CXOFiles No.3 Marcia Flaherty: Vetting Business Opportunities at Riverside Radiology

Many business opportunities for radiology groups become mired in an inability to act in the private practice sector. In order to explore the dynamics that facilitate entrepreneurial action within radiology practices, ImagingBiz.com identified a practice that has successfully developed several new service lines in the past five years: Riverside Radiology Associates in Columbus, Ohio, a soon-to-be 60-radiologist practice, officially founded in 1980, but with roots that go back many years. Not only does RRA operate a successful full-service outpatient imaging center and interventional office, it has developed an information technology service and a brand-new teleradiology business, and also provides billing for some clients. We explored the process by which RRA assesses new business opportunities with Marcia Flaherty, who has served as practice CEO for seven years. ImagingBiz.com: Tell us about some of the most successful new service lines and delivery models RRA has developed over the past five years?  FLAHERTY: Key areas have been Premier Medical Imaging, a multimodality outpatient imaging center with interventional services; COPS, our technology company; and, currently we are starting up our own internal nighthawk service. COPS stands for Central Ohio PAC System. It’s a technology company. We provide PACS services for a number of physician practices and hospitals. We utilize the Fuji Synapse system, and we also have a voice recognition system, Power Scribe. That technology infrastructure allows us to provide these services. We started providing services to a hospital that did not have PACS and were able to convert them into our system and changed their turnaround from days to literally hours. Everything now is done within 24 hours or less. We are able to create a very efficient environment. We also provide PACS for a number of the physician practices where we read studies, and an example is a large orthopedic practice that has a couple of magnets and CR. They needed a PACS product to support their imaging services, so we, on a per-click basis, lease them out PACS and store their images. ImagingBiz.com: Before we get into the method of vetting new opportunities, would you provide some background on how the group is governed?  FLAHERTY: Our Board of Directors is comprised of all shareholders and those on a partnership path. New physicians immediately become members of the Board and are involved in the discussions of the group. Our Executive Committee (EC) is comprised of seven physicians, who represent specific areas of subspecialization, as well as our officers. We have four committees that report to the EC, and we try to get each Board member on at least one committee. These include the Operations Committee, which focuses on scheduling, recruitment, and information technology; the Finance Committee, which reviews financial details and oversees our billing company and managed care initiatives; the Professional Relations Committee—this committee along with the EC are elected committees—that deals with areas of professionalism and work-life issues, setting the standard for professional behavior and dealing with flexible scheduling models and reduced partnership options; and, the Business Development Committee, which reviews all business opportunities and in-depth business plans. Each committee makes recommendations to the EC, and the EC reviews and acts on the committees’ recommendations, then moves appropriate items on to the board for review and action. ImagingBiz.com: How are new opportunities presented to the group? FLAHERTY: As described above, the Business Development Committee conducts due diligence on all new opportunities and makes recommendations to the EC for their review, and then each opportunity is passed onto the Board of Directors for review and action. There is a lot of work involved in the process. We go through a fairly extensive review process for opportunities. Most due diligence is done by internal resources. We have four key areas in our management: we have our technology, which is a huge area, we have a business development area, which includes our marketing and sales, we have an executive director of business development, and we also have a manager of operations. So that group is very much involved. They also developed our billing operation for some of our imaging pieces, so that group is very involved in new business development and bringing it on board. Then we have our clinical operations, which is our imaging center and our interventional office, and finally we have corporate services, which includes finance, purchasing, HR, accounting, the whole nine yards. But business development is one of our four key areas of management within our practice. ImagingBiz.com: RRA has been a trailblazer in the outpatient world, most notably in outpatient interventional radiology and women’s imaging. How does the group sidestep the inertia trap to move quickly on new opportunities? FLAHERTY: Our governance structure affords for appropriate review and movement of recommendations. We have a defined process for reviewing new opportunities, and business development is one of four key areas of focus in our management structure. ImagingBiz.com: How much time is devoted to business development? Is it valued by the group? FLAHERTY: The Business Development Committee meets monthly to review details of opportunities and the Executive Committee meets weekly: these physicians are intimately involved in our business development opportunities. We have an executive director of business development and an operations manager of business development. This dedicated management structure provides the support to appropriately review and address all opportunities, and then to operationalize the business. ImagingBiz.com: What is the role of the CEO in orchestrating the continuous change necessary to stay on the cutting edge? FLAHERTY: Supporting the governance structure and developing the management expertise for our practice opportunities are key areas for focus. It’s my responsibility to facilitate this partnership and excellence in the governance and management aspects of the practices. We plan an annual meeting each April where we review our goals and strategic direction and spend a significant part of Saturday in dialogue as a Board of Directors on discussions of these matters. We also held a retreat this year in January, engaging Dr. Lawrence Muroff to review and provide feedback on our practice structure and business development opportunities. He had some excellent recommendations, many of which we have implemented. We are planning something similar for next year. ImagingBiz.com: Could you expand on the challenge of developing the management expertise? For instance, do you