From Partner to Employee: The Captive Radiology Practice

Terry Owen is senior vice president of Florida Hospital in Orlando. He says, “We think the old days of fee for service, the high-water mark, are behind us.” What’s coming is some permutation of the accountable-care organization (ACO), with bundling of payment for services and outcomes-driven treatment. “If we get bundled pay for disease groups, then obviously, we will need radiology services for those disease groups,” Owen says. In June 2008, Florida Hospital put radiologists across the country on alert when it announced that it was not renewing its contract with a radiology group that had served it for 40 years. Instead, the hospital offered to take that group’s radiologists on as employees. Two-thirds of the physicians accepted. Those who stayed were organized under a new administrative entity, Radiology Specialists of Florida, which was placed under the hospital’s subsidiary, Florida Physicians Medical Group. One of the issues that prompted the hospital to employ the radiologists was a failed negotiation with the predecessor group over subsidies for unpaid indigent care. The old group claimed that without subsidization for unpaid indigent care, it could not compete in recruiting radiologists. Owen said in 2008 (and still says) that Florida Hospital’s intent was never to employ radiologists. That was simply the option the hospital chose after the breakdown of negotiations with the old group. “One of the tools we have is an employment model,” Owen says. Some analysts count employed radiologists as less than 10% of those working in nonacademic settings. Radiologists might want to plan to prevent becoming employees (or, given the current vagaries of reimbursement, they might want to become employees for their own financial health).Employment TrendsOwen believes that employment is becoming an increasingly attractive option for new radiologists coming out of residency. “What I see is an interest in more predictable shifts and a more scheduled work life, along with some concern with more stability of income,” he says. “There are changing expectations, and starting a practice can be very costly.” Larger trends also might be pushing the employment model. Corporate teleradiology companies that can leverage technology to undercut standard hospital contracts for interpretation, especially in rural settings, are paying radiologists (either through salaries or per study) to read remotely. The consolidation of health systems into megaproviders that can adapt to insurance initiatives to drive down costs also is adding shine to the employment model.

“What I see is an interest in more predictable shifts and a more scheduled work life, along with some concern with more stability of income.”

—Terry Owen, senior vice president,
Florida Hospital, Orlando, FL

Florida Hospital is a case in point: It is growing. While Florida Hospital in Orlando is the entity’s flagship, the system is actually composed of eight hospitals and four OICs. It treats nearly a million patients per year and is part of the even larger Adventist Health System. Florida Hospital has mounted a task force to study evolving health-care scenarios. “I think every responsible organization is doing pilots of the ACO, the medical-home model, or some other way of delivering the product differently,” Owen says. “We strongly feel that in this country, we have a costly model without the outcomes to justify that cost. There are a number of ACO-type models or bundled-pay models on the radar screen. Earlier this year, the Florida government talked about moving all Medicaid to managed care, including provider-sponsored networks. In some parts of the country, people are a lot further along than we are here.” With a new focus on quality and outcomes, hospitals must come up with solutions that align the incentives of physicians and the hospital. Owen says, “We all have been focused on productivity or volume, not on outcomes. How do you transition to an outcomes-driven model? That’s something we’ve got to do.” Methods of aligning the physician and hospital, including risk sharing, are being explored. Employing radiologists or other specialists can be part of that solution, he says, although it’s a minor part now. “Our number of physician employees is significant, but it’s nowhere near the majority of the medical staff,” Owen says. As for Florida Hospital’s in-house, employed-radiologist makeover, Owen says that the transition has been seamless. Radiology Specialists of Florida is running the department, using teleradiologists to handle overflow. “They don’t use locum tenens anymore,” he reports. The salaries of radiologists, Owen thinks, have been unchanged in the two years of employment. “It has gone well,” he says. “On the finance side, we still have opportunity for improvement, but where we are is a very good place to be. I think the radiologists are happy to be at the hospital. We are pleased with the service and the quality of work.”Events in ToledoWhat happened in 2009 at the Mercy Health Partners hospitals in Toledo, Ohio, is a second example of how a radiology group with a long-standing relationship can run afoul of a major client. In this case, the hospitals did not opt for a direct-employment model. Instead, they asked a corporate entity to take over radiology services and run the imaging departments (using a combination of locum tenens, in-house staff, and teleradiology providers). Consulting Radiologists Corp (CRC) had covered the Mercy Health Partners hospitals in Toledo (Mercy St Vincent Medical Center, Mercy St Anne Hospital, Mercy St Charles Hospital, and Mercy Children’s Hospital) for decades when it was suddenly replaced by Imaging Advantage LLC (Santa Monica, California), a corporate provider of imaging services. David R. Cervantes, MD, an interventional radiologist, is president of CRC. Cervantes reported in 2009 that CRC had been in negotiations with Mercy Health Partners over benchmarks (particularly for report turnaround) that the group felt were unobtainable without more flexibility on the part of Mercy Health Partners. The hospitals would not agree to 24-hour transcription or provide transporters for radiology patients, for instance. CRC was unusual in that it was operating under an old handshake agreement forged decades earlier. There was no contract between CRC and Mercy Health Partners. The system was demanding one, however, and negotiations had been ongoing when they stalled. After being told by the system that the contract was no longer a priority, CRC radiologists were offered jobs by Imaging Advantage, which had been given the Toledo contract for Mercy Health Partners beginning in June 2009. The conditions of the offer were that CRC would give up reading for St Luke’s Hospital in Maumee and close an imaging center that it ran. Instead, the group kept its contract with St Luke’s Hospital and its imaging center, and it said goodbye to Mercy Health Partners. Cervantes says, “We never told anybody in our group they couldn’t go there, but nobody went.”

