Wednesday, March 27, 2019

"Ramblings On Radiology And The Job Market"

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Dalai's note: Daniel Corbett is a Radiology business consultant who has posted incredibly useful information on Aunt Minnie as long as I've been there. This opinion piece should be mandatory reading for all in the field.

There has been much posted lately about the robust job market for radiologists. There has been wide ranging discussion about the quality of the jobs available with regards to corporate practices and teleradiology. The potential to join a group without knowing about "discussions" the group may be having with other entities is very real. As for private practice jobs I think most would agree many if not all practices are facing the same difficulties with short staffing due to increasing volume, retirements and partners leaving for greener pastures. All this adds up to an increasingly risky job market with potential for "jumping from the frying pan into the fire" for experienced radiologists or just plain getting screwed by a fellow looking for their first job. For you 2020 fellows this can be disconcerting as there are many jobs to choose from and recruiting tactics have become aggressive. Loan repayment, signing bonuses, super short partnership tracks all tell of the desperation of groups down one or more FTE's and desperately need the help.

In my 30 years in radiology I have been through several swings in the job market. The radiologist shortage of the early 2000's was deep but technology leaps and radiology increased efficiency lessening the impact of short staffing. It was bad and many groups fell apart but as a specialty we got through it. This new shortage seems more intense and desperate as efficiency through technology has maxed out. We all felt safe for the last 10 years and even complained that there were too many radiologists turning radiology into a commodity. I never believed that for a second. Radiology is THE anchor specialty and cornerstone on which all healthcare relies on. There was never a question in my mind that volumes would continue to grow along with the demands on radiologists.

In my mind the whole corporate radiology model is nothing more than a Wall Street attempted takeover of the most lucrative healthcare specialty. It changes nothing in the dynamic of traditional relationship between the radiologist, the medical staff referrer and the patient. Corporate radiology is an invasion of suits and greedy radiologists selling out their specialty for a cut of the pie which has been steadily declining. These corporate entities have invaded our specialty by taking advantage of the market forces which are beyond anyone's control. With a large percentage of radiologists at or near retirement age, many of which were in controlling position within their groups, it was easy for them to lure "exit strategy" radiologists with large amounts of PE money. Over the past ten years the delayed retirement of many senior radiologists created the short term surplus of radiologists which helped these entities take hold due to a ready supply of radiologists looking for work. Another aspect is the marketing power they wield with large amounts of money. The corporate groups have unlimited funds in which to hire people to call your hospitals to get an audience. They bring high powered radiologists and business people to pitch their product of efficiency, quality, technology and 24/7 sub-specialty reads to dreamy eyed administrators who are tired of hearing complaints about their private practice radiologists. The corporate groups have moved from purchasing the fat cat groups to hostile takeovers. The gloves are off and they will steal your contract from under your nose and the next thing you know you will be offered to become an employee or leave. I know this is true because I am seeing it happen in real time with several groups. It is a train wreck in slow motion.

I believe no group is safe as the stated goal of these entities is total market domination. The total corporatization of radiology would be a disaster for radiologists, hospitals and patients. These corporations must be fought at every level to keep radiologists as autonomous clinical and business entities. Radiologists should refuse to work for them even if it is for excellent pay in the perfect location. As an employee you have no control and never will. Do not trust their "partnership" sales pitch. Only in a corporate practice as an employee are you truly a commodity to be used and replaced. Only in a private practice do you truly have a say in your business and your future.

