Keys to Maximizing Your Share of the Local Radiology Market

The pandemic was a significant challenge for many radiology practice groups. However, it also provided an opportunity for them to take an honest assessment of their operations and find ways to improve, innovate and maximize efficiencies to remain competitive and thrive in a post-pandemic climate. Radiology practice groups are seeing increased imaging demand as patients are catching up on missed care over the last two years.

There are a few core questions practice leaders must ask themselves. How can we learn from the last 24 months to best position the practice for an uncertain future? What investments can we make today to maximize opportunities to grow our business? Radiology practice leaders need to be making decisions to not only thrive in 2022 but be well positioned five, 10, and 15 years into the future.

In order to create an effective strategic plan, we must first analyze the impact of four recent trends that will bring significant changes to health-care delivery. Accordingly, let us take a closer look at key takeaways for radiology groups to consider as they develop strategies and seek ways to innovate their offerings to position themselves optimally in an ever dynamic marketplace.

What You Know Should Know About the Migration of Volume from Inpatient to Outpatient Settings

Health-care services, and often diagnostic imaging or radiology services, that can be administered outside of the hospital environment in a freestanding site are becoming more attractive to patients and insurance companies. This is largely due to cost and convenience. In addition, Medicare is continuing to expand its coverage of outpatient procedures, which will only further accelerate this site of service shift. Further, the COVID-19 pandemic has only accelerated the shift in consumer preferences towards the outpatient setting. We can expect these volumes to increasingly shift into the outpatient setting over the next five to 10 years.

The takeaway: To handle this expected increase in volume, radiology practice groups should consider innovating their outpatient offerings to run more efficiently. The practices that best prevent long wait times and provide maximum ease of scheduling and high-quality care will be best positioned to experience the greatest success with patient care. If practices do not have established outpatient sites or partnerships with an outpatient footprint, they should strongly consider avenues toward establishing those care environments whether via partnership, new investment or otherwise. Many physician groups will need to reevaluate their outpatient and broader consumer strategies. If they do not offer outpatient care settings, it may be time to consider creating one.

How Will Sweeping Changes with Medicare Affect Your Reimbursement?

The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, has signaled it is shifting financial resources from speciality care fields to primary care providers while keeping overall spend budget neutral.¹ Procedure-heavy specialties are expected to receive reductions in Medicare reimbursements while consultative specialties will likely see reimbursement increases.

The takeaway: Radiology practice groups need to factor in these expected Medicare rate reductions into their 5-year forecast. The big question is: will commercial payers follow the reimbursement reduction decisions of CMS? If yes, this could be an even bigger impact on the bottom line. Groups with a higher Medicare patient concentration will most likely see a more profound impact than groups that are predominantly focused on commercial patients. Regardless of reimbursement mix, physician groups need to be proactive in planning for and investing in new sources of revenue and cost efficiencies to help offset these future revenue cuts.

What Kind of Impact Will the No Surprises Act Have on Reimbursement?

The No Surprises Act took effect on January 1, 2022, and is intended to help control unplanned out-of-network costs, which help curb unscheduled “surprise” out-of-network health care charges for patients. A study published in September 2020 in the American Journal of Managed Care found that a comprehensive federal law to rein in surprise billing could reduce overall health insurance premiums by 1 to 5 percent.² While the majority of the law addresses emergency care billing, it also covers non-emergent care when patients are unknowingly treated by an out-of-network provider.

The takeaway: While the legislation benefits patients, it also has ramifications for radiology practice groups as it may reduce their negotiating leverage with managed care. Radiology practice groups will also no longer be able to threaten insurers with “going out of network,” which has historically allowed physician groups to secure better rates. The radiology practice group’s loss of this bargaining chip will likely shift more leverage towards the managed care entities.

(Editor’s note: A variety of physician groups, including the American College of Radiology (ACR), have filed lawsuits to challenge the independent dispute resolution (IDR) process of the No Surprises Act, which emphasized the insurer-set qualified payment amount (QPA) in resolving disputes over out-of-network charges.³ More recently, a federal judge in Texas vacated the controversial IDR provisions of the No Surprises act.)⁴

Shopping for Health Care: A Renewed Emphasis on Price Transparency and Convenience

In today’s market, consumers want to shop for health care in the same way they shop for a car. Prospective patients want transparency in price and quality. They are also demanding a higher level of convenience that has not historically been available in healthcare.

