IMAGING · RADIOLOGY


multiple debt-fueled acquisitions, includ- ing paying $885 million to acquire Mednax Radiology Solutions and $300 million more to obtain three unnamed imaging groups. Rad Partners experienced volume declines in 2020’s second quarter stem- ming from COVID-19. But its numbers have rebounded to pre-pandemic levels, and S&P expects the provider group to benefi t from size.” That said, at the end of last year, S&P estimated the company’s debt at 10 to 11 times its adjusted earn- ings, and calculated that that situation would remain unchanged through this year (2022). Of course, there are countless situations


involving organizations smaller than Radiology Partners, but in which consoli- dation is moving ahead. As Stempniak also wrote in Radiology Business, this time in a report published on April 4 of this year, “Private equity-backed Rayus Radiology revealed its latest expansion plans on Friday in concert with a Midwest hospital system. Alongside Froedtert & the Medical College of Wisconsin, the Minneapolis-based imaging group is opening a new outpatient location in the Milwaukee suburb of West Bend. This marks the seventh such center launched by the regional hospital system and man- aged by Rayus Radiology.” As Stempniak noted, “Nine-hospital Froedtert & MCW said the new location, which offi cially opened April 1, will aim to increase access for referring physicians seeking high-end MRI services. The move is the latest in a string of recent imaging center launches, with locations in geographies including Utah, Minnesota and Maine.”


Daniel Levin


Getting the bigger picture: a landscape that continues shifting forward How do industry observers see this situ- ation, in which national radiology fi rms are acquiring the practices of more and more radiologists? “There’s certainly been a lot of con- solidation activity, with a lot of private equity groups driv- ing consolidation,” says Daniel Levin, a partner in the Boca Raton, Fla.- based HealthCare


Appraisers healthcare valuation services company. “An example of how that trend has played out is [the Sunrise, Fla.-based]


“Parts of healthcare are already well-consolidated, and other parts—radiology, home health, physical therapy, dentistry— those practices are now consolidating for effi ciencies. And part of it is also to get better negotiating rates with payers.” —Arthur Wong


MedNax [as mentioned in the para- graph above], a publicly traded group that had historically been focused on hospital-based services, and then added anesthesiology and radiology, and later sold those businesses to private equity groups. There are a lot of large platforms out there,” he says. “That said, it’s still a relatively fragmented space compared to dermatology and ophthalmology, and we’re still seeing a lot of interest on the hospital side in terms of partnering, as well as hospital interest in direct acquisi- tion of radiology practices and of diag- nostic imaging centers. There’s still room to run in terms of consolidation, but there is that push and pull” in terms of tension between consolidation and maintaining smaller size,” he adds. “And yes, there’s a lot of private equity money wishing to invest.” Arthur Wong, a senior director and


sector specialist in healthcare at the New York-based


S&P Arthur Wong


Global Rat ings (formerly Standard & Poor’s), agrees. “The private equity dollars are helping to fuel the consoli- dation,” Wong says. “Parts of healthcare are already well- consolidated, and


other parts—radiology, home health, physical therapy, dentistry—those practices are now consolidating for effi ciencies. And part of it also is to get better negotiating rates with payers, who have already been consolidated. It makes sense to push back on the players. Without even mentioning the overall growth and demand for health- care. And the technology component adds further fuel to the trend, because it can address some labor shortage issues. There’s


6 hcinnovationgroup.com | NOVEMBER/DECEMBER 2022


a nursing shortage but also a physician shortage. And also the march towards value-based care. Not only do you see consolidation within certain markets in healthcare; you’re also going to see cross- sector consolidation. That’s also where technology has matured to the point where it’s allowing these connections.” Wong’s colleague Richa Deval, an associ-


ate in the healthcare section at S&P Global, says that “The radiology market is pretty fragmented, but we’ve seen signifi cant growth” among the large companies acquiring practices “over the last fi ve or six years.” For example, she says, “Radiology Partners is more than a $2.5-billion com- pany with 3,600 physicians. And one reason for the consolida- tion was to nego- tiate better


rates Richa Deval


with payers. They were facing pres- sure from payers to lower the rates. And UnitedHealthcare pushed them out of network in a lot of states, and that actu-


ally hurt them. But in terms of consolida- tion, the market is pretty fragmented, and these companies found that consolidation was one way to better negotiate with payers and capture greater market share.”


Changing practice conditions seen rearranging all the variables One industry expert who has a handle on the larger picture is Keith Chew, principal with the Springfi eld, Ill.-based Consulting With Integrity, a consulting fi rm that he leads. “Radiology fi nds itself in a unique position, in that radiologists are an extremely important component of the care continuum,” says Chew, who has spent over three decades in radiol- ogy group management. “There are two schools of thought out there” with regard to where things are headed, Chew says. “There are people who believe the cor- porate practice of radiology will create effi ciencies; others believe radiology is best performed by independent radiologists. From my perspective, both schools have been successful and unsuccessful. I don’t have a crystal ball that tells me that one will necessarily triumph over the other. I believe it depends on the circumstances of the individual situation.” Indeed, Chew says, “If you’re in a loca-


tion where you cannot recruit radiologists, sustaining independent practices is just


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