The entry of corporate management companies into radiology
May 19, 2015
On May 12, 2015, MEDNAX announced its official agreement to acquire Virtual Radiologic, commonly known as vRad, for $500 million. vRad is a leading outsourced radiology physician services company comprised of over 350 U.S. board-certified radiologists. It is also the largest corporate provider of national teleradiology services.
In our opinion, this acquisition marks a turning point for the practice of radiology in that corporate ownership of radiology groups has arrived. This trend began a few years ago when Sheridan added the specialty to its line of services. Sheridan’s acquisition of Radisphere Radiology in January of 2015 further reinforced its commitment to radiology, with the acquisition of vRad by MEDNAX occurring just four months later.
These are not isolated incidents, but rather a pattern of events which reflect the entry of corporate management companies into radiology. And, from the look of it, they are not leaving anytime soon:
“Radiology is a large, fragmented industry with total revenue of roughly $18 billion…” said Roger J. Medel, M.D., Chief Executive Officer of MEDNAX in a press release regarding the transaction. “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.”
As stated by Medel, MEDNAX has a newfound ability to cross-sell radiology with its array of specialties which include neonatal, anesthesia, maternal-fetal, pediatric cardiology and other pediatric physician services. This grants MEDNAX a competitive edge in cross-selling multiple service lines to hospitals as they streamline processes, provide greater economies of scale and a “one-throat-to-choke” administrative solution across multiple clinical departments.
This transaction serves as a warning to radiology groups nationwide of what’s to come. With the acquisition of vRad, the corporate consolidation of radiology practices is officially here. It is our opinion that we will be hearing of more acquisitions by both multi- and single-specialty management companies seeking to broaden their service lines as well as by private equity firms buying opportunistic practices.
The expansion of these multi-specialty groups into radiology has ultimately changed the competitive landscape of radiology. The primary competitive threat for practice leaders is no longer the other radiology group across town. Instead, it has become the emergency medicine or anesthesia department across the hall which is owned by a multi-specialty management company who either offers, or is soon to offer, radiology. If you didn’t think consolidation would envelope radiology as it did anesthesia and emergency medicine, MEDNAX’s acquisition of vRad proves it is possible, and it is happening.
/wp-content/uploads/2014/05/Logo_header_vs21.jpg00admin724/wp-content/uploads/2014/05/Logo_header_vs21.jpgadmin7242015-05-19 18:27:412016-07-19 18:59:06What the Acquisition of vRad Means for the Practice of Radiology