Sector spotlight: Radiology
The high level of market fragmentation and the presence of many radiology groups that can act as platform investments to scale to regional or national providers has garnered significant attention from both private equity and strategic acquirers who recognize the tremendous opportunity that exists to scale the business model. Drivers for radiology practice consolidation include:
- Highly fragmented market: The Radiology Business 2017 rankings showed that the top 50 groups had a combined 3,837 radiologist full-time employees, representing just 12 percent of the more than 30,000 radiologists estimated nationally.
- Central role in population health management: Imaging is increasingly becoming more critical to improving the overall quality of care, including for care coordination, utilization management, big data and improved quality and outcomes.
- Evolving healthcare landscape: Due to the shifting reimbursement model from volume to value-based care, continuing hospital consolidation and rising technology and infrastructure costs, independent radiology groups increasingly determine that they need a partner to remain competitive.
- Importance of scale for success: Larger group practices will be at an advantage over smaller groups and provide for increased leverage with payers and downstream customers, such as physicians and hospitals who have grown larger through increased M&A activity and begun to bring radiology services in-house.
- Personal liquidity: Significant interest from private equity investors has led to attractive valuation multiples for radiology practices, providing an exit strategy for retiring radiologists who are often being replaced by younger radiologists who are less interested in running the business side of the practice.
For more information on this topic, or to learn how Baker Tilly Capital specialists can help, contact our team.