Tim Myers, MD

Airpower and on the ground military power separately, cannot win a conflict. Together; however, the combination can be devastating. – Anonymous

 recently stated that the global teleradiology market was worth approximately $0.92 billion in 2012.  The estimation is that this market will grow at a rate of approximately 22.3% between now and 2019, resulting in an estimated worth of approximately $3.78 billion in 2019. 

With this much money entering the market in such a short period of time, as stated in my previous 

, the pressure to dominate the market will be irresistible for corporate and imaging players alike; but who are the major players?  As the future of radiology will potentially be determined, or at least significantly impacted by what these groups do, radiologists should know who they are and their strengths and focus points.

The radiology/imaging market is difficult to parse and identify a specific percentage of market share.  Not only do you have to take into account size, but also growth, visibility, and the more ethereal quality of influence. Finally, you have account for the military dictum from above; airpower or on-site power alone cannot win. A win in this case would be a national radiology group.  This group will need a strong and/or dominating teleradiology system supporting and supported by a combination of local and regional on-site radiology partners who, in turn, dominate their markets.

My top picks for the four major players currently in the market include vRad/Mednax, Aris, Strategic Radiology (SR), and Imaging Advantage (IA). There are a number of mezzanine players and a myriad of small players also in the mix, but in my opinion, they do not have the numbers of radiologists, or the visibility or influence required to play at the national level.

vRad[[{"type":"media","view_mode":"media_crop","fid":"39295","attributes":{"alt":"","class":"media-image media-image-right","id":"media_crop_3535833719850","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3937","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right;","title":" ","typeof":"foaf:Image"}}]]


vRad is well known to nearly everyone in radiology and imaging. The recent 

 of vRad by Mednax has provided additional capabilities for the future that are potentially powerful, but as of yet unclear. The current teleradiology company is the combination of two prior industry leaders, Nighthawk Radiology Services and Virtual Radiologic Corporation/vRad. It's hard to deny their visibility; they have the lion’s share of offsite teleradiology services. In fact, by all estimations, they are the world's largest provider of off-site teleradiology services. They reach all 50 states and according to their website, they have more than 350 radiologists. 

From the standpoint of combined power, vRad has attempted on-site operations with some success, though limited. Mednax with its ability to provide a range of on-site services now includes teleradiology; but, will this soon morph into providing on-site radiology and imaging as well? With vRad’s knowledge base primarily centered in teleradiology, the partnership between the vRad airpower and the Mednax ground power could be both disruptive in the market and potentially formidable. As usual, the devil is always in the details and implementation of a complete package, if realized, is still some distance in the future.

Technologically, vRad remains one the most aggressive radiology and imaging companies.  They continue to capitalize on their best resource – more than 15,000 interpretations per day from sites across the United States. Data mining and turning that raw material into actionable information is a goal of the technology focus. This, along with recent collaborations, including 

, to improve radiologist workflow and efficiency demonstrate that vRad is continuing to try and move toward an even larger share of the radiology and imaging pie.

Aris[[{"type":"media","view_mode":"media_crop","fid":"39296","attributes":{"alt":"","class":"media-image media-image-right","id":"media_crop_6648077209626","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3938","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right;","title":" ","typeof":"foaf:Image"}}]]

 of Optimal Radiology Partners. This deal creates a national practice of more than 160 radiologists. It brings together an additional key component not seen to a great extent with vRad: on-site and teleradiology services. Aris is lesser-known than vRad, and to date has only been in the upper band of radiology companies vying for a higher profile and more market share. With the addition of Optimal, their reach and visibility increases. The true power and influence of the combined organizations is yet unknown. This will depend largely on what they do next.

Strategic Radiology[[{"type":"media","view_mode":"media_crop","fid":"39380","attributes":{"alt":"","class":"media-image media-image-right","id":"media_crop_9357245358017","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3946","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"height: 42px; width: 300px; float: right; border-width: 0px; border-style: solid; margin: 1px;","title":"","typeof":"foaf:Image"}}]]


Strategic Radiology (SR), with its potential power and reach, cannot be overlooked. SR began as a concept that gained momentum and focus in 2007 when over a dozen of the largest radiology practices in the country came to Scottsdale, Arizona for a meeting of the minds. That meeting culminated ultimately in the formation of SR. The consortium consists of a combination of large and moderate-sized regional radiology practices. Currently there are 18 core and 5 affiliate practices.

If size were the only determinant of who would win the game of the most dominant national radiology group, SR representing more than 1,300 radiologists in its affiliated groups, would win hands down. From the standpoint of visibility, however, SR remains somewhat in the background. The primary focus, to date, according to their website, has been sharing “data and best practices, interchanging clinical expertise, and consolidating certain practice expenses.” There is also a very definite focus on quality and quality initiatives within the member groups.

