Splash 4 Partners- Competitive Drivers in Radiology & Teleradiology

Trends & Competitive DriversIn Radiology & Teleradiology

Who makes up the competitive landscape?

What are the trends driving competition in the industry?

On what metrics do radiology and teleradiology businessescompete?

What are the competitive advantages of the largest radiologyand teleradiology companies?

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Jacob Grosshandler [email protected] Grosshandler [email protected]

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Trends & Competitive Drivers In the Teleradiology Space

Splash 4 Partners (“S4P”) was engaged by ahealthcare focused investment fund to helpdiligence the radiology and teleradiologyspace in hospital settings. The following is ahigh-level summary from S4P’s competitiveanalysis of the teleradiology landscape.

Contact S4P to leverage our principals’ yearsof experience in private equity, lending, andmanagement consulting to enhance yourdiligence findings and improve your business.


The Competitive Landscape Overview

*Note: Data from the Economics of Diagnostic Imaging 2008 National Symposium suggests that fewer than 10% of radiologists are employed by theirhospital in a truly “integrated service model”; however, there is anecdotal evidence to show that in some instances hospitals are putting pressure ongroups to become employees of the hospital rather than be in independent practice serving the hospital.

Lines are blurring between the types of companies providing radiology services to hospitals.

•Combination of on-site and remote teleradiology services.•Full practice management model; contracts directly with hospitals.•Examples: Imaging Advantage, Foundation Radiology Group, Radiology Partners,

Radisphere.

Outsourced RadiologyServices Providers

• Most providers started by providing preliminary reads after hours (nighthawk services).• Pure play telerad service providers do not provide on-site radiology services; remote.• Customers include radiology practices, hospitals, imaging centers, & other clinical settings.• Examples: Imaging On Call, Rays Radiology, StatRad, vRad.

Teleradiology ServiceProviders

• Traditional physician owned and run radiology practices.• May or may not own and operate free-standing imaging centers in addition to managing

hospital contracts.• Examples: Advanced Radiology Services PC and Radiology Associates of North Texas PA.

Traditional RadiologyPractices


The Competitive Landscape Overview – Continued•Outsourced practice management companies where radiology is one of several

clinical areas served. Other common areas include ER, anesthesiology, etc.•Examples: TeamHealth (note: TeamHealth completed the exit of its radiology /

teleradiology business in Q1 2011, which accounted for ~$11.2 million in 2010revenue).

Multi-Specialty PracticeManagement Companies

•Corporate and/or private practice freestanding imaging centers, who may ormay not also service hospital radiology contracts.

•Example: RadNet owns Imaging On Call.

Freestanding ImagingCenter Operators

•Groups of hospitals within a large health system and/or private practices thatcome together to provide teleradiology services to consortia members.

•Example: Strategic Radiology.Consortia


Select Trends / Themes Driving Competition

RevenueGeneratorCost

Center

Hospitals trying to answer ifradiology is a revenue

generator or a cost center

Impacted by the rise of ACOs andmovement to pay-for-performance /

outcomes-based and bundledreimbursement

Declining reimbursement andperception that there is more savings

in radiology to be had

Appetite for hospitals to pay subsidies /stipends to radiology providers is dwindling

“Hospitals are decreasing or eliminating thesubsidies they were giving to radiology groups

for night services…a medium-sized group mighthave been getting half a million dollars.”(1)

(1) “Lines Blur Between Private and Corporate Radiology As Teleradiology Evolves.” Radiology Business Journal, February 18, 2014.http://www.radiologybusiness.com/topics/care-delivery/lines-blur-between-private-and-corporate-radiology-teleradiology-evolves.


Industry participants compete on the following factors:

1. Geographic reach

2. Sub-specialties**

3. Scale / size

4. Technology

5. Price

6. Best practices, results, driving outcomes

7. Capitalization / financial resources

*Criteria not listed in any particular order of importance.**While the breadth of subspecialties is taken as given in the analysis to follow on the “Focus List of Competitors” (as sufficient detail islargely unavailable through publicly available information and most claim to cover all / most subspecialties) other research noted that notall radiology and teleradiology service providers offer pediatric radiology or mammography.

