In recent years, the leadership of Advanced Diagnostic Imaging (ADI) noticed that its market of Nashville, Tennessee, was experiencing an increasingly common trend. Chad Calendine, MD, president of ADI and CMO of Optimal Radiology Partners (ORP), says, “The national partnership we formed last year with ORP validated our observations that in many markets, health systems have begun—in earnest—to employ their referral base. As health systems employ those physicians, you can be in jeopardy of having your referral base hired away. It’s a well-known vulnerability for radiology practices and imaging-center owners, but options for addressing the problem can be limited.”
Tom Blankenship, chief development officer for ADI, has worked in the hospital world employing physicians. He explains, “Hospital systems typically encounter two kinds of situations that lead to the employment of physicians. Either there’s a market-driven shortage, so there aren’t normal incentives for a physician to establish a practice in a given area, or there’s a crisis of some kind—a competitor system is attempting to employ away the referrers itself, or a practice important to the hospital is in distress. For hospitals, the strategy is often defensive and reactive.”
With that in mind, ADI opted for a proactive strategy that was aligned with its desire to support and strengthen the independent practice of medicine (and that would combat the erosion of its referral base): It expanded to become a multispecialty group. “It occurred to us that we are a physician group: Why don’t we provide our colleagues with an alternative to becoming health-system employees by hiring physicians ourselves?” Calendine explains. “That’s exactly what we have been doing, intentionally, over the past year.”
Platform in Place
Calendine explains that the idea of bringing medical and surgical specialists into the group first occurred to the radiology practice four years ago, although the option was exercised in a much more limited capacity. “We had a vascular-surgeon colleague who worked closely with our interventional radiologists, and his practice was dissolving due to the retirement of one partner and the relocation of another,” he says.
“He came to us and explained that he would rather not stay here in solo practice, with the overhead burden on himself alone, and he asked whether we could work together. We had the practice infrastructure (including the billing system, human resources, benefits, and accounting processes) in place. All that remained was to look at our managed-care contracts and see whether we could bill for his services if he joined our group,” Calendine adds.
That inquiry turned up an unexpected revelation: “Most of our private-payor contracts are all-services contracts, regardless of the CPT® code,” Calendine says. “When we bring specialists into our group, we alleviate the threat of losing our referral base, but we also further bolster and support these practices—so they can continue to grow.”
ADI ensures that the group is a unified business, but its operational model, in integrating specialists, has a relatively laissez-faire style, compared with the strict oversight that other potential employers in the market would be likely to require. “We focus on healthy practices and let them continue to run their practices the way they always have,” Calendine says. “We have centralized decision making on high-level items and consolidated billing, accounting, and financial reporting, but we don’t interfere with the day-to-day operations of the physicians we hire.”
He continues, “They get no guaranteed compensation from us, nor do we charge them for anything other than services provided. When they need an outpatient imaging study, we ask that they send the patient to one of our centers, but they are not rewarded (or penalized) for that in any way. Typically, hospitals and health systems come in and actively manage the practice, and physicians don’t like losing their control.”
The radiology practice incorporates these new specialty groups using divisional accounting, further underscoring their autonomy. “All the money they make goes to their division,” Calendine says. “They don’t pay us a tithe, and we don’t lose money on them. Whatever their financial reality is, it’s theirs.”
Multispecialty Future
In the year since the radiology practice began actively pursuing employment of specialists, it has brought on 41 nonradiologists, and it anticipates doubling that number by the end of 2014. “The group now includes physicians and midlevel providers in vascular surgery, orthopedics, neurosurgery, neurology, and general surgery,” Calendine says. “Instead of complaining about the demise of private practice and our vulnerability, we’re aggressively fixing the problem.”
The formation of the broad multispecialty group has also yielded some operational efficiencies. “We think our imaging centers already have a very patient-centered model, but there is improvement as a result of the integration,” Calendine says. “We’re able to benefit from common information systems and share images and files more seamlessly, and that’s an advantage for our physicians, as well as our patients.”
Calendine and Blankenship conclude that the new multispecialty model has been even more successful than they had hoped. “This has caught on like wildfire,” Calendine says. “We didn’t expect it to go so wonderfully.” Blankenship adds, “These physicians have a strong preference for remaining independent and working with other physicians. This is a physician-driven, free-enterprise model that strengthens our collective position for the future.”
Cat Vasko is editor of ImagingBiz.com and associate editor of Radiology Business Journal.