A strong and very definite bright spot within the organization is its physician leaders, including Arl Van Moore, Jr, MD, its Chairman and CEO.  Moore was chairman of the American College of Radiology Board of Chancellors and a past president of the American College of Radiology. He was also president of Charlotte Radiology in Charlotte, North Carolina.  

Moore says that SR is highly focused on developing a coordinated teleradiology system that will benefit all of its members: "It takes a lot of collaboration and coordination, but we are committed to doing it right and handling cases in a clinically and cost-efficient way, no matter how much work is involved. Ultimately, we'll be able to provide integrated night and subspecialty final readings as well as some locums coverage across practices."

Moore and SR have developed a progressive, visionary group of leaders and an effective board of directors, primarily from amongst its large group partners. Together, they provide SR with the potential to bring significant capabilities for coordination between the groups and in development of a national, dominating radiology group. “Teamwork and leadership will be the secret to success; now and in the future,” Moore says.

SR, whose members are radiologist-owned and run groups operated by seasoned and focused administrative teams, stands at the opposite end of the spectrum from the mega-corporation, Mednax/vRad. The question remains how well any one or any group of people can mold such a large group of radiologists and radiology groups into one machine capable of sustained, coordinated action.

Imaging Advantage[[{"type":"media","view_mode":"media_crop","fid":"39298","attributes":{"alt":"","class":"media-image media-image-right","id":"media_crop_9542644600959","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3940","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right;","title":" ","typeof":"foaf:Image"}}]]


This brings us to the final player, Imaging Advantage (IA). IA was founded in 2006 by Chairman and Chief Executive Officer Naseer Hashim. Serving with Hashim are Chief Medical Officer Art Radow, MD, and President and Chief Operating Officer, Brian Hall, a former executive with Nighthawk Radiology Services.

Early in its history, IA had a reputation for displacing physicians and was primarily viewed as a threat to groups concerned about losing their contracts. Today, the company focuses on aligning the interests of physician groups and hospitals. This not only secures the local contract but provides more options for both partners through IA’s national network of contracts. Of its new operations effort, Hall says, "The IA solution starts with optimizing throughput and patient workflow, creating alignment with the on-site imaging and IR physicians, the referring clinicians, and the hospital. We augment the overall program with teleradiology and are measured on both clinical and economic outcomes. This combination aligns well with a wide range of the new outcome and quality based payment models."

IA has been growing. It currently reports to have over 400 radiologists with both on-site and teleradiology operations. Its recent acquisition of BRIT Systems increases its ability to provide a strong, unified, and proprietary RIS/PACS system, both on-site and for teleradiology. The combination of on-site, teleradiology, and infrastructure provides a potential springboard to launch an aggressive campaign towards a dominant position in radiology and imaging.


Whether created by radiologist-dominated or corporate-dominated groups, the first truly coordinated national radiology group will dominate the imaging/radiology market and potentially set the course and tone for the next 10 to 20 years. Third party payers and hospital systems alike would have to, and may actually jump at the chance to work with such an entity.

Corporate groups like Aris are merging their way to what may be a strong foundation from which to launch a national radiology campaign. The question is whether there is time to coordinate the new companies and make the move to the next level.

Radiologist-dominated groups, like SR, provide a different platform, taking advantage of regional power to dominate ever larger sections of the country. A strong, central command-and-control governance structure with the authority to make decisions for all will allow them to be more coordinated in their operations. An overlay of a strong teleradiology system coordinated both centrally and regionally is the next big step needed to dominate in their respective markets and make the entire system self-sufficient.

IA and vRad have the capital and potential power to make it to the top first. The distraction of the recent purchase may require some time for vRad to refocus, giving IA time to continue to maneuver and grow.

Regardless of which of these entities makes it to the top first, there is no doubt that radiologists and radiology groups will be different and will have to learn to function in this new paradigm.

Articles

A list of the major players in radiology and what radiologists should know.

The Pathway to Dominating Radiology and Imaging

First, let's look at the overall deal. Mednax acquired vRad for $500 million in a cash transaction. This is approximately equal to 10x the EBITDA number provided by unnamed internal vRad sources for the article 

Newstone, Blackstone’s Credit Arm Hire Credit Suisse to Find Buyer for vRad

 in March, and discussed subsequently in the 

. This figure surprised many and is approximately 2.5 to 3 times the amount that many insiders believed that vRad would eventually be sold for.

According to the press release by Mednax and the Dow Jones article, vRad currently generates annual revenue of $185 to $190 million. vRad is reported to have approximately 350 radiologists with customers in all 50 states.

