The Radiologists Primer: Partnerships, Mergers & Acquisitions

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With payment models shifting, belts getting even tighter and hospital relationships more fragile than ever, the radiology practice model is evolving. Increasing demands for subspecialist coverage, coupled with the need to trim costs, are fueling a spate of mergers and acquisitions across the U.S., a trend that is projected to continue and perhaps, accelerate, as healthcare reforms are implemented. This month, Health Imaging & IT visits with practices on the leading edge of the merger movement to create a guide to surviving—and thriving—amidst changing business relationships.

Beware the clash of cultures

"I've never seen a bad deal morph into a good deal," cautions Steve Forthuber, COO of RadNet's Eastern Operations in Baltimore. The reverse, however, is true, and two factors account for the bulk of breakups and bad deals—culture clashes and business factors.

"Cultural issues—staffing, hours, quality—are difficult. They can be very problematic and poison or destroy a merger. Before spending big bucks to sort out the legal and accounting aspects of a proposed merger, it's wise to make sure you can work your way through the cultural issues," notes Lawrence R. Muroff, MD, CEO and president of Imaging Consultants in Tampa, Fla.

"In many cases, culture is not given the emphasis it merits prior to the merger. It's much tougher to manage after the merger," adds Lynn Elliott, CEO of Radiology Associate of North Texas in Dallas.

Charlotte Radiology, an 85-radiologist practice in North Carolina, completed a two-year merger with a 17-physician group at the end of 2009 and credits its upfront investment in cultural integration as a key to success. "The amount of time we spent trying to define the post-merger mission objectives and leadership helped make the process as seamless as possible," explains COO Mark Jensen. The groups assessed best practices in both organizations to determine which practices might best fit the merged organization.

Similarly, in the year preceding a dual merger with two practices (one with 12 radiologists and the second with 25 radiologists) in March 2011, Radiology Associates of North Texas, a 73-radiologist practice, organized regular meetings with representatives of all three groups. "Each time we worked through various implications of the merger, so that each group felt represented in making plans.  We worked out the differences in advance of pulling the trigger," says Elliott.

Some cultural information, he says, can be gleaned via analysis. For example, an examination of RVUs often indicates whether a practice is a lifestyle-oriented group or a high-production organization. "Whether or not practices are in sync regarding lifestyle, revenue and productivity is important to know," Elliott says.

Other considerations such as governance, management style, discipline and call require conversations about previous models and discussions about how they will be handled going forward. Some issues, says Elliott, may lend themselves to an analytical presentation while others require discussion, debate and resolution.

Integration…with ease

Meanwhile, RadNet is a master of the accelerated acquisition, aiming to embed new centers firmly into the fabric of the organization of its 206 imaging centers (and it seems, ever growing) within 60 to 90 days of the acquisition. "It's in our company's DNA to make mergers and post-acquisition blending of cultures as smooth as possible," explains CIO Ranjan Jayanathan.

The process begins with a town hall meeting to introduce corporate culture, human resources and benefits. "We run the company to our beliefs," offers Forthuber. "If people choose not to get on board, we deal with it fairly quickly. Otherwise, it destroys the culture."    

A fair amount of RadNet's success is tied to its consistency, so the business implements its service agreements and supplier contracts from day one in newly acquired centers. They also apply customer service training to fold new staff into service metrics, so patients, physicians and payors have consistent experiences in terms of scheduling, turn-around time and other customer service metrics.

At the same time, RadNet strives to understand local culture and relationships before instigating wholesale changes. For example, if a center has a different scheduling process that works with a referring office, RadNet discusses the process with the groups to determine the rationale for the process and see if RadNet's methods might apply.