Earlier this month saw Mednax announce significant plans to transform its business. Mednax intends to:
– Sell its Mednax Radiology Solutions business, which includes its radiology groups and the teleradiology market leader Virtual Radiologic (vRad).
– Reposition itself as a dedicated pediatrics and obstetrics business, including a return to its original company name, Pediatrix Medical Group.
Mednax made its entrance into the radiology business following the $500m acquisition of vRad in 2015. It has since continued its growth strategy of acquiring significant local radiology groups and imaging practices, with its tenth practice added in January 2020. Since 2016, overall revenues for Mednax have grown from $3.2bn to $3.5bn in 2019, an increase of 10%; however, EBITDA has suffered a 24% decline over this four-year period. The accumulated debt for Mednax during this period of acquisition has been substantial, with c. $1.7B in net unpaid debt owed by the overall business as of June 2020. Through the sale of its Radiology Solutions business, Mednax is aiming to apply the sale proceeds towards reducing this debt. The company had already been taking steps to ease the financial burden since 2018, including the sale of healthcare management services business MedData in October 2019, and American Anesthesiology medical group in May 2020.
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COVID-19 Impact
Whilst the president of Mednax Radiology Solutions suggested the intent to sell was not influenced by the COVID-19 pandemic, the temporary halt of all non-urgent diagnostic imaging procedures may well have been a key factor in the timing of this decision to sell; COVID-19 had a substantial impact on the radiology business in April 2020, with Mednax’s volumes plummeting by c. 50% and a reduction of 25% on revenues (Y-o-Y). For vRad specifically, imaging volumes in mid-April 2020 declined by c. 55% before recovering considerably at the end of May 2020 (c. -25% YoY), although this is still significantly down.
The recovery in May gives cause for optimism over the coming months. As highlighted in the graph below, vRad has predicted a gradual recovery during Q2/Q3 2020 and a return to normal procedure volumes in Q4 2020.
The COVID-19 impact on Mednax is just one example of dramatic declines in imaging procedures reported by several vendors in 1H 2020, with some providers citing a 75% drop, and outpatient imaging especially hard-hit.
Signify Research’s analysis on diagnostic imaging procedure data highlighted several modalities suffered high-double digit declines due to the impact of COVID-19. However, CT suffered a relatively softer decline in procedures, as this modality became a key indicator for diagnosing the disease.
vRad cited a similar rise in the importance of CT, which accounted for around half of its entire teleradiology reporting by modality, pre-COVID, and up to almost 60% share in mid-April. vRad also provided insight on the change in its reporting by function, with daytime volume declining 15% more than nighttime, highlighting the impact of a reduction in elective procedures, particularly outpatient imaging.
Imaging Procedures likely to Surge Post-COVID
At this relatively early stage, the rate of imaging procedure recovery is challenging to predict; however, Signify Research is reasonably confident that the huge reductions in diagnostic imaging procedures during the first half of 2020 will lead to a steady recovery in the second half of 2020, and a rapid increase in 2021 as pent up demand is relieved.
Teleradiology is Tied to Diagnostic Imaging Procedures
In 2019, teleradiology was used in just over 1.6% of diagnostic imaging procedures performed globally. Its main use was in supporting out-of-hours diagnostic image reading requirements, followed by capacity relief and specialist reporting.
Source: Hit Consultant