Radiology, M&A

If the glow is off radiology as a revenue center, no one told private equity. Things are moving so quickly in the corporate radiology world, a scorecard would be helpful.  A quick recap follows.

Last year, ambulatory surgery center operator Amsurg, pockets full of Citi money, bought Sheridan Healthcare, based in Sunrise, Florida.  Sheridan specializes in physician and management services in anesthesiology, emergency medicine, neonatology and, increasingly, radiology.

In January of this year, Sheridan acquired Radisphere, an early player in the teleradiology market operated by two radiologists who launched their eponymous company, Franklin & Seidelmann (F&S), in 2001. Also the object of private equity investment, F&S rebranded itself as Radisphere, a national radiology group, and at the time of acquisition employed more than 100 radiologists.

Then, in March, Sheridan struck again, this time acquiring Radiology Associates of Hollywood, with 53 radiologists. The practice has provided services to Memorial Healthcare System, Hollywood, Fla., for 40 years. Memorial Healthcare System is the third largest public healthcare system in the nation, and likely where the twain met, as Sheridan provides anesthesiology services to Memorial.

More recently, we saw Akron, Ohio-based Aris Radiology acquire Nashville-based Optimal Radiology. Majority owner of Aris is Akron-based Summa Health System, but private equity firm Great Point Partners holds a stake in Aris as well—and reportedly financed the Optimal acquisition.

Easy money and private equity

All of this activity is not entirely about radiology; partially, it’s about easy money and private equity. The Wall Street Journal1 projected that 2015 worldwide M&A volume will exceed $3.7 trillion if it continues at its current pace, making it the second biggest year on record after 2007. Healthcare claims the largest piece of the M&A pie, with deals valued at $159.7 billion.

If I wanted to pander to the private practice, I might point toward a recent opinion piece2 in which the author predicts the demise of private equity as “a bull-market investment vehicle whose time is done.” I don’t buy that wholesale, nor does it change the fact that many players in the corporate radiology space are well managed, fulfill a need and have become formidable competitors in a changing healthcare landscape.

Still, these companies face the same challenges with which private practice radiology grapples—increasing regulatory pressure and quality documentation requirements and declining reimbursement. They also face the additional challenge of pleasing investors.

Where the rubber meets the road

Optimal felt the pinch of that requirement last year, when the California Public Employees Retirement System (CalPERS) put the kibosh on a planned $10 million cash infusion into the company by private equity fund Health Evolution Partners (HEP) Inc, according to an article in Pension & Investments. At the same time, it made known its wish to end its relationship as sole limited partner with David Brailer’s healthcare-focused fund.3

CalPERS, valued at $300.6 billion, was looking for the 20% return reportedly promised by Brailer at the outset of the relationship in 2007 when it plunked down $705 million, according to the article in Pensions & Investments. Between 2007 and the end of 2013, the HEP Growth Fund averaged a 6.5% return, a strong return for a provider but not a number to excite investors.

Concomitant to this deal activity in radiology, we’ve seen an increase in news about new, deeper relationships between radiology practices and hospitals, shared here in the pages of this issue of Radiology Business Journal, as well as in our weekly newsletters from This is evidence that private radiology practices understand that to compete with corporate radiology, they must move into tighter partnerships, make promises and keep them.

If nothing else, this flurry of M&A activity in corporate radiology should give private radiology practices a gratitude moment—maybe it’s not such a bad racket after all.


  1. Cimilluca D, Mattioloi D, Raice S. Rising optimism fuels deal rebound. Wall Street Journal. April 9, 2015: A1.
  2. Kessler A. The glory days of private equity are over. Wall Street Journal. March 29, 2015. Accessed April 10, 2015.
  3. Diamond R. Poor returns forcing CalPERS  to cut cord on healthcare fund. Pensions & Investments. August 4, 2014. Accessed April 10, 2015.