It’s an interesting time to be a physician in America. 2021 marks the first time in history where independent physicians now comprise less than 50% of all physicians. Go to any major city and you’ll see hospital owned facilities on most street corners often competing with each other like McDonalds and Burger King. Physician employment by corporate and/or hospital entities is the norm and no longer the exception.
Specifically, in the radiology world, consolidation has been ongoing for many years. Take a quick peek at the ACR or SIR job boards and you’ll see the majority of posted jobs are for Rad Partners or Envision. In some markets, such as Arizona, Texas and Florida, it’s rare to find an independently owned private radiology group. Most groups which were once independent have sold out with their senior partners being offered multi-million-dollar buyouts and their junior associates on a path of more work for less pay and even less say in their professional existence. This too in the context of trainees coming out into the world with more debt than ever before.
Why has this happened? If you want an objective assessment, you better go elsewhere. The way this monkey sees it is American healthcare is a hot mess. The administrative burdens and ever decreasing reimbursement have made the business of medicine a race to the bottom. Throw in the fact that physicians historically are egotistical jerks who have trouble playing nice with each other and we’ve created for ourselves a mess of a situation where our work continues to get devalued. So, if you’ve been in the game for a while and have a path to cash out with someone else taking all these headaches off your plate and offering awesome practice efficiencies, it’s easy to pull the trigger which of course sadly leaves us younger physicians in a tight spot.
Interventional Radiology in the OBL world is unfortunately not immune to this phenomenon. Reimbursement cuts will continue to happen as they are for pretty much every other field in medicine. Word is out about this magical field that has the potential to crush it in the outpatient setting. In this beautiful country, when someone smells opportunity, they do what they can to capitalize on it. And that has clearly happened in the OBL world. Corporate OBLs are alive and real and I worry that the next generation of IRs may not have the tools to navigate the business side of things.
Imagine an opportunity where you are fresh out of training and offered a good starting salary (say somewhere between 300-500k) and a path to make even more if you are very productive. It’s an outpatient position with no call and you get to do cool cases without any of the administrative or practice-building hassle required in building and maintaining a freestanding outpatient practice. Sounds ok, right? Sounds even better when seeing your most viable alternative is a corporate or hospital employed position where your salary potential will be capped but you have to do a fair amount of diagnostic radiology (don’t forget that this is what pays the bills in hospitals) and have to take hospital call. You’re 300k in the hole and need to make some cash to pay off Uncle Sam for the generous student loans. What are you going to do?
At the end of the day IR is hard and life is even harder. You need to work to make a living for yourself and provide for your loved ones. I don’t judge anyone for choosing a certain path, but I think the problem is many future IRs will go into this world without understanding the business landscape of outpatient IR. You need to be just as educated in the business of IR as you are in the clinical practice of IR to be successful and not put yourself in a bad position. You need to think like an OBL owner and not an employee.
If you own an OBL, how do you build a viable business? You need to do a few things:
1. Generate referrals.
2. Provide Excellent Clinical Care
3. Create Strong Administrative Systems
4. Collect Payment from Insurance Companies
As a physician, you are an expert at number 2, and maybe number 1 if you had excellent clinical mentorship, but you probably know nothing about 3 and 4. You can see how being an OBL owner and operator is so hard! Physicians will need to learn new skills which are just as important, if not more important than providing excellent clinical care in order to build a viable business.
Imagine you are a non-physician who owns an OBL. You know absolutely nothing about being a clinician, but you know a lot about the business of healthcare. This is a tremendous opportunity. You understand that there are common conditions such as fibroids, enlarged prostates, knee pain, leg vein problems and clogged leg arteries with not so great surgical alternatives that can be treated through pinholes in the wrist or groin on an outpatient basis by these wizard physicians known as interventional radiologists. It just so happens that despite reimbursement cuts, these procedures still pay pretty well. Why not find a good IR who has no desire to practice diagnostic radiology in a hospital and capitalize on their talents to build a machine where I can print money for myself and my shareholders? Knowing that this IR’s opportunity cost is a corporate hospital-based salary, I can use this market force to my advantage to keep my labor costs in check and provide even more value to my shareholders.
Ok, so this non-clinician business person can hire a great IR, perhaps one of our readers even. They have expertise in building administrative systems and billing insurance. How do they generate referrals?
This is where things get very tricky. It used to be that to build referrals, you go out in the community. You give talks. Forge relationships with other physicians and advanced practice providers. You hustle hard and try to get a single referral. You practice the three As: affability, availability and ability. You do well with that first referral and that will turn into a second and hopefully a very long and fruitful relationship with your referring source. Maybe these days you get busy on social media to build referrals. Getting referrals, the old-fashioned way is a pure hustle that takes time and money. This is what I did to build up my first OBL practice and let me tell you, it was a total grind. It took me three months before I made a dime. In my market though it worked and I got the practice to a point where I was able to do quite well financially. I cannot state how challenging this is and how it is a time-consuming process. It takes years. It takes so much patience and dedication. While I believe it is incredibly rewarding (and fun), it is a tough road but one every IR will have to do anyway in some shape or form to build a clinical practice either in a hospital or outpatient facility!
Well, let’s return to our non-physician OBL owner. He or she has no idea how to talk to physicians. While your IR should have this skill you’d rather have a pretty face go market because you want your clinical labor crushing cases where they can generate top dollar per unit time. As a healthcare business person, you’re savvy and know that it’s not just about grinding to get referrals eventually, but to do so ASAP. Your objective is to create a financially viable business as fast as possible. Why? Because doing so allows you to sell your business to a private equity firm at a generous multiple, just like radiology groups have sold out to entities like Rad Partners. That’s where the money is really made.
So how do you do this? Well, you create a financial incentive for referrals. Just like large healthcare systems create issues for physicians who refer out of their network, you need to create a mechanism to get a large volume or referrals ASAP. The way to do this is to give referring practices a piece of the OBL pie. Even better, you can now market your practice as a “collaborative” practice where there are close relationships with key specialists involved in successful patient outcomes.
This is quite common in the OBL world today, especially PAD practices. What they do is give equity to podiatry groups which creates an incentive for these physicians to refer patients to the OBL. While this is common with corporate practices, in theory anyone can do this. Even as an independently owned OBL, you can bring on referring physician investors if you feel the volume generation justifies your personal loss of equity in the business.
What’s the problem? Well, there’s a small detail called the Stark Law. It’s a complex law, but long story short, this law creates restrictions on referrals in an effort to avoid fraud. Pertinent to the OBL world are the Safe Harbor provisions, one of which states that the revenue generated from investor practices cannot exceed 40% of the total revenue. This means that you have to generate the other 60% of revenue the old-fashioned way.
While there are honest OBLs out there including some multi-state corporate practices, there are perhaps an equal number of ones which are clearly not playing by the Safe Harbor rule. Most IRs entering this world as employees are clueless and frankly don’t care because they don’t personally bear any of the liability. They get to do cool cases and make a great salary. The problem is you never know when these practices will get caught. I suspect it’s only a matter of time.
At the end of the day, just like you don’t get a pass on math when it comes to personal finance, you shouldn’t get a pass on business knowledge when it comes to outpatient IR practices. Whether you choose an employee path or are like this monkey who is independent to the core, understanding the business of IR is critical. I strongly encourage that clinical interventional radiologists take the extra steps and become true experts in practice ownership and administration. You can always hire out certain roles, but at the end of the day in a world of healthcare consolidation and shady collaborative opportunities, equity is everything. Put in the work; reap the rewards. Learning never stops. And the moment it does, you give up control of your destiny. Don’t forget those words and act accordingly.
1 thought on “Competition and “Collaboration””