have a process by which you develop this expertise internally? FLAHERTY: One of the critical factors is finding the right people in an organization and putting those people in the right roles. That is something we spend a lot of time doing. We also want to grow people in our organization. We’ve seen a lot of internal growth in our management team from folks who’ve joined our organization. We are able to provide them with more tools and more education and give them opportunities to seek more knowledge and really grow internally in the organization, and that’s been something that has been very rewarding to watch. Our practice is built upon the theme of partnership and the relationship between our physician owners and our staff exemplifies this partnership in a significant way. It is this focus that we all work in tandem to permeate throughout our organization. As management and staff, we have the utmost respect and admiration for our physician’s expertise—they are amazingly talented and dedicated to their patients and referring physicians—and we as staff aspire to provide the same level of commitment to advancing the business. People are here because they love working with this group and they love the reputation and the work that is done in this group, and I guess a lot of people in health care are really driven by being part of that process. So looking at the management group, the tone for the organization is set by the expectations that the physicians have of themselves. A key component to keeping this focus is that our President, Dr. Mark Alfonso. And the other members of our Executive Committee are very business savvy, respectful, and genuinely nice people to work with. This really sets the tone for the practice. ImagingBiz.com: Are there any particular tools or techniques that you use as CEO to identify opportunities internally? FLAHERTY: We have a specific process that involves several steps: Main question: How does each opportunity fit our strategic direction and goals? A rigorous financial review process that includes review of the impact on all areas of the practice; Determine what will be required to operationalize this opportunity; and, How will we be able to improve the health status of patients served? Our approach has been one of seeking to develop key alliances and partnerships with health systems and physician practices. We have a significant business and technology infrastructure, and we attempt to see how we can utilize this structure to better support hospitals and physicians, including other radiologists. In addition to high quality, subspecialty radiology, we believe this infrastructure is key to developing and enhancing the imaging business and is a unique value that we bring to each opportunity. We have a particular process for doing the proforma and have developed and honed that for what we are looking at based on our business model. We do have computerized software processes. ImagingBiz.com: Are there sources of information that you use to identify opportunities externally? FLAHERTY: We do have an interest in how others are addressing similar situations and seek to understand trends and best practices. We review information from the trade journals, the Advisory Board, and SG2 reports. The key responsibility for our business development initiative is to apply these to our market region and business model. ImagingBiz.com: Has the practice ever regretted missing the boat on an opportunity? If so, what was the lesson learned? FLAHERTY: I am not sure if I would describe this as missing the boat, but I will describe a lesson we learned several years ago. We strive to develop our business based on a partnership mindset. We were put in a position once of being pitted against another group based on the actions of a hospital. We learned that we did not want to fall into that position again: it has the potential to damage relationships with those that we want to partner with, and while we are a very competitive practice in our approach to our business plans, at the end of the day, if something makes good business sense, we don’t want to be in a position of having created “bad blood” between our practice and another practice. It serves no purpose for either party, but sometimes these incidents can stand in the way of greater success for both parties. The other thing that we have learned is that our group by virtue of our size and business structure can be seen as threatening or adversarial. We believe our present and future success, and that of those we partner with, is based on the premise of development of mutually beneficial relationships. We are trying to learn how to be more effective in conveying and acting on this message. ImagingBiz.com: How has the DRA affected the role of the CEO in vetting new business opportunities? FLAHERTY: While the DRA has had some impact on our practice, we have also been cognizant of the vagaries of the federal government and other payers on the impact of reimbursement, particularly technical revenue in our owned imaging operations. However, our business model has been built on diverse and specialized services that are not necessarily or significantly impacted by this force. The information technology company is a piece that is not impacted. It’s a different type of revenue stream. We do some billing for some other folks. We have revenue that comes into our practice that is not dependent on professional or technical reimbursement, and that is more dependent on businesses that do not waver with the federal government’s whims. Teleradiology really is an exciting business for us. We have provided 24 x7 coverage here at Riverside internally for about 10 years. And we will continue to do that. We have several physicians in our group who are totally dedicated to providing that service, and we have operated like that for some time. Now, we have developed a parallel service of physicians that will be reading for all of the outside hospitals, and we’ve had a few other groups talk to us about providing the service for their group. Another hospital has talked with us about providing service for their hospital, and really, it is structured to be able to provide final reads. We are not looking to be nationwide in this, we are looking to provide a regional service that supports radiology and hospitals. We haven’t really promoted it, but as people are learning that we are looking at that, radiologists who are faced with coming in after paying fees to a nighthawk—and they still have to read out cases—are realizing that there has got to be a better way to do this. That is where the partnerships we have with others are going to be instrumental in that business. We aren’t setting out to make that a huge operating arm, but it is something we will do as long as we have physicians who are interested in providing that service.