you no longer have to be onsite; you’re no longer geographically protected because you’re the only radiologist in City X.”

However, the loss of autonomy may be a hard pill to swallow for certain physicians.

“I didn’t become a physician to punch a clock into a giant machine,” said Heller. “I care about patient care and local control.”

While Heller is happy with his decision to join Radiology Partners, he acknowledged that not all care providers may feel the same way.

Additionally, as hospitals face higher standards for value-based reimbursement, they expect more from radiologist practice groups. Services such as subspecialty or 24/7 reads may be difficult for small groups to offer, while larger groups can spend the human capital. Competition for hospital contracts can be fierce, and diversified support staff is another key differentiator in the physician service group market, according to Heller.

“It’s only when you get bigger you can have that back office support,” said Heller. “You only need so many high level people focusing on revenue cycle management, but they’re expensive so it’s tough for small or medium size practice to afford.”

The initiation of MACRA reporting underscores the need for a team focused on quality improvement, added Heller. A small practice may not have the resources to hire a team to get into the analytics weeds on MACRA/MIPS reporting due to high up-front costs, but a larger practice can absorb the hit of hiring analysts.

“All of these things come together to determine how you’re going to grow in the marketplace,” said Heller.