“We have three components: The radiologists on-site, the radiologists reading remotely (who are still our radiologists), and commercial teleradiology for Mercy St Vincent Medical Center only.”

—S. Mark Ellis, vice president, operations,
Mercy St Vincent Medical Center, Toledo, OH

A year later, Cervantes says, the decision not to work for Mercy Health Partners definitely changed CRC. The group has downsized from 19 to 11 radiologists; it still reads for St Luke’s Hospital, has contracted with another outlying hospital, and still has the CRC imaging center, which has gotten busier. Radiology groups should be extremely wary, since something like the Imaging Advantage takeover could happen to them, Cervantes says. He advises radiologists to strengthen their relationships with hospitals and tells new radiologists to align themselves with established practices, not teleradiology companies. As a specialty, he says, “We have to get our medical staffs to realize that you can’t turn radiology into a commodity.”Learning PartnershipAt Mercy St Vincent Medical Center, S. Mark Ellis, vice president of operations, says that the changeover resulted in a tough year for the Mercy Health Partners radiology departments, but he attributes that to learning a different system. “It’s like any other marriage: If you make the separation, you’ve got to learn the new partner,” he says. Ellis says that Mercy Health Partners is now poised to give better service and to move with clinicians into new areas of specialized care in oncology, stroke, and vascular intervention that Mercy St Vincent Medical Center and the other hospitals didn’t offer previously. “We refer to Imaging Advantage as our radiology department,” he says. “To our physician customers, it’s just part of the infrastructure.” Mercy Health Partners supplies the radiology suites and modalities, technologists, and support staff, and it handles billing, with the exception of professional fees. “Imaging Advantage provides the professional services and bills for those. Mercy Health Partners manages and controls the overall outcomes and the scheduling of patients,” Ellis says. This frees the radiologists to focus on patient care, he says, while the hospital handles management, although a radiology CMO is contracted to Imaging Advantage. In the beginning, Imaging Advantage did rely on locum tenens heavily, but that has changed, Ellis adds. “We have three components: The radiologists on-site, the radiologists reading remotely (who are still our radiologists), and commercial teleradiology for Mercy St Vincent Medical Center only,” he says.

“Clarian Health has gone down a path where it determined, several years ago, to align as many physicians as it can with the hospitals’ interests and support the best patient care.”