Mednax hopes to use vRad as an entrÃ©e to the expected $3.8 billion 

market as well as the broader radiology and imaging market. Mednax CEO, Roger J. Medel, MD, was quoted in the Mednax 

 as saying, “We believe vRad is an excellent platform for growth in teleradiology and the broader telemedicine market.” He went on to say, “Radiology is a large, fragmented industry with total revenue of roughly $18 billion, and it is evolving rapidly to include teleradiology as an economic and clinical necessity for customers. We believe the opportunities for organic growth at vRad and for cross-selling between the company’s and MEDNAX’s customer bases are compelling. This acquisition also further broadens the scope of services we can provide to our hospital partners.”

But, what is a Mednax? In a corporate description from the 

website this is how they describe themselves: “MEDNAX, Inc. is a national medical group that comprises the nation’s leading providers of neonatal, anesthesia, maternal-fetal and pediatric physician subspecialty services. Physicians and advanced practitioners practicing as part of MEDNAX are reshaping the delivery of care within their specialties and subspecialties, using evidence-based tools, continuous quality initiatives and clinical research to enhance patient outcomes and provide high-quality, cost-effective care.”[[{"type":"media","view_mode":"media_crop","fid":"37991","attributes":{"alt":"","class":"media-image media-image-right","id":"media_crop_9044167130553","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3771","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right;","title":" ","typeof":"foaf:Image"}}]]

, Mednax originated as a neonatology group, Pediatrix Medical Group in 1979. Their initial public offering (IPO) was in 1995. MEDNAX, Inc. (MEDNAX), incorporated on October 10, 2007. From a low of approximately $12.40 in late 2008, Mednax has steadily climbed in share price to approximately $70 today. Mednax is reported to have approximately 2,625 affiliated physicians providing care in approximately 34 states and over 400 hospitals. Through its affiliated physicians, Mednax provides neonatal care, anesthesiology services including pain management, maternal-fetal care, pediatric cardiology, and other subspecialty care.

Now, the real question, "What does this mean for radiology?" If we look at Dr. Medel's statement, perhaps there are some clues. He states that, “Radiology is a large, fragmented industry with total revenue of roughly $18 billion…” If by fragmented he means that radiology is still primarily practiced by individual radiologists in radiology groups, this is true. He goes on and says, “We believe the opportunities for organic growth at vRad and for cross-selling between the company’s and MEDNAX’s customer bases are compelling.” Organic growth in the teleradiology market typically means converting current customers of other teleradiology providers to vRad. Cross-selling between the company’s customer bases suggests potential new market opportunities that may not be open to vRad competitors giving vRad a distinct advantage in marketing and sales.

Whether the new vRad plans on or will be successful working through the Mednax network to cross-sell directly to hospitals and hospital systems rather than working through the radiology groups that have the hospital contracts, remains to be seen. vRad has always been adept at walking the tightrope between providing services to the sometimes competing interests of hospitals and hospital systems, and radiology groups. But, in an industry where predatory behavior towards radiologists and radiology groups has long been a significant concern, efforts to remove the ability to provide in-house teleradiology, to use a teleradiology provider other than vRad, or dis-intermediate radiology groups entirely, would signal a much more aggressive move.

It's too early in the game to gauge the reaction of the radiology market and radiology in general to this news; and just as difficult to predict how Mednax/vRad will move into the future. Is the largest provider of teleradiology services in the US moving further away from its radiology roots, or will this acquisition move vRad away from corporate radiology and closer to physician-to-physician radiology and teleradiology services? Time will tell. Stay tuned…

vRad is acquired by Mednax, NYSE:MD. But, what is a Mednax?

What You Need to Know About Mednax’s Acquisition of vRad

Amid the hype and public relations blitz of the announcement of the Aris acquisition of Optimal, is there only light, or is there perhaps some heat as well?

With more than 160 radiologists, this deal creates the second largest grouping, if not group, of radiologists in the U.S. With these kinds of numbers, the roles of the radiologist leadership in this mega-imaging conglomerate become paramount. Whether you are for or against this acquisition or any such increased corporate move into imaging and radiology, the one clear bright spot in the deal is the chief medical officer (CMO) for Optimal, now Aris, Chad Calendine, MD.

According to the press releases,  Calendine will be maintaining his role as CMO within the new organization, with perhaps some between-the-lines hints of new potentials ahead. I had a chance to talk with Dr. Calendine about his view of radiology and the current landscape within radiology.

When asked about the ADI-Optimal partnership he said, “We brought knowledge of how to run radiology groups, work with partners and employees and provide a high level of service.” Behind the scenes, Calendine has been a strong presence within Optimal Radiology Partners, the partnership between Optimal Radiology and Advanced Diagnostic Imaging (ADI) of Nashville, TN, a partnership that was announced in November 2012.

When asked about the continuum between the corporate/business side and the physician side, he said, "Here, the agenda [has been] set by physicians. We’ve been involved with very accomplished business people [and] that level of business expertise cannot be purchased. To be a successful national radiology group it takes both – a strong physician leadership that understands the business side, and very strong business people that understand core health care principals.”