The deepening shortage of radiologists is our best weapon in the fight against corporate radiology. As long as there are good private practice options the the corporate groups will struggle for staffing. Being unable to fulfill their lofty promises will be their demise. Their whole business model is dependent on properly staffing their contracts while taking a cut for investors. They throw a lot of money up front but the ROI depends on maintaining the status quo over time. I believe once the time limits for the buyouts expire those radiologists will leave causing the house of cards to collapse. Private practices must also do their part in the fight. Dishonest and dysfunctional practices must strive to be better. To remain relevant and secure private practices must do away with unfairly long partnership tracks, tiered partnerships and shady outpatient and billing schemes. Strive to be democratic and provide good professional management at all levels. Work had to promote fair practices so partners and soon to be partners feel they are treated properly and are invested in their practices. If you don't lose people you never have to recruit new people. Only by being the best option for new radiologists will private practice win over corporate radiology. Strive to improve and maintain the best relationship with your contracted hospitals. Meet regularly, immediately address issues, constantly promote your practice within the medical staff. If there are no cracks in the armor the enemy can't get in!

Finally I want to advise the 2020 fellows on a few things. So far I have encountered an astonishing number of 2020 fellows who have already committed to a practice, before even starting their fellowship. I know this is because of the huge number of opportunities out there. If you get an offer with the top group in the community of your choice and you know in your heart this is THE job for you then by all means sign. But know over the next 15 months there will be plenty of other opportunities open to you. Don't be tempted to continue to interview after making a commitment. This past year I know of several fellows who reneged on groups they signed contracts with to take another job they found later. This is not how you want to start your career. When you interview you must expect the practice to put pressure on you to sign. This is normal and expected but trust me you will rarely lose an opportunity by delaying. If you interview early tell practices up front you will not make a decision until you have completed your interview process no matter how long that takes. If they chose to not interview you then you know what they are about. Do not succumb to the pressure to get a job while the market is hot. You have all the time you need. Traditional timing of interviewing after starting your fellowship and committing before the end of year or later will work out well for you. I foresee groups hiring 2020 fellows very early then continuing to recruit for an experienced candidate. If they find one they may renege on you!

Radiology is experiencing rapid change again. There are some bad things to be wary of but there is also great opportunity. Knowledge is your best tool so do your homework before making changes. Seek advice from trusted sources whether your a radiologist looking to make a job change or a group looking to improve your operations and processes. Hopefully private practice will win the day and we will see a new radiology paradigm evolve over the next decade.

ADDENDUM...More from Mr. Corbett:

