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Collaboration: A Winning Strategy

Many of us in the imaging industry are aware of the hard times our profession is experiencing. Candidly, it’s time to stop beating a dead horse. Because radiology is essential to medicine today, there are hard questions that need to be asked. For instance, who will be the providers? What will they be? What will they look like organizationally and operationally? What will be the winning strategy for those who become first class providers of radiology services?

Troubled Times
Unprecedented Challenges

The business of radiology is tough and at every turn another challenge stares us back in our face. If the radiology industry were a patient, the “signs and symptoms” section of its medical record would be the size of a phone book. So, for the sake of brevity, let’s simply summarize: Reimbursement stinks and it’s getting worse. Corporations are telling us what we can and can’t do and when we can do it. Everything in radiology is outrageously expensive. There aren’t enough professional resources critical to the industry. Finally, and certainly not the last of it, there’s an over-abundance of technical resources in most major American markets causing incredibly intense competition. Are we having fun yet?

Provider Economics and Impact on the Medical Community

Financial soundness is the foundation on which medical organizations develop and maintain clinical excellence. The majority of current healthcare providers, whether free standing diagnostic imaging centers or multi-faceted health systems, must rely on positive P&L’s from patient care to sustain operations. For free standing imaging centers, profitability is a live-or-die situation. For most hospitals and health systems, radiology has historically been a significant contributor to the bottom line. However, radiology industry challenges have eroded profits, and in some cases, worse than others. Unfortunately, this erosion has the potential to impact the overall quality of medical care in far too many situations.

Looking into the Future

Some of the brightest minds in the world are trying to solve the macro-economic problems of this country’s healthcare industry. The difficulty is that we’re not there yet and it’s doubtful whether anything substantial will happen soon. We must therefore face the fact that, for radiology service providers, things are going to remain tough and probably get worse before they get better. With that in mind, significant efforts have been undertaken by members of the radiology community, from individuals to institutions and everyone in between, to carry on.

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Industry Reactions
The Regulatory Battle
The tireless efforts of individuals and organizations that represent the imaging industry and interface with our law makers are commendable and most appreciated. Without them we would most likely be in a far worse position then we currently are. Fighting the regulatory battle, however, is a slow and arduous task. The day-to-day facets of the imaging industry move quickly and require rapid responses and action. Time is of the essence for most radiology providers. If, as individual providers, we wait or even hesitate before making a move, troubled times will certainly continue. We must support those who support us economically and with our time. Most importantly, we must also help ourselves.

Looking Inward
Clean-up, clean-up, everybody everywhere. Clean-up, clean-up, everybody do your share! Just like that loveable children’s chant goes, the radiology industry has looked inward and has made incredible strides. It has cleaned-up operations in order to maximize efficiency; it has re-negotiated service contracts, re-negotiated supply contracts, reduced staffing levels, and employed a host of other creative mechanisms to lower costs. However, here’s the problem: While these efforts help, (and they’re certainly needed) they aren’t enough to offset the tremendous beating the radiology industry has taken.

Is Massive Consolidation Inevitable?
To Wall Street, the free standing diagnostic imaging center market probably looks like a classic “roll-up” industry primed for consolidation. The end result would

be a few mega corporations emerging from the smoldering ashes as victorious, highly profitable entities that capitalized on economies of scale, superior management expertise, and regional market dominance. Is this type of scenario inevitable? If history is any indicator, the answer is probably no since the radiology industry is a very localized, fragmented business.

Strength in Numbers
Collaboration not Consolidation
So let’s bring everything we’ve been discussing to the local market level. This is the environment in which most of us work. We’ve tried everything humanly possible to combat the forces that are hampering us by re-vamping operations, fighting with insurance companies, renegotiating contracts, and other measures, and still we’re struggling. Competition is mounting and other providers are getting into the radiology business. Worse, they’re pulling away the only straw we have left which is volume. Yes, volume is the name of the game and on this very point we should all be asking ourselves one simple question: How in the world do WE get more volume? The answer to this is COLLABORATION. Hospitals and competing imaging centers must consider the alternative route of partnership and collaboration. Let’s not forget–there’s tremendous strength in numbers.

The Critical Role of Strategic Planning and Transactional Due Diligence
This type of strategy will not work for everyone. Sometimes you just have to dig in your heels and fight the

battles that need fighting. Furthermore, collaborative efforts are never easy and can be incredibly time consuming and resource intensive. Yet, with careful planning and transactional due diligence, the time and money spent can be well worth the effort. Here are some key points to remember:

• Neither party is the bad guy. Get over it and move on. Remember, you’re looking for a win-win situation.

• Conduct extensive due diligence, clearly identify and articulate each party’s individual goals and objectives, and establish realistic expectations.

• Use a neutral third party to help facilitate the process.

• Navigate the process in a methodical, step-by-step fashion with clearly identifiable go-no-go milestones. A letter of intent is a great place to start.

Outcome Potential
The most successful radiology service providers will be those who embrace some form of collaboration within their local markets. This collaboration can take on many forms, whether it’s between a hospital and its radiology group, a hospital and a competing imaging center, a hospital and its medical staff, or a combination of all the above. In the end this type of collaboration can lead to first class radiology services to the medical community as well as sustainable financial soundness.