—Richard Helsper, MBA, FACHE, COO,
Ball Memorial Hospital, Muncie, IN

There are 14 radiologists now on-site, Ellis says, with another six to eight Imaging Advantage remote readers dedicated to Mercy Health Partners, in addition to the teleradiology company’s radiologists. Preferred readers are selected from the commercial teleradiology pool and assigned to read Mercy Health Partners cases so that familiarity develops with referrers. Remote readers contracted to Imaging Advantage are brought to Mercy St Vincent Medical Center to train and to get face-to-face contact with the medical staff. According to Sarah Bednarski, media spokesperson for Mercy Health Partners, the combined hospitals are now conducting about 800 imaging exams daily, with 90% of those read by Imaging Advantage contracted radiologists. Ellis says that both the Ohio Department of Health and the ACR® have assessed the radiology operation at Mercy Health Partners and have given it passing grades.Clarian HealthWhat started in 1997 as the merger of three Indianapolis, Indiana, hospitals to form Clarian Health has now grown into a network of more than 20 owned or affiliated hospitals throughout Indiana. As Clarian Health has expanded, it has focused on bringing physicians on as employees through an entity called the Indiana Clinic. Today, there is a mix of private-practice and employee physicians in the hospitals, but the direction of change is toward employment. Richard Helsper, MBA, FACHE, is COO of Ball Memorial Hospital, Muncie, part of the Clarian Health group. “Clarian Health has gone down a path where it determined, several years ago, to align as many physicians as it can with the hospitals’ interests and support the best patient care,” he says. “Through the Indiana Clinic, as well as direct hospital employment and lease models, there are hundreds of physicians, hospitalists, primary-care physicians, and radiologists already aligned, sometimes to specific locations and sometimes as part of the larger pool.” Helsper, who most recently held the corporate position of vice president of operations for Clarian Health, says that employing physicians is becoming more common for hospitals as they consolidate and position themselves to respond as ACOs. Size equals clout in negotiating contracts, he says. The squeeze on physicians’ pay due to falling reimbursement is opening the door to more of these arrangements. “Physicians are seeing this, and it’s frightening to them: There is no one who hasn’t had to work harder this year than last year to make the same money,” he says.

“Aggregate RVUs set the salary. . . .If we manage costs, we have the opportunity to control salary or adjust vacation time. That gives us a lot of flexibility.”

—Kenneth A. Buckwalter, MD, FACR, clinical director,
Indiana Radiology Partners, Indianapolis, IN

Many specialties, radiology included, will migrate away from freestanding physician-owned clinics and back to employment models, he predicts. “Medicare is putting more scrutiny on in-office coverage,” Helsper says. “Clarian Health has taken over imaging centers just so the providers could rid themselves of them, because they could barely cover the costs.”Indiana Radiology PartnersThe radiology practice at Clarian Health provides a clear look at how the employee model for physicians can take shape as health systems consolidate. Kenneth A. Buckwalter, MD, FACR, is clinical director of Indiana Radiology Partners (IRP), a group of close to 100 radiologists who work for the Clarian Health hospitals. IRP is owned by Clarian Health and acts as the clinical arm of radiology services. IRP is soon to be part of the Indiana Clinic, a multispecialty group formed to oversee all the specialties engaged in the employee model. The Indiana Clinic is co-owned by Clarian Health and the affiliated Indiana University School of Medicine, Buckwalter says. Clarian Health formed IRP following the merger of two radiology groups in 1997. IRP radiologists are guaranteed salaries benchmarked to Medical Group Management Association (MGMA) standards. “If we do a million work RVUs, that’s the total money we’ll have to distribute to the radiologists. Aggregate RVUs set the salary. Instead of being a fixed salary, as it is now, salary will float based on work available. If we manage costs, we have the opportunity to control salary or adjust vacation time. That gives us a lot of flexibility,” he says. “It gives us lots of control,” he adds. “If you were on a fixed salary, the hospital could take over another hospital, and you’d have more work and the same fixed pay. The downside is if the hospital loses business, then the salary will drop.” In that case, radiology could cut jobs or move people internally to balance the income and lifestyle desires of various physicians. No production incentives are imposed, but radiologists are expected to meet demand and stay busy. “In the aggregate, we produce at about the 50th percentile for MGMA standards for private practice, and that’s with the large residency program that we run. It’s much simpler for the hospital system to pay a fixed amount per RVU; the radiologists don’t have to worry about the hospitals’ payor mix. We don’t have to worry about the uncompensated emergency department night visits that kill some radiology practices,” Buckwalter says. Radiologists don’t have to worry about malpractice insurance, which is paid for by the Indiana Clinic. “I think it’s a hugely beneficial model,” Buckwalter says, “and better than a fixed-salary model.”

