Reimbursement cuts fueling consolidation in radiology

Consolidation continues to be a dominant trend in the hospital and healthcare industry, including in radiology, according to a recent article in Diagnostic Imaging.

"[G]roups are gobbling up other groups," Patrick Moore, president of Smart Physician Recruiting, told Diagnostic Imaging. "Or, even in some cases, hospital systems are saying to radiology groups, 'We're done negotiating. Either you'll be our employees or we'll find someone else.'"

Kevin McDonough, a senior manager for Dallas-based valuation and transaction advisory company VMG Health, told imagingBiz last year that the drive to consolidate has been marked by hospital acquisitions of physician practices and physician-owned ancillary service lines. According to McDonough, hospitals are making practice acquisitions as a reaction to seeing their competitors securing referral sources in their markets, as well as to position themselves strategically as the time of the accountable care and share-risk delivery models draws near.

As for individual radiologists, they have been following--and reacting to--the consolidation craze, as well. A survey conducted last April by Diagnostic Imaging found that more than two-thirds of respondents were worried about being acquired by a hospital or healthcare system.

McDonough told imagingBiz that physicians are trying to protect themselves from market forces, reimbursement cuts, and cost increases. Moore agreed that reimbursement cuts were primarily responsible for driving independent radiologists toward the relative security of hospital affiliation. While a radiologist's compensation in a hospital probably will be less than he or she could have earned as an independent, that income will be secure, and there won't be any issues about finding--and maintaining--business.

Young radiologists may be looking at consolidation--and the move toward hospital employment--as a net positive, Kirk Rebane, co-founder of Paoli, Pa.-based healthcare financial advisory firm Haverford Healthcare Advisors, told Diagnostic Imaging. As children of the financial crisis of 2007-08, he said, they may not be as entrepreneurial as their parents, and may welcome the security and stability of a hospital position.

Moore, however, also noted that the move toward consolidation could end up reinforcing a view of the specialty that radiologists have been trying to combat--that of radiology becoming more of a commodity.

To learn more:
- read the article in Diagnostic Imaging
- see the survey conducted by Diagnostic Imaging
- read the article in imagingBiz

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