The New Player

The trend in mergers and acquisitions in healthcare continues to make headlines, altering geographic and competitive boundaries and, in general, disrupting established practice patterns in medicine. This is not necessarily a negative development—nor is it intrinsically good. Call it a mixed bag.

Hospital mergers are so pervasive that the standalone community hospital has become a rarity. Payors have merged to the extent that the Department of Justice is suing to stop the mergers of Aetna Inc./Humana Inc. and Anthem Inc./Cigna Corp on the grounds that they could lead to higher premiums. That brings us to physician practices.

Radiology Business Journal has ranked the 100 largest practices in radiology since 2012 and the 50 largest practices since 2009. While the increase in the median size of the 100 largest practices from 40.5 in 2012 to 47 in 2015 suggests organic growth, practice mergers likely propelled the median size of the 10 largest practices from 71 in 2009 to 97.5 in 2015.

Leaders of large practices that I have talked with over the years cite the need to enhance information technology capabilities, provide a single level of service across increasingly broad geographies and deepen leadership expertise in many domains, including billing and compliance (see articles, pages 8 and 34) and quality improvement (cover story, page 18). All of that takes cash, and in a private practice, that cash comes out of physicians’ pockets. Consolidation enables practices to spread the cost across a wider base.

Let the bundles begin

The pressure to contain costs in healthcare is only going to grow. The Wall Street Journal reported that U.S. public pension 20-year annualized returns are expected to drop to the lowest levels ever recorded. A few days ago in my home state of California, the California Public Employee’s Retirement System (CALPERS) reported a fiscal 2016 return of 0.6%. CALPERS has a funding gap of $112 billion.

As such, the news that CMS would initiate mandatory cardiac bundled payments for heart attacks and bypass surgeries should not come as a surprise. Hospitals in 98 randomly selected metropolitan areas will receive a lump sum for these care episodes. Target prices will be set each year based on historical regional and hospital-specific data related to the hospitalization and related care for 90 days post-discharge. Any savings will be retained by hospitals that meet quality metrics.

When it comes to finding targets for cost-containment initiatives, cardiac patients are low-hanging fruit. Writing in Health Affairs eight years ago about the Triple Aim, Berwick et al noted that congestive heart failure is the most common reason for admission of Medicare patients to a hospital, with 40% readmitted within 90 days.1 “[Congestive heart failure] is a prime example of what goes wrong when a health care system lacks the capacity to integrate its work over time and across sites of care,” the authors wrote.

The easy part is building the care protocols and hammering out the bundle. Bigger challenges begin after discharge.

When that bundle—or any other care-improvement initiative—is addressed, radiology needs to be there and prepared with evidence-based radiological care protocols, the data to support those protocols and the ability to articulate how its services and technological tools can contribute to the integration of that care across care settings after the patient leaves the hospital. Otherwise, the contract will go to the lowest bidder. It’s really as simple as that.

Three Doors

Working all of this out is going to take time, resources, the ability to innovate and strong, motivated leadership. We’ve seen examples all over the country of large practices—led by strong leaders—growing and innovating. A new path is emerging,  one of alignment with other like-minded practices under an umbrella organization that manages quality, billing and other administrative functions.

Some practices, however, will not have the will or the interest to get into the new game; some will prefer to focus on reading studies. Those practices should expect to receive a knock on the door from an increasingly eager suitor—private equity (see article, page 10).

Private equity-backed radiology-services providers—and they are growing—offer to provide the cash for the investments that radiology practices will need to succeed under value-based payment. The upside may be limited to whatever you can negotiate, but the downside is limited too.

These players are looking for exactly what your practice is looking for—skilled radiologists, particularly those with leadership skills. Of course, there is nothing to prevent a private practice with good leadership and a solid plan to go shopping for its own cash infusion.

Moving forward, let reason, not fear, guide your decisions. It’s good to have options.