Radiology 100: Big Is Beautiful

Welcome to the 7th annual Radiology 100 group survey results. Hopefully the survey will cause some of the radiology groups to pause and ask what has changed in the marketplace this year, and what could/will happen in the next year? As you review the survey and compare this year’s results with last year’s, you will notice that many of the radiology groups are not growing in terms of the number of radiologists. Both productivity increases and decreased utilization have had obvious impacts on the industry. 

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Growing a business in a mature industry is difficult, and radiology is now a mature industry. Growth can come through two main areas: organic growth and mergers/acquisitions. The survey highlights some of mergers that we have seen in the marketplace: Integra Imaging, University Radiology, Synergy Radiology, South Jersey Radiology Associates and others have climbed in the survey as a result of mergers. Mergers, however, are difficult due to power, money and control issues. In successful mergers, we see culture, trust and financial discipline helping to pave the path to success.

Organic growth will come from one of the following four areas, with the respective relative cost noted:

Growth tactic/strategic focusRelative Cost
More current services to current clients/customersLow
New services to current clients/customersMedium/high
New services to new clients/customersHigh
More of the current services to new clients/customersMedium/low

From a radiology group perspective, it seems that “more current services to current customers” has some limited upside in our healthcare system today. In many markets, in fact, being a good radiology group partner to a hospital means providing fewer services to current customers.  The next best option taking cost in account would be “more of the current services to new clients.”

Opportunities and threats

As the large groups get bigger and more efficient, and as utilization decreases, growth is going to be of key importance. Mergers are an answer, but organic growth is required in order to not simply split a smaller pie between the same number of radiologists. The next logical strategy for growth is providing current services to new customers. Enter competition—this will come into the radiology world to a level we have not seen previously. In the past, competition between radiology groups has been limited due, in part, to a shortage of radiologists and a professional culture that frowned upon predatory behavior. The question is whether this will change in the coming years, as the need for growth drives greater competition.

If we are entering into a more competitive environment, groups should review their strengths, weakness, opportunities and threats. Groups should also know their competitors, who they are and what they are doing. There has been a lot of concern in the past years about competition from the national teleradiology companies. Those companies appear to have not been as successful as they may have hoped to be, as prices dropped and groups brought their nighttime reads in-house. The independent groups may have won the first battle; I expect that we will see a round of consolidation of national companies in the future. If that occurs, they might recapitalize and start a second round of growth initiatives.

Watching the national multispecialty groups might also be wise. Cleveland Clinic and Mayo Health System are building partnerships with the likes of Community Health Systems (150 community hospitals) and a technology division of United Health Care. Start to develop your plan to compete against these “category killers.” That is the competition I fear for  independent groups.

We are seeing many mergers of groups in the 10- to 50-radiologist range that will be completed in 2015. As these groups walk through the process, it is apparent that there are many synergies and cost savings. Mergers are difficult in many ways, but those groups that learn how to successfully allow smaller groups to join with them will find the growth less difficult. Build a culture of being the best place in the world for a radiologist to work and smaller groups will want to join your practice.

We continue to be very optimistic about the future for private radiology groups. Thank you for your participation in the survey!

Joseph P. White, CPA, MBA
CliftonLarsonAllen LLP: CPAs, Consultants, and Advisors

With procedural volumes down in 2013, the nation’s largest private radiology practices sought growth opportunities in MSOs and imaging center ownership

America’s independent private radiology practices exercised their resilience in 2014, with continued, incremental growth in nearly every practice-size cohort. Overall, the Radiology 100 practices eked out a median growth of 2.7 full-time equivalent (FTE) radiologists, from 39 in 2013 to 41.7 in 2014, despite declines in procedure volume. Perhaps in search of growth, all four practice-size cohorts increased their median number of imaging centers owned (Figure 1, page 24).

Cosponsored by CliftonLarsonAllen and Radiology Business Journal, the seventh annual survey to rank the 100 largest private radiology practices was made available on the web site and publicized through email and web banners. We received a total of 108 responses, not all of which ranked in the Radiology 100.  The criteria used to rank the nation’s largest radiology practices were the number of FTE radiologists and (if two practices had the same number of radiologists) FTE employees.