Further, with the explosion of telehealth and telemedicine, patients have become accustomed to digital health care that provides much more convenience than going to in-person appointment. Patients are no longer willing to put up with long waits to see a doctor. They are now accustomed to on-demand health care that is as convenient as opening an app on their phone.

The takeaway: Radiology practice groups would be wise to make investments to meet these new consumer realities and expectations. Those who do so will be in a position to market how the practice is delivering outstanding patient service in a highly convenient and affordable manner. Practices able to clearly articulate that they are delivering high-quality, high-touch patient care while leveraging cutting-edge technology will maintain a competitive edge.

Performing a SWOT Analysis and Emphasizing Strategic Investments

As radiology practices consider how to best strengthen their positioning for 2022 and into the future, we recommend conducting a SWOT analysis (see above) to identify areas for investment and fortification.

Once a SWOT analysis and strategic plan are formalized, it is vital to execute on that plan and make the necessary investments in a prudent fashion. The success of that plan is dependent on its execution.

There are six common innovative and strategic investment avenues to drive success in the post-pandemic environment. Each of the investment decisions should be analyzed based on a radiology practice group’s unique circumstances: practice type and industry pressures, cash flow profile, competitive forces, legislative policy updates, forecasted patient demand, staffing, capabilities, and technology.

For radiology practice groups seeking to grow their business into a “platform” group (as opposed to joining an established platform via acquisition or a merger), it is critical to be aggressive in adding service lines, gaining market share, and building scale, which equates to investing in IT, management, and personnel. Of course, these investments may result in a decrease to owner income distributions in exchange for more favorable long-term practice positioning.

One other avenue to achieving scale is partnering with regional or national groups that offer new resources without sacrificing initial short-term owner distributions. National group models typically allow the clinical control and governance to remain with the local groups, while the partner brings valuable capital, administration, technology, and operational capabilities to quickly scale and achieve immediate success in this environment emerging from a global pandemic that has upended the health-care delivery system.

While coping with external challenges such as reimbursement pressures, industry consolidation can be daunting. Creating a long-term strategic plan that deepens competitive differentiation and builds scale is critical for ensuring long-term sustainability.

It is not practical to make all investments at once. The key is to outline a one-year, five-year and ten-year investment plan and execute. Incremental growth is best as it is most manageable, demonstrates practice momentum and helps ensure your practice is nimble and agile to adjust for changing competitive dynamics and future market changes.

The radiology practice groups that will most likely fare best in 2022 and beyond will be those that have conducted the necessary SWOT analysis and made strategic investments in their platforms as a result of that analysis. This analysis along with strategic investments bolsters a practice’s ability to scale and address whatever challenges the future might bring.

Editor’s note: Mr. Colbert is a senior managing director and founding member of Ziegler's Healthcare Investment Banking practice. He has represented 27 radiology groups on innovative transactions. Colbert specializes in advising physician groups on strategic and financing alternatives including mergers and acquisitions, joint ventures, capital raising transactions, and partnership development. For more information, visit www.ziegler.com/physician-groups .

References

1. Daly R. Medicare shifts payments toward primary care physicians in PFS final rule. Available at: https://www.hfma.org/topics/news/2020/12/medicare-shifts-payments-toward-primary-care-physicians-in-pfs-f.html . Published December 3, 2020. Accessed March 9, 2022.

2. Duffy EL, Ly B, Adler L, Trish E. Policies to address surprise billing can affect health insurance premiums. American Journal of Managed Care. 2020;26(9). Available at: https://www.ajmc.com/view/policies-to-address-surprise-billing-can-affect-health-insurance-premiums . Published September 11, 2020. Accessed March 9, 2022.

3. Hall J. Challenging the IDR process of the No Surprises Act. Diagnostic Imaging. Available at: https://www.diagnosticimaging.com/view/challenging-the-idr-process-of-the-no-surprises-act . Published February 1, 2022. Accessed March 11, 2022.

4. Hall J. Federal judge vacates IDR Provisions of the No Surprises Act. Diagnostic Imaging. Available at: https://www.diagnosticimaging.com/view/federal-judge-vacates-idr-provisions-of-the-no-surprises-act . Published February 25, 2022. Accessed March 11, 2022.