New Factors Driving Hospital Acquisitions

It’s no secret that more and more independent imaging centers have become hospital-owned entities over the past few years. But now, a new set of industry forces are fueling this trend, and experts say hospitals and practices must cooperate to make these care partnerships effective.

In an April Diagnostic Imaging survey, 70 percent of radiology professionals reported they were either “very” or “a little” worried about facing a hospital acquisition. According to Brian Baker, president of Regents Health Resources, a national medical imaging and imaging business intelligence consulting firm, the industry is facing a different set of factors making radiologists nervous.

What’s Driving Hospital Acquisitions

“For the most part, imaging providers do what they’re asked to do. They don’t direct care,” Baker said. “And, as the marketplace continues to change and focus more on risk-sharing, imaging centers are becoming more vulnerable and are losing leverage.”

With the health care industry’s move toward the accountable care organization (ACO) model, finding ways to control costs while securing appropriate reimbursement levels is priority No. 1 for many clinical settings. Independent imaging centers, however, have little negotiating power. But as hospital-owned groups, they can benefit from a hospital’s or health system’s superior bargaining position with payers.

While this concentration on the bottom line is important, finances aren’t the only force pushing hospital acquisitions. Including imaging centers under a hospital’s umbrella and linking the group to the facility’s electronic health record can also help both settings comply with the federal Meaningful Use requirements for the adoption of electronic records.

“One of the challenges currently is that independent imaging locations are often not on the same medical record system as the hospital,” Baker said. “By acquiring an imaging group, a hospital can be proactive in integrating services and patient records.”

The industry’s shift toward more collaborative, integrated care - and the growing concern over reimbursement levels - has also caused a spike in scrutiny over all Medicare claims, said Michael Sanderson, president of RemitDATA, a professional medical reimbursement and claims management company. Independent imaging centers, often ill-prepared to weather long-term audits without harm, can benefit from hospital support.

“All the different audit administrations are out in full force to stop fraud and abuse, and a lot of practices aren’t equipped to deal with being put on 100 percent pre-pay audit if Medicare believes they have fraudulent billing,” he said. “Having claims pulled for adjudication can delay cash by six months to a year, and many can’t handle the risk of being pushed to come up with that much operating capital on their own.”

Acquisition Impacts

Opponents to hospital acquisitions characterize these relationships and oversight as a loss of autonomy, Sanderson said, but it also eliminates much of the stress that independent radiology groups and providers experience. Many are happy to accept capped incomes and relinquish the flexibility of designing their own marketing tactics in favor of secure employment in an uncertain economy.

Some in the industry also worry that the specter of a hospital acquisition can hamper a practice’s ability to attract new providers. If a radiologist is reticent to sign on, his or her reluctance is most likely to stem from how the acquiring hospital handles the purchase, said Arun Jethani, chief executive officer of Medical Imaging Specialists, an organization aimed at helping hospitals, imaging centers, and radiology practices maximize their profitability.

“Hospital acquisition isn’t new for doctors, so a lot of how they respond depends on what the hospital’s reputation is. Either the facility’s good at it or they’re not. Hospitals should be transparent in their expectations, but they should also pay attention to what practices want,” he said. “For the most part, radiology groups see a lot of people coming right out of a fellowship or residency. These providers are looking simply looking for a position.”

Creating and Navigating a Smooth Acquisition

If you’re faced with a hospital acquisition, the reimbursement and care model concerns might seem overwhelming, Jethani said. But it is possible to navigate these negotiations and ensure a smooth process.

Most importantly, he said, make sure all your providers are open to discussing the possibility of and reasons behind an acquisition. Discussions can fall apart rapidly if you have extremely vocal detractors who don’t understand the potential benefits of a partnership.

Your first step, he said, should be to create a governance committee with representatives from your practice and the hospital.

“Establishing a governance committee is vital to creating a win-win acquisition agreement for both your practice and the hospital,” Jethani said. “Such a group can make sure everyone’s expectations are met in regards to current income levels, retirement incomes, weeks of vacation, productivity, and opportunities to read in subspecialty areas.”

That level of communication can also pave the way for you to become an active participant in the hospital’s strategy, Baker said. Demonstrate your desire and ability to contribute to the facility’s goals, and pursue directorship positions, medical committee memberships, and opportunities to participate at the Board of Directors level.

Lastly, remember that acquisitions can take from six months to a year to cement. It’s a long time, but even that can be beneficial.

“A lot of people fight change,” Jethani said. “However, in a marketplace where change is necessary, this time frame gives everyone the opportunity to get comfortable with the idea.”