Private practices contracted to a hospital is the purest form in hospital based specialties. The volume generated by the hospital department will generates X in pro fees. This is the book of business available. This will vary by location and payor mix. The rads read and bill for the exams and get reimbursed creating the "pie" of net revenue. From the net revenue you need to pay the bills/expenses which usually include billing fees, accounting, legal and all the other miscellaneous costs to run the business. In some groups this can include employees and all the expenses that come with them including rent, equipment and supplies. What is left is physician compensation. Included in physician compensation are benefits and tax deductible business expenses like CME, Phones, Med mal, health, etc. What is left is W-2 which is your taxable income.
These expenses vary greatly by group based on size and how they choose to run the business. Some practices have high overhead due to many employees, imaging centers, own billing companies, etc. I have seen overhead percentage run up to almost 30% of collected revenue. I have also seen lean, self managed groups run as low as 9-10%. Considering a primary care practice averages 40-50% overhead, radiology is not such a bad gig. I believe the average overhead percentage for a well run private practice with no imaging centers to be around 12% which includes billing and management (legal, accounting, infrastructure).
Now consider a hospital employed practice. The hospital provides all the infrastructure including the billing, management and benefits. They pay the radiologists a salary and benefit package to provide service. This can be a simple model and appear to be a good deal for some radiologists as long as they are getting paid a fair market rate for a fair market volume of work. The problems with employed models is hospitals don't do well managing radiologists and the expenses get away from them. They also don't understand fair market value and its relationship to the amount of work. They often get wrapped up in silly unrealistic RVU productivity models which cause more damage than good. Also most radiologists (doctors in general) who are employed default to the lowest productivity needed to keep their job. Why work harder if you don't get paid more? This requires hospital employed models to be overstaffed which lead to higher costs (overall) to get the work done so the hospital ends up subsidizing the professional component out of the technical revenue. Some hospitals are fine with this if it is control they crave but eventually the constant turnover and internal dysfunction can cause them to fail.
So the original question is how can a corporate sell their model to hospitals? The answer is NEVER if there is a lean, well run private practice in place. Almost every single corporate take over happens because there is weakness with the current provider. Lack of service, poor quality or most common group dysfunction is the culprit in a private practice contract loss. Every Single Time! The corporates always sell the hospital on making their radiology provider woes go away. They are NEVER a cheaper option. They sell the hospitals on quality, technology, infrastructure, management and especially service. Also the lure of 24/7 sub specialty reads is like crack to a hospital administrator, especially dealing with a troublesome group.
Let me be clear about this again. The idea of skim jobs and back door financial deals between hospitals and corporate radiology are pure fantasy. Sure sometimes there are some shady deals that get them in the door but for the most part the deal must stand alone on the service provided for the revenue generated. As we all know you can only streamline, increase efficiency and cut costs so much. After that it comes down to what the radiologist gets paid. The main cost modifier for these corporate groups is through the leveraging of teleradiology but this has a hard limit. You need critical mass onsite to make any hospital run optimally. When the market was fat with radiologists they could pay less. Now that there is a shortage they must be competitive which dips into their profits. As I have been saying all along, staffing will be their downfall. If they can't afford market rate labor and maintain staffing they will fail. Once the profits decrease and losses accrue Wall Street is gone! Unfortunately when this eventually pans out there will be a large hungry black hole which will need to be addressed but that is for another post at another time.
Again in reality is nothing can compete with a competent well run private practice surviving on the professional component. Hospitals desire high quality reads with superb service and not providing a subsidy. In the past hospitals provided their well respected groups financial help with the supply and demand of radiologists turned. No hospital wanted their long term (functional) providers to self destruct. Usually these subsidies where tied to real data showing where the group needed help to remain competitive. When the market changed the subsidies were removed or renegotiated. The key is always fair market value and the ability to properly staff. All hospitals really desire are well led and managed groups where the radiologists are involved at all levels. If they have this they have no need to consider other options.
In a perfect world this should be easily attainable but too many groups are dysfunctional. Poor leadership, lack of proper infrastructure, disruptive radiologists, poor practice management, shady partnerships and billing practices, you name it, it's out there. You may think your business is yours and not known by the hospital and medical staff but you would be wrong. All your dirty laundry is out there. You know it because you know all the other physicians dirty laundry. What still amazes me is how a multi-million dollar business like a radiology practice can be properly managed by the radiologists who have no formal training in business. I know of many multi-million dollar radiology groups who are managed by former techs and some with no formal healthcare business education. Not to say some of these people are not good at what they do and are not dedicated. I have worked with some amazing practice managers but how can one person, even one with a BA or MBA in business know all there is to know about a highly complicated business like radiology? They just can't be experts at everything. It still boggles my mind how many groups have little to zero oversight of their billing companies or operations. When was the last time your group audited your billing company? We have found hundreds of thousands of dollars being lost over many years. BTW this is another area where the corporates will have an advantage. They know where EVERY dollar is generated, collected, and spent.
I am always hesitant to sound like I'm marketing but I was asked how organizations like RP and Envision get their noses under the proverbial tent. My answer is and will always be the lack of organization, leadership, governance, finance and overall management of private practices. For the sake of security and protecting itself from any potential invasion, every private practice should do a top down, comprehensive, in the weeds evaluation of the way they structure, govern, lead, operate and manage their practice.
Healthcare is rapidly changing. We are being told to do more with less. The cost of this amazing care we have in our country can't be afforded by the majority of the population. The insurance industry is broken. They way healthcare is delivered is broken. Change is inevitable and change is where Wall Street invests heavily. Wall Street and PE money are capitalizing on the greed, dysfunction and lack of cohesion between radiologists. After all they can run your business way better than you. They will buy some and steal others. The only way to stop them is compete and be better. But the first step to recovery is learning you have a problem. I hear it all the time...our practice is great, everything runs well, we all get along, everyone loves us....just before the bus runs you over - BAM!

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