Hospital-based radiology practices are poised for enduring market dominance. That doesn’t mean they don’t have to promote themselves more aggressively than ever.   

If economic Darwinism continues to cull the unfittest from radiology’s provider population, hospital-based practices will soon stand as the only herd in town across most healthcare markets in the U.S. Many freestanding outpatient practices will accept acquisition by hospital systems, their radiologists converted to hospital employees, while plenty of others will close their doors.

So say some experts and, despite radiology’s relative resistance to the trend of specialty practices getting scooped up by hospital systems en masse, the numbers appear to support their predictions.

A 2010 survey by Regents Health Resources showed that hospitals owned eight of 2009’s top 20 imaging providers—up from five in 2006. Meanwhile, between 2005 and 2008, physician practices owned by hospitals doubled and, by 2008, the percentage rose to nearly half of all medical practices. The ECRI Institute reported as much in May, adding that hospitals and physician practices are tying the knot via contracts, even in states like California and Texas, where laws prohibit the corporate practice of medicine.

An interesting aside is how quickly the tide turned in hospital-based radiology’s favor. From 2000 to 2005, the free-standers were grabbing market share at a conspicuous clip. And they were pulling it off not so much on the appeal of their lower pricing as through the strength of their marketing savvy: While hospitals fiddled, their freestanding counterparts hired dedicated professionals to call on referrers while spending big on direct-to-consumer billboards, broadcast spots and other forms of high-visibility advertising.

As it turns out, these activities matter less and less as Medicare continues to reimburse hospitals at much higher rates than freestanding centers, reimbursement continues to plummet across the board and hospital systems push to regain lost market share.
So hospital departments are markedly better positioned than independent diagnostic testing facilities to weather the accelerating contractions in the industry.

Still, in a healthcare economy this erratic, few practices in any setting are contraction-proof. The question is: How do hospital-based radiology practices prepare for a future of increasing pricing and preauthorization pressures?

Bargaining for business

Thomas G. Dehn, MD, has some ideas. Executive vice president and chief medical officer of the radiology benefit management firm National Imaging Associates (NIA) in Columbia, Md., he’s spent long years on both sides of the business equation: practice billing and payer authorizing.
If you’re a hospital-based radiology administrator, “give your CEO a hug,” says Dehn without irony. “Tell him or her that diagnostic imaging represents 10 percent of the overall healthcare spend and that you’re willing to work with the C-suite, if they’re interested in cutting deals with local businesses and manufacturers.”

He cites as an example a major consumer products company headquartered in Wisconsin that contracted with Milwaukee-based Aurora Health Care. The company’s employees are steered to Aurora facilities, which include 15 hospitals and nearly 200 clinics. The company gets a discount on its health insurance. The health system gets volume.

“There would seem to be a marketing opportunity there for a hospital-based radiology operation,” says Dehn, who points out that the margins are slim these days on the radiologist’s piece of the pie, a.k.a. the professional component.

“Almost 85 percent of the spend is on the technical component,” he says, referring to the hospital’s overhead and other costs of operating the imaging equipment. “The professional component is now less than 20 percent of the overall spend, down from 30 percent when I was in practice. You’ll get a good hearing if you go to the hospital chief and say, ‘We have to be competitive in this market. I’m willing to be more competitive on the professional side if you’re willing to be more competitive on the technical.’”

Dehn also recommends proactively acknowledging referrers’ top concerns—preauthorization hassles, quality and promptness of reports, scheduling, imaging technology—and schmoozing payers’ medical directors to directly pitch volume-for-discounts deals. He’s quick to add that freestanding imaging centers should be even more aggressively engaged than their hospital competitors. “If you’re part of a hospital group today,” he says, “the wind is at your back.”

Consolidation and control

Of course, winds can diminish as quickly as they gather. When it comes to radiology, savvy hospital marketers have not only caught up but also caught on to that phenomenon.

Peggy Martin, Adventist Health System’s corporate marketing manager in Roseville, Calif., shares how business has changed. For the last six or seven years, she has presented a session to the mostly hospital-based audience at the AHRA Leadership Institute, and each year she polls attendees to find out how many pay for dedicated radiology marketing services. The first couple of years, “maybe one would raise a hand, sometimes none,” she says. “When I asked last spring in Seattle, the audience was close to 90 percent hospital-based and more than half the hands went up.”

Deborah MacFarlane, a healthcare business consultant based in San Diego, cites Medicare’s push for accountable care organizations (ACOs) as an unstoppable accelerant in the market shift. “The way things are moving now, the hospitals are the winners,” she says. “The ACO model is aimed at making pacts between doctors and hospitals, and keeping patients within an integrated network. Independent diagnostic testing facilities are just going to lose out on patient volume.”

Eyeing the developments against the broad backdrop of healthcare reform, MacFarlane, who specializes in radiology, says the whittling of imaging owners from the many to the few fits with the Patient Protection and Affordable Care Act’s emphasis on consolidation. “Healthcare operating in a free market environment, where you have literally thousands of imaging centers,” she says, “is much harder to control than 20 major hospital systems across the U.S. controlling the majority of what goes on.”

Sometimes survival of the fittest means attrition of the unaffiliated.

Market Your Practice 3 Ways

1. Virtually Socialize: Apart from building relationships and raising awareness, social networking sites, like Facebook, Twitter and LinkedIn, can showcase physicians’ expertise and the practices’ new technologies to referring docs as well as patients. “We can do the same things on our websites, but social media is a lot more interactive,” notes Lauren Brendel, corporate communications coordinator at Adventist Health System in Roseville, Calif.
2. Play Gigs: From online scavenger hunts to local health fairs to mammography parties, options abound for inspiring patients to make your practice the one that patients ask to be sent to, says Peggy Martin, Adventist Health’s corporate marketing manager.
3. Wine & Dine: Referring physicians will always be the prime drivers of imaging volume, but payers’ medical directors are increasingly important as well, says Thomas G. Dehn, MD, chief medical officer of National Imaging Associates in Columbia, Md. Serving up consistently good work from scheduling through reporting matters most to both audiences, but it can’t hurt to network and to do it—get this—in person. Dollar for dollar, there’s still no substitute for word of mouth.