What factors impact a radiology facility's decision to put itself up for sale?
December 03, 2019
by John W. Mitchell
, Senior Correspondent
With the U.S. medical imaging market generating an estimated $100 billion a year, the medical specialty is attracting an increasing number of venture capitalists and other investors. In an RSNA session titled "Corporatization of Radiology," a four-member panel provided wide-ranging viewpoints on the issue, including radiologists who sold their practice and another group who decided against selling.
Dr. Howard Fleishon, vice chair of the ACR board of directors, opened the session with some hard numbers. He said there are approximately 38,000 radiologists in the U.S. market, (as of 2017) or one for every 9,400 people. Combined, hospitals and outpatient clinics perform 630 million procedures a year, about 30 percent on Medicare patients. Diagnostic imaging volumes are projected to increase by about 2.5 percent a year through 2023.
When you combine these stats with a projected workforce shortage of radiologists (driven partly by retirement), increasing demand for after-hours calls and a desire for better work/life balance, it's easy to see how selling a medical practice can be attractive, according to Fleishon. Corporation ownership of medical imaging practices was at six percent in 2017. But he said with recent purchases, that number is more likely up to around 10 percent today.
Each of the panelists stressed that because no two radiology practices are alike, no two decisions about selling a practice will be the same. Dr. Catherine Everett, a former partner at Coastal Radiology Associates, reviewed the practice's decision tree to be acquired by Radiology Partners, the largest physician-owned and physician-led radiology company in the country. Everett and her partners spent two years deliberating and vetting until the vote was taken to sell the practice.
Everett detailed a growing list of market concerns, including a glut of radiologists competing for contracts from a payer with market dominance. There was also an increasing demand for uncontrollable after-hours patient call volume, growing IT expenses, mounting regulatory and compliance costs, demanding practice management time away from the practice of medicine, and concern about hospital system mergers and acquisition.
Dr. Gregory Nicola, a partner in the 50-physician Hackensack Radiology Group, said his group also considered selling to a private company. However, they had a long-standing good relationship with their regional health system and did not feel competitive pressure from other radiology groups.
Also, because many of their physicians were junior partners, the financial benefits of a sale were less significant. Another factor was that many of their partners enjoyed their practice management duties. Such responsibilities as marketing and IT were essential to their job satisfaction and career growth. In addition, another local specialty group had sold to a national company. Nicola and his partners noted the relationship between those physicians and the health system appeared to be strained. He said it was a quick, easy decision for the group not to sell.
Another panel member, Dr. Lance Lawler, president of the Royal Australian and New Zealand College of Radiologists, was on hand to share the nations' experience with corporate radiology. Over the past 25 years, he said Australia, in particular, embraced the business model quickly. The government's Medicare system is the primary payer for imaging services in Australia.
In 2010 Australian private radiology revenues were $2.6 billion, compared to $3.9 billion in 2019. Perhaps surprisingly, the corporate market share in Australia in 2010 was 67 percent, yet stands at 51 percent today. He said that while the Australian government has realized some benefit from the corporate model — such as service in rural areas — there is, at other times, friction.
Professional groups representing the corporate practices and the society representing private practices don’t always agree on what radiology public policy is best. This can be confusing to lawmakers in Australia, he said.
Lawler, who is from New Zealand, said his group, the largest in the country, has no plans to switch to a corporate business model.