Finally, responding to a question about radiologists within standard radiology groups,  Calendine said, “They underestimate the risk of inaction. So they believe the safest course is to keep doing what they’re doing. And, time has told us that is not the case. You must continue to morph, look for partnerships, re-envision your position. The analogy we use is the down escalator. We’re all on a down escalator, so if you want to maintain what you have, you have to turn around and start walking just to stay where you are. Most people are looking at their feet, and think they’re on stairs. Then they hit the bottom and fall.”[[{"type":"media","view_mode":"media_crop","fid":"34680","attributes":{"alt":"Optimal and Aris ","class":"media-image media-image-right","id":"media_crop_3530212019478","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3690","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"height: 66px; width: 300px; border-width: 0px; border-style: solid; margin: 1px; float: right;","title":" ","typeof":"foaf:Image"}}]]

With this acquisition, and potential additional acquisitions and mergers yet to come; I believe the question will be whether the physician leadership of the combined companies is up to the task of keeping a radiologist- and patient-focused agenda on the table. Or, will the corporate leadership exert their focus with little or no real, substantive input from the radiologists. As I have previously asked, “

Will the lessons taught to-date be absorbed and acted upon, or will they continue to be ignored?

Only time will tell, but radiologists and seasoned leaders like Dr. Calendine stand the best chance of weathering the corporate storms.

Another radiology acquisition, another test for radiologists.

Tis the Season…For Mergers and Acquisitions in Radiology

On March 12, 2015, an article published on Dow Jones’ Private Equity & Venture Capital news and data portal reported that Newstone Capital Partners and Blackstone Group’s GSO Capital Partners had retained Credit Suisse Group to begin the sales process for Virtual Radiologic (vRad). This ends months of insider speculation regarding the future of the largest corporate provider of national teleradiology services, which began to surface even before RSNA in November 2014.

,” suggests vRad’s slow march to the auction block has been anything but inevitable. But despite merging with Nighthawk Radiology Services via Providence Equity Partners in 2011, along with other advantages, the article goes so far as to describe “years of turmoil,” decreasing profit margins, and “client attrition [that] nearly drove the company to bankruptcy protection,” with equity from Providence being “largely wiped out.”

While this news is significant, our real focus should not center on vRad itself, but whether vRad’s situation is an anomaly, or within the norm regarding frequently difficult marriages between imaging and radiology groups to venture capital or corporate medicine groups. History seems to suggest that more often than not, these are marriages of convenience, with radiologists either seeking a means to exit or overly aggressive growth strategies.[[{"type":"media","view_mode":"media_crop","fid":"33548","attributes":{"alt":"Tim Myers, MD","class":"media-image media-image-right","id":"media_crop_6696482955526","media_crop_h":"0","media_crop_image_style":"-1","media_crop_instance":"3535","media_crop_rotate":"0","media_crop_scale_h":"0","media_crop_scale_w":"0","media_crop_w":"0","media_crop_x":"0","media_crop_y":"0","style":"float: right; height: 200px; width: 200px; border-width: 0px; border-style: solid; margin: 1px;","title":"Tim Myers, MD","typeof":"foaf:Image"}}]]

Once together, the corporate partners become the dominant force, with the radiologists relegated to supporting roles – or removed altogether. This is a complete reversal of the typical roles seen in private practice and academic radiology and imaging, where radiologists have much more influence in determining tactical and strategic planning and goals, in association with a business manager.

With radiology and imaging generating over $20 billion in professional revenue each year, and with an expected continued rise for the foreseeable future, venture capital groups, hospital corporations, and others with corporate interests will find it increasingly difficult, if not impossible, to ignore the allure of trying to break in to the market. The problem has been – and remains – how to do it without killing the goose that’s laying the golden eggs. Like it or not, radiology has followed a long and sometimes difficult evolution, from the first radiologists to today’s modern groups. This fact is usually ignored at the peril of the investors, and others who would seek to change this model.

During this time, it is also important to bring attention to the pundits, who have continually attacked teleradiology as the root of all evil, or at the very least, responsible for a large part of the issues seen in radiology today. Digging deeper into these superficial attacks on fellow radiologists may show that the people and radiologists involved in radiology are not the issue; the radical departure from the physician-run medical organization to corporations may be the issue, not just in radiology, but also in medicine in general.

Regardless, waiting and watching to see who will be the next to take the plunge, and take over the problems and possibilities at vRad, will be interesting and may help shed some light on the future direction of corporate-radiologist relations. The next question: will the lessons taught to-date be absorbed and acted upon, or will they continue to be ignored?

The real threat to radiology is corporate medicine.

Author | Tim Myers, MD

Articles

The Pathway to Dominating Radiology and Imaging

What You Need to Know About Mednax’s Acquisition of vRad

Tis the Season…For Mergers and Acquisitions in Radiology

vRad is For Sale: What Does This Mean For Radiology?