Corporatization in Radiology: Interesting Facts, Troubling Issues

Radiology in the U.S. may be more proportionately affected by the trend than other specialties due to record high valuations, a higher degree of fragmentation, and reimbursement uncertainty, the authors suggest.

White Paper: Corporatization in Radiology
ACR Commission on Corporatization: Howard B. Fleishon, MD, Arvind Vijayasarathi, MD, MBA, MPHb, Robert Pyatt, MD, Kurt Schoppe, MD, Seth A. Rosenthal, MD, Ezequiel Silva, MD
September 17, 2019

The hotly anticipated white paper from the ACR Corporatization Task Force (CTF), recently published online by Journal of the American College of Radiology, reports on the current status of corporatization in radiology and its potential to impact patients, radiology, and radiologists.

While it produced no firm conclusions on whether the trend in the corporatization of radiology practices is negative or positive for the specialty, Fleishon et al provide a concise history of corporatization in medicine, some fascinating facts, and an accounting of troubling concerns that are likely to fuel continued debate.

The authors attribute the introduction of corporate medicine to The Gilded Age and the practice of 19th century mining, railroad, and manufacturing companies hiring physicians, which generated the first position papers from the American Medical Association based on concerns about:

  • commercialization of the practice of medicine
  • potential conflicts of interest between the corporation’s fiduciary obligations to its shareholders, and
  • maintaining the independence of the physician’s medical judgement.

These concerns, over time, resulted in Corporate Practice of Medicine Doctrine, which is public policy that limits the practice of medicine to physicians and addresses concerns about non-physician-led businesses that practice medicine or employ physicians. This "doctrine" is based on state regulations, legal opinions, and licensing board decisions. Currently, 33 states have such laws in place, but many allow broad exceptions, the authors write.

Fleishon et al acknowledge the well-known drivers of consolidation in health care and underscore the growing size of the sector—with health care spending projected to increase from $3.6 trillion in 2018 to $6 trillion in 2027, catnip for opportunistic investors. 

The Radiology Experience

The number of corporate acquisitions and investors in radiology has been building since 2001, peaking in 2015 with 30 investors making slightly less than 40 deals, according to data provided by Frost & Sullivan. The last two decades of activity feature more investors, more transactions, and bigger valuations than the physician practice management activity of the 1990s. The authors cite research that anticipates continued activity through 2023, contingent on capital liquidity, legislative and regulatory changes, and market volatility.

Radiology in the U.S. may be more proportionately affected by the trend than other specialties due to record high valuations, a higher degree of fragmentation, and reimbursement uncertainty, the authors suggest. Radiology is not, however, the only target of corporate consolidators, which have shown interest in dermatology, ophthalmology, emergency medicine, and orthopedics.

Reports on the experience of other subspecialties include higher productivity demands, pressure to sell products, steerage of patients to affiliated physicians, up-charging, and greater reliance on physician extenders.

In Australia, however, the consolidators have had an unimpeded run that began in the early 1990s, and by the end of 2005, 70% of practices were contained in the corporate model. Corporate owners also founded a national advocacy group that competes with the Royal Australian and New Zealand College of Radiologists. “There are probably limited opportunities for trainees to earn equity or partnership positions within corporate or the remaining community-based private practice radiology groups [in Australia],” the authors wrote. 

More Speculation Than Data

With limited peer review literature available for insight into the last two decades of consolidation, the authors offered speculation on the potential impact on patient care and advocacy. In reviewing implications of the national model for compliance and licensure, place-of-service billing, accreditation, medical director duties, and the CMS Anti-Markup Rule, Fleishon et al made clear that changes in state regulations and CMS requirements could aid and abet or hinder the corporatization trend. Other topics addressed include:

Nonphysician professionals. Physician extenders (PEs) are currently being utilized by approximately 40% of radiology practices; 50% report recruiting PEs. The authors speculate that VC- or PE-owned groups might contribute to an uptick in PE use.  Also, as consolidation enables centralization of ancillary practice duties (HR, contracting, billing), Fleishon et al suggest that the absolute number of administrators and nonphysician leaders could decline. A trend of fewer corporate representatives attending Radiology Business Management Association events supports such speculation.

Diagnostic radiologists.  The authors identify some immediate and longer-term issues that are emerging in the radiologist marketplace, adding that “longer-term impacts of radiology corporatization may not be apparent for several years.” For instance, the authors did not measure professional satisfaction for radiologists within corporate entities.

Fueling the trend are sizable payments: The authors report that some radiologists are realizing significant returns on their practice equity in that upfront payments that replace future earnings are taxed at capital gains rates. On the other hand, a serious and ongoing issue for early career and nonpartner radiologists is that they could end up as “nonequity employees of corporations.” Fleishon et al urge private practices considering acquisition to include early career radiologists in discussions and to make applicants aware of potential practice sales.

The experience of Australia notwithstanding, the authors are optimistic and predict that physicians will have sufficient practice model options. Most important to Strategic Radiology and other independent practices was their advice to focus on creating highly functional governance structures: “With the accelerating dynamics of the marketplace, high-functioning group governance structures will be critical to assure proper due diligence.” 

Access the ACR White Paper on Corporatization in Radiology.

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