“I see far more to be concerned with on the corporatization road than in the hospital employment model. I think the corporations are far more formidable competitors than radiologists have ever faced before.”

—Lawrence R. Muroff, MD, FACR, CEO and president,
Imaging Consultants Inc, Tampa, FL

Nonetheless, radiologists are worried about income, and one of the issues in negotiation between IRP and the Indiana Clinic is the benchmark to be used to set reimbursement per RVU. Data for the Midwest indicate higher RVU benchmarks for radiologists than for other regions, and radiologists want those benchmarks used, whereas the clinic wants the same aggregate national benchmarks applied for all specialties, not just radiology, Buckwalter says. “They want one standard, and our point is that for the Midwest, radiology is a higher number,” he explains. “We’ve had a number of conversations, and we’ll have to come to a reckoning. Our goal is to have the best-run department in the clinic. We have no desire to be contentious. There is a limited pot of money, and radiology is at the high end. There’s not too much sympathy from nonradiologists if our per-RVU reimbursement is $52 versus $54.” IRP is unusual in that its salary structure is flat, with no additional pay for rank or seniority. New radiologists are brought in at 80% of the salary standard and move to 90% the next year. After that, they become partners in IRP. Buckwalter says, “We pay more the first year or two, and then new employees discover that they like being here, and they don’t want to leave. These junior people do a ton of work, typically. I don’t begrudge paying them that amount to start.” By keeping salaries more or less equal, IRP avoids another phenomenon that plagues the recruits in many private-practice settings: churn. “Lots of folks turn over the junior people they pay at 40% to 50% of the senior-staff level. Then, they take that excess revenue and redistribute it to the senior partners. It’s a very common strategy. They just bring in more new people. We treat our juniors much better than most people do,” Buckwalter says.Decreased IncomeMany radiologists fear that if they move to employee status, their incomes will inevitably decline. Buckwalter views this as a real possibility. For now, hospitals must approximate in salary what their radiologists might make in private practice, but if more and more radiologists become employees, then hospitals won’t worry as much about mirroring private practice, and salaries could fall, Buckwalter says. “Right now, we’re benchmarked against private practice, and that allows us to enjoy our high salaries,” he says. “The downside is if all private-practice groups evaporate, then hospitals will set the salaries. Radiology may experience across-the-board cuts when hospitals seek to cut expenses. I know that has happened in other hospital systems.”

“‘We’re not really good at managing physicians,’ hospitals might say. On a good day, most hospitals never want to employ these people.”