In order to make the list as accurate as possible, we included known practices of size that did not submit their data and gathered their numbers based on web research.

An effort was made through telephone and email solicitation to confirm data found on practice web sites for those practices that did not self report their data. The listings for the practices that did not confirm their data are printed in blue, and to account for the difference between an actual body count and a practice’s FTE radiologists, we reduced by 5% the number of radiologists counted on the web sites for those practices that did not self-report.

All but the smallest practice-size cohorts registered increases in median size, but the greatest growth occurred within the largest practice cohort. In fact, the smallest practice cohort may have registered growth had we not changed the methodology for FTE counts for non-self-reporting practices this year. This also may have skewed downward the number of practices that increased rather than decreased in size: Of the Radiology 100, 37 practices increased in size, while 48 decreased and nine remained the same. (Six practices were on the list for the first time in 2014).

Nonetheless, some private practices grew significantly. Nine practices grew by eight or more radiologists, and one nearly doubled in size to land in the number three spot, suggesting that mergers rather than natural growth are fueling the increases in median practice size. The fact that procedure volumes were down for 2013 (the most recent full year for which data was available) in all but the smallest practice-size cohort suggests that growth is hard earned in this healthcare environment (Figure 2, page 24). That search for growth may account for the fact that all four practice-size cohorts increased their median number of imaging centers reported.

At the summit

For the third year in a row, Radiology Associates of North Texas (Fort Worth, Texas) held the distinction of being the largest private radiology practice in the U.S., although the practice actually declined in size by two FTEs, from 124 radiologists to 122 (Table). RANT also bucked the trend in increased imaging center ownership, divesting 11 of 13 imaging centers, with a corresponding decline in FTE employees—from 213 to 44. The practice did increase, however, its number of hospital contracts by two for a total of 26.

Advanced Radiology Services (ARS), Grand Rapids, Mich., the second-largest practice, is a long-time alumna of the Radiology 100. The practice was an early adopter on the consolidation curve, occupying the number one spot in our first ranking in 2009 and holding onto it until RANT displaced it in 2012. ARS, a hospital-based practice with no imaging center holdings, retained its number two spot on the list, with 105.45 FTE radiologists.

Southwest Diagnostic Imaging (SDI), Phoenix, Ariz., leaped from number 26 on the list to claim the number three spot in 2014, growing from 58 to 101 FTE radiologists.  SDI merged with East Valley Diagnostic Imaging, Mesa, Ariz, in February of this year, adding 40 radiologists, and forming a mega-practice that dominates the Phoenix metropolitan area. In the process, SDI picked up nine hospital contracts and nearly doubled its number of annual procedures, from one million to 1,823,651.

The fourth largest practice, Integra Imaging, entered the top five practices on the list in 2013 when Spokane-based Inland Imaging merged with Seattle-based Seattle Radiologists to create Integra Imaging, with 97 FTE radiologists. The practice added one FTE radiologist this year, but dropped from number three to number four.

University Radiology became the nation’s fifth largest private radiology practice with 96 FTE radiologists, following a merger with Jersey Shore Radiology Associates that brought 10 radiologists into the fold. The practice also acquired five more imaging centers for a total of 15 and an additional hospital contract for a total of eight.

In search of growth

In 2009 when Radiology Business Journal and CliftonLarsonAllen first began ranking radiology private practices, just two of the largest 50 practices had more than 80 FTE radiologists.  This year, 10 practices exceed the 80-plus milestone.

The largest practices, those with >65 FTEs, again experienced the greatest growth in size, with a median increase of 5.7 FTE radiologists (Figure 3, page 25).  They also generated increases in other key metrics, including median number of FTE employees (252.5) (Figure 4, page 25), median number of imaging centers (15) and median number of sites served (46).

However, whether due to increased utilization management, declining hospital volumes or competition, they failed to increase their median number of hospital contracts (Figure 5, page 25), dropping from 18 to 15. Additionally, their median number of procedures performed declined from 1,135,475 in 2013 to 1,099,142 in 2014. The increase in practice size and decrease in volumes suggest that some of these mega-practices have capacity on hand.