# of regions, states, and cities served

Sub-specialties covered (assumed given)**

# hospital clients, # reads, & # radiologists

Type of PACS, RIS, etc. (assumed given)

Price (NA)

KPIs (e.g., ATAT, quality measures, etc.)

Backers with deep pockets, access to capital

Criteria – Factors of Competition* Measurement Proxy

Competitive Drivers of Large Radiology & Teleradiology Businesses


Example Competitor Profile: Optimal Radiology Summarywww.optimalradiology.com

HQ: Nashville, TN

Ownership: Health Evolution Partners (2009)

Years in Business: 9+ years

Key Stats:2,000,000 studies (2013)100+ FTE radiologists~30 hospitals served

Sample Clients: Bayfront Medical Center (FL / 480 beds) Lewistown Hospital (PA / 123 beds) Fishermen’s Community Hospital (FL / 47 beds) Charlotte Regional Medical Center (FL / 208 beds / part of Health Management

Associates) Sentra Northern Virginia Medical Center (VA / 183 beds / part of 11 hospital system in

VA and NC)

Summary Data Points: Optimal Radiology originally known as Optimal Reading Services Group, Inc. and later Optimal IMX and was based in Birmingham, AL until relocating its headquarters

to Nashville, TN in August 2013. In late 2012, Optimal Radiology announced a joint venture partnership with Advanced Diagnostic Imaging (“ADI”), a leading subspecialty practice based in Tennessee.

ADI is comprised of 36 subspecialty trained radiologists who interpret more than 850,000 exams a year. In addition to maintaining hospital-based and teleradiologypractices, ADI offers the region's largest network of outpatient imaging centers, operating as Premier Radiology. The JV operates under the name Optimal RadiologyPartners. (Note: It is unclear whether ADI’s 850,000 annual reads are in Optimal Radiology’s 2 million annual count).

Optimal Radiology is backed by Health Evolution Partners (“HEP”), a $700 million SF-based venture and private equity fund founded by Dr. David Brailer, PresidentBush’s health information technology czar. HEP invested in the company in June 2009.

Customers range from critical access hospitals to Level II trauma centers. The company’s web site says it provides full service radiology management agreementsthat range from 25,000 – 200,000+ annual studies.

Optimal Radiology claims to do work for the DOD and military hospitals.


Example Competitor Profile: Optimal Radiology – SWOT AnalysisSTRENGTHS• Size / scale – reportedly completes ~2 million studies per year (though this likely includes its JV with Advanced

Diagnostics Imaging).• Counts several multi-unit health systems as clients (e.g., Lifepoint, Health Management Associates).

WEAKNESSES• CEO / executive management turnover (on 4th CEO since 2009).• While claiming national coverage, appears concentrated in a handful of states (FL, GA, and PA).

OPPORTUNITIES• Potential growth opportunities with some of its multi-unit health system clients.

THREATS• Despite being one of the larger players, Optimal seems to be a competitor that just seems to “bump along” or

“wander”, not realizing its full potential. In a dynamic market such as this, continuing down that path could becrippling.


Other Questions & Themes Splash 4 Partners Explored

Radiology & Teleradiology Market Size

Hospital Market Segmentation

Technology Driving Process Changes

Regulatory Changes Impacting Hospital Decision Making

Emerging Regional Competitors

Trends in Labor Dispute and ContractNegotiations Between Traditional RadiologyPractice Groups & Hospitals

And more


About Splash 4 PartnersSplash 4 Partners supports middle market businesses and financialsponsors by accelerating growth and increasing profits. We provideactionable insights and data driven solutions to executives andinvestors in the health, wellness, education, and informationtechnology industries that:

Identify new strategies to capture market share

Expand existing relationships with current customers

Explore evolving competitive dynamics of a market, and

Align the firm’s capital structure with its long term objectivesContact Us:Jacob Grosshandler [email protected] Grosshandler [email protected]


Splash 4 Partners- Competitive Drivers in Radiology & Teleradiology

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