Adventures in Joint Ventures: The Academic Radiology/Hospital Relationship
Academic radiology’s relationship to hospitals is a fundamental component of the academic or medical school practice type. The relationship can be complex. While private practice groups merged and consolidated, academic groups participated in joint ventures. This is when a radiology group forms a third entity with a hospital partner—in a very general sense, a business model, combining and sharing resources, risk, and profits. If you work in academic radiology, you may likely encounter a joint venture arrangement and employment model, or if you work in an off-campus imaging center owned by a hospital, it may be very much like an academic practice environment.
So why have academic radiology departments entered into joint ventures and how does it work exactly?
Read on to learn more about the background and context of these prevalent business arrangements, and what it may mean for you:
Back in the 90s, some academic radiology departments bought their own equipment and set up outpatient imaging centers during a time when departments had capital and it was lucrative to do so. Then, subsequent reimbursement changes made this less profitable.
In addition to lost income potential, academic radiology groups with imaging centers independent from the academic hospital meant that the hospital and radiology group were competing against one another. At the same time, the radiology group was providing services within the hospital and thus had a symbiotic relationship with the hospital.
This led to problems and made things unnecessarily complicated. For example, there were different call numbers to set up appointments, one for hospital-based imaging services and one for radiology owned imaging services, both associated with the same academic medical center. Naturally, this was confusing to patients. The process of scheduling radiologic examinations was inefficient and patients were often not given the choice of imaging center most convenient to them. To try to address the problems, many academic radiology groups formed joint ventures with their associated hospital.
Let’s make a deal
The cost-efficient operation of a stand-alone imaging center, combined with the hospital-level reimbursement fees by the Outpatient Prospective Payment System (OPPS)—the system through which Medicare decides how much money a hospital will get for outpatient care—offered an attractively high level of profitability.
At the same time, physicians were seeing reductions in reimbursement from Medicare and private payers alike, so hospital acquisition of off-campus imaging centers became commonplace. In many respects, a joint venture offers a win-win scenario.
Restructuring under a joint venture
Not surprisingly, many radiology groups agreed to form a new, third entity along with its hospital partner. In these joint ventures, the radiology group didn’t disband, but it restructured the way it did business. For example, the new venture took on the real assets (buildings and equipment) and responsibilities for business operations. The new company employed support staff, and the radiology group typically employed the physicians and provided professional services as a contractor. The joint venture had its own board of directors designed to represent each participant (hospital and radiology group). Typically in these arrangements, the hospital brought access to necessary capital, and the radiology group brought the professional expertise necessary to provide patient care .
Revenue and reimbursement implications for radiologist
For the radiology practice, revenue cycle management in off-campus hospital outpatient departments (HOPD) was just like that of the typical hospital in- or out-patient arrangement. Billing was done separately, with the facility billing the technical component under OPPS and the radiology group billing the professional component under the Medicare Physician Fee Schedule (MPFS, the fee schedule used by Medicare to reimburse physician services; the MPFS is funded by Medicare Part B and is composed of resource costs associated with physician work, practice expense and professional liability insurance).
The Medicare rules for billing services performed in off-campus HOPDs changed with the passage of the Bipartisan Budget Act of 2015 (BBA), making ownership of imaging centers by hospitals less attractive than it once was. However, only the technical component reimbursement was reduced. Even if the facility used global billing, the professional reimbursement to radiologists was not affected  . HOPDs operating prior to November 2, 2015 were exempted from this change.
In sum, joint ventures may benefit radiology groups, hospitals, and patients. It’s not a perfect system, of course, but this partnership model offers vital opportunities for many academic radiology groups. And of course, academic radiology departments and academic hospitals are, by nature, entwined.
- Boden TW. Employment, mergers and joint ventures: more radiology groups exploring new ways to work with hospitals. Radiology Today 2014; 15(11):20-22. Available at: https://www.radiologytoday.net/archive/rt1114p20.shtml. Accessed June 26, 2019
- Coffta S. Reviewing the Rules for Imaging Centers Operated as Hospital Outpatient Departments. Healthcare Administrative Partners. Posted June 19, 2018. Available at: https://info.hapusa.com/blog-0/reviewing-the-rules-for-imaging-centers-operated-as-hospital-outpatient-departments. Accessed June 26, 2019