Just one practice-size cohort, practices with 35 to 49 FTE radiologists, managed an increase in median number of procedures performed. This cohort also increased its median number of hospital contracts and median number of imaging centers owned, by one each. This group was one of two practice-size cohorts that downsized its number of FTE employees, suggesting that practices continue to look for efficiencies.

The two practice-size cohorts that increased rather than decreased their number of employees were the ones with the greatest increases in their median number of imaging centers—the largest and smallest practice-size cohorts. Practices with more than 65 radiologists increased their median number of employees by 42.5 FTEs, for a total of 252.5 FTE employees, providing a specialty-specific assist to the nation’s declining unemployment rate. Practices smaller than 35 FTE radiologists increased their median number of employees by 28 FTEs for a total of 44.

Imaging center ownership was one of two measure we track that increased across all practice-size cohorts, but most significantly in the smallest and largest practices. Practices <35 FTE radiologists increased their median number of imaging centers from one to four.  Practices >65 increased their median number of imaging centers owned from 10 to 15. Despite draconian reimbursement cuts—or maybe because of them—outpatient imaging center ownership appears to provide an increasingly attractive opportunity to grow procedural volumes.

Trends and anomalies

Another measure we have been tracking for several years is whether or not practices operate a managed services organization. In 2014, the median number of practices reporting that they operate an MSO increased in every practice-size cohort. The greater the size of the practice, the greater the percentage that reported operating an MSO: <65, 60%; 49–50, 58.3%; 34–49, 47.1%; and >35, 13%. Last year, none of the practices in the smallest cohort reported operating an MSO.

Because we do not ask practices to specify what type of MSO they operate, the nature of these businesses is unknown and could be anything from a billing company, an information technology consultancy, a teleradiology services provider or something else. The fact that an increasing number of practices in all size categories are seeking to leverage their resources and expertise underscores the need to seek new sources of revenue to fuel growth.

Coverage patterns have not changed since last year, when 13% of practices reported outsourcing some of their reads to radiology services companies.  This year, the same percentage of practices reported outsourcing some of their reads, but none of those were in the largest practice-size cohort.

This year, we asked practices to report their change in productivity for the first time. The smallest practice cohort reported the greatest productivity increase from fiscal 2012 to 2013—4.96%. The largest practices achieved a 2.7% increase, while the 50–65 cohort was just behind at 2.5%. Although the 35–49 practice cohort was the only one with an increase in median procedure volume, it reported a 1.3% decrease in productivity. This cohort also was the group with a decline in the median total number of sites served, from 27 in 2013 to 22 in 2014.

Last year, just 28 practices contributed their financial data, while this year, nearly half of all practices—48 total— contributed financial data on the condition that it would not be shared. The greater pool of data provides a more reliable portrait of the practice landscape, a gift to the entire specialty for which we are grateful.

Due to our pact, we cannot share specific numbers, but we can say that median total revenue was up in the largest and smallest practice-size cohorts. It declined significantly in the other two size groups. Revenue per FTE radiologist was also greatest in those two groups, but slightly higher in the smallest practice size cohort. Whether these gains are related to the greater level of imaging center ownership, successful MSO operations or favorable geography, we can only speculate. Another commonality between the smallest and largest practice groups is an increase in the median number of employees.

After withstanding eight years of reimbursement cuts, radiology practices appear to be facing a new and possibly greater challenge—the specter of declining procedural volumes. With hospitals looking at managing the cost of diagnostic-related groups, we are seeing first time-ever efforts to manage inpatient utilization of imaging. This is likely to heighten competition for clients, further fueling the consolidation trend in the private practice environment.

To all of the practice representatives who took the time to contribute data for this report we offer our sincere gratitude.

We gratefully acknowledge the assistance of Michael Mertz, MBA, manager, healthcare, CliftonLarsonAllen who provided the computations for this survey.

About the Survey

The survey to rank the 100 largest radiology practices is the result of a collaboration between CliftonLarsonAllen and Radiology Business Journal. CliftonLarsonAllen is a nationwide professional services company counted among the top 20 accounting firms. Radiology Business Journal is a bimonthly economics journal serving leaders in medical imaging and published by TriMed Media.