—Doug Smith, president and CEO,
Barrington Lakes Group, Barrington, IL

The way out of this scenario is for radiologists constantly to prove their worth to referring clinicians and hospitals. Buckwalter says, “The bottom line, for those of us who are hospital-based physicians: We are joined at the hip, like Siamese twins, to the hospital. We need to do everything in our power to make sure the hospital is a success.” Helsper agrees. He notes that there are now many variations in the way that radiologists in the Clarian Health system are compensated. Some remain in private-practice models. About 100 are currently salaried members of IRP, which is looking at rolling into the Indiana Clinic. Eventually, most (if not all) radiologists will be employees in system-owned groups like IRP, he says. To retain their importance, radiologists have to make an added effort to demonstrate their value. “Pick up that phone,” he advises, in urgent cases, adding, “Call and tell that referrer what the finding is, when it’s unusual or critical. In radiology, you have no patient contact (except, perhaps, for interventional radiologists). If you make your referring clinicians look good, they will send you business; if you make them look bad, they won’t.” It is also important to leverage radiology expertise, Helsper says. IRP radiologists provide night coverage to many Clarian Health hospitals, and they are beginning to offer these services commercially. “IRP is conscious of not appearing predatory,” Helsper says, “but it’s happy to help, when asked. It will do night-coverage service, but it’s not knocking on doors.” Many commercial teleradiology companies are knocking on doors, however. Commoditization FearLawrence R. Muroff, MD, FACR, is CEO and president of Imaging Consultants, Inc, in Tampa, Florida. He is a nuclear-medicine specialist who now devotes his time to consulting with radiology practices and hospitals on a range of issues. Muroff says that he sees more to fear from teleradiology companies and the commoditization of radiology than he does from hospitals turning radiologists into employees. “The salary model is not common at this time,” he says. “I think it’s probably close to 6% to 8% of those in practice.” When hospitals do employ radiologists, he adds, it’s not to save money, it’s to have greater control over hours, assignments, subspecialization, and keeping radiologists on-site. “The secondary factor is that the hospitals don’t like the radiologists to compete with them,” he says. “They want the radiologists’ incentives aligned with those of the hospital. The easiest way to do that is if they are employees.” Muroff says that the nonpredation philosophies of the early teleradiology companies have been dispensed with; the corporate teleradiology companies are doing more to disrupt existing contracts with hospitals than any move by hospitals to turn radiologists into employees has done. “I see far more to be concerned with on the corporatization road than in the hospital employment model. I think the corporations are far more formidable competitors than radiologists have ever faced before,” Muroff says. “Teleradiology teaches peer physicians and hospital administrators that relationships don’t matter and that studies can be read at any time and in any place. Commodities are basically traded on price, and that makes it very dangerous for radiologists.”Practicing DecommoditizationMuroff says radiologists must counter the trend by decommoditizing radiology. That means involvement in the governance, politics, and clinical practices of the hospitals for which they read. Radiologists must involve themselves in their communities, too, Muroff says. “It’s very rare that a group has been fired while a member of that group sat on the medical staff of the hospital, and I’ve never heard of one being fired when a member sits on the hospital’s board,” he notes. Doug Smith is president of Barrington Lakes Group (Barrington, Illinois), a Chicago-area radiology consultancy. He works with radiology groups and hospitals on contract negotiations, joint ventures, and what he calls other weird arrangements. Smith says that there is built-in tension between hospitals and radiology groups. “Hospitals are like a medical mall: They’re dependent on the kindness of the medical staff to do anything,” he says. When there are discrepancies between radiology-service expectation and delivery in that setting, hospitals might see bringing the radiologists on as employees as the best way to gain control. He adds that after some consideration, hospitals might say, “‘We’re not really good at managing physicians.’ On a good day, most hospitals never want to employ these people.” Smith agrees that corporate teleradiology companies are changing relationships between hospitals and radiology groups, but he says that the full hands haven’t yet been dealt to let us see who will win that game. “The teleradiology companies that are really self-professed virtual national radiology groups say they’ll put certain bodies on the ground and read the rest from a distance,” he notes. “It’s still too early to see the holes in those relationships and to see if that’s a true emerging model that really has legs.”Making HayAt the Clarian Health hospitals, there is no fear of teleradiology providers taking over a practice; the hospitals have a team of emergency radiologists at their hospitals 24/7 through IRP. Buckwalter believes that it sends a bad message if independent radiology groups have teleradiology night coverage when other clinicians at the hospitals they serve must cope with night call. Helsper, in fact, says that teleradiology groups are only “making hay while the sun shines,” and he thinks that they might be a short-lived phenomenon. When large systems form ACOs, they will take the night-call piece for themselves, as part of their service model (just as IRP has done within Clarian Health), Helsper suggests. “Teleradiology is a cottage industry,” he says. “It fulfills a need today, but as systems get bigger, we won’t need those external groups, just as Ball Memorial Hospital’s joining Clarian Health gave it access to 24/7 radiology through IRP.” Helsper says that having more large hospital systems will probably lead to more radiologists becoming hospital employees (or having their services leased) in a true integrated-care model. “I think the employment model is becoming more common, and you will see it more on the national level,” Helsper says. “Radiology will be one of many specialties doing the same thing. For more and more clinicians, employment will be a comfortable place for them to be. They’ll have flexibility, infrastructure, and backup; I think it will ultimately depend on income stabilization.” Radiologists on hospital salaries might be a small percentage of all radiologists now. How long will that be true, though? For those not wishing to be radiologist employees, the advice is uniform: Involve yourself more with your clients. Make your referrers look good, as Helsper says. Smith adds, “Hospitals are actively putting together ACOs to be part of the early test models. Get a seat at the table today, and be a contributor. If you aren’t at the table, somebody’s going to be making a decision about your service, and it isn’t going to be you.” George Wiley is a contributing writer for Radiology Business Journal.