Tag Archives: Outpatient

Signify Premium Insight: Walmart Health’s Growth Shows Store is Serious About Retail Therapy

Earlier this month Walmart announced plans to double the number of health centre locations it offers in the US in 2024. The move will see 45 new Walmart Health centres opened in 2023 and 2024, adding to the 32 that have already been established since 2019.

Alongside primary care, dental care and Walmart telehealth among other services, Walmart Health also offers X-ray imaging services to patients. As such the retailer could play a significant role in the growing trend towards the consumerisation of healthcare and the increasing prevalence of outpatient imaging.

With this rapid expansion, retailers including Walmart could become attractive targets for vendors, but, how best can they capitalise?

Signify Premium Insight: What Intelerad Hopes to Make with Life Image Acquisition

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Intelerad has continued its streak of acquisitions by buying up medical image exchange vendor Life Image. The move, along with its previous acquisition of another image exchange vendor Ambra in Autumn 2021, means the enterprise imaging vendor has now combined two of the top three competitors in image exchange, and has given itself a clear market leadership position.

Intelerad hopes that the acquisition will enable the vendor to capitalise on the interoperability focus of the 21st Century Cures Act in the US and should help providers more easily share images across their networks, preventing information sharing bottlenecks and use of legacy processes such as burning CDs. Given Intelerad’s recent run of acquisitions and the integration that they require, is adding another company into the mix really the best use of the company’s resources?

The Signify View

As detailed in several previous Premium Insights, since Hg Capital took a majority holding in Intelerad in February 2020, the imaging IT vendor has sought to expand its capability, and secure market share by making a succession of acquisitions. These have included a variety of companies, including cardiovascular information systems vendor LumedX, image management platform provider Digisonics, UK based enterprise imaging company Insignia, mammography screening management software vendor PenRad and several others. By making these acquisitions, Intelerad has not only been able to grow its position in the market, but it is assembling the capabilities it requires to create a cloud-based multi-ology enterprise imaging platform.

One of the acquisitions to pave the way for this ambition was Ambra, a deal which not only netted Intelerad a growing, profitable business, but also helped to round out Intelerad’s radiology offering, bringing cloud-based PACS, image exchange and VNA to its platform. Further, by buying a vendor offering such capability, Intelerad acquired a toolset that can help bring together its other disparate acquisitions into a cohesive whole.

The latest acquisition, of Life Image, builds on this momentum. It adds another, larger, successful image exchange business to the vendor’s portfolio, cements Intelerad as the market leader in image exchange in the US and adds further tools that will help Intelerad integrate its host of acquired companies.

A Question of Acute

Life Image also opens new sales opportunities for Intelerad. The enterprise imaging vendor’s customer base is heavily weighted toward the outpatient radiology segment. While this is a lucrative and growing market, it is also one that is increasingly being targeted by major international vendors with companies such as GE HealthCare and Change Healthcare, amongst others, harbouring designs on the segment.

Life Image, on the other hand, is primarily focused on larger provider networks, and academic institutions. Flourishing in this market has, so far, proved somewhat difficult for Intelerad, so the vendor will look to utilise Life Image’s installed base and network of contacts to aid in its growth of the large, lucrative mainstream acute market, including the government health sector. This is especially true given the vendor agnostic nature of image exchange systems. For a hospital to adopt image exchange from Life Image, there is no requirement that it sever ties with its current image IT vendor and enter into a new partnership with Intelerad. Life Image’s image exchange could therefore not only prove to be attractive as a standalone product, but allows Intelerad a ‘seat at the table’ when providers look to update existing imaging IT systems. This opportunity can be enhanced by the intelligence Life Images’ platform can provide on incumbent imaging IT vendors volume and performance, offering Intelerad useful insights with which to tailor their own sales pitches when contracts come up for renewal.

This isn’t Intelerad’s first attempt at targeting the acute sector, with its previous acquisition of LumedX an earlier strategy for gaining ground in the market. However, the fact that Intelerad is continuing to target the acute sector with Life Image highlights the importance of the acute market .

Additionally, Life Image, as well as Ambra, to a certain extent, are also well placed to make progress in the market thanks to recent changes in policy, with the 21st Century Cures Act requiring providers to be able to provide patients with their medical imaging data. This initially focuses on general health data and medical history, but, over time will increasingly address all kinds of data, including medical images. As the ability to share images becomes a necessity for providers, Intelerad, given its ownership of Ambra and now Life Image, two of the three largest vendors in the image exchange space in the US, finds itself in a position which appears increasingly promising.

Real World Advantages

Beyond offering opportunities for increased sales of Intelerad products within the acute space, the acquisition of Life Image also builds on another revenue stream. With the access to the range of medical imaging data that it brings, even if Intelerad doesn’t itself own the images, the enterprise imaging vendor can better position itself to serve hospitals and customers through the establishment of a real-world data platform.

The growing importance of health data, including medical imaging cannot data be understated, and hospitals are increasingly aware of the value of that data. The acquisition of Life Image allows Intelerad to further tap into the value of this data, as customers from areas such as pharmaceuticals turn to this data to improve the efficiency of drug discovery, for example. While the true value of Life Image will take some time to realise in this regard, given the nascency of the market, the fact that Intelerad is already preparing for such opportunities places it ahead of the curve compared to most of its direct competitors.

Making a Whole

The picture isn’t universally rosy, however. While the acquisition of Life Image is no doubt a sensible move, and invariably will have been somewhat opportunistic, it doesn’t solve Intelerad’s fundamental problem, deriving value from its long list of acquisitions greater than the sum of the constituent parts.

There are also some gaps in Intelerad’s lineup. The vendor, does, for instance, harbour some AV capability, but, in lacking a fully-featured in-house solution, relinquishes some control. The same is true of AI, with a partnership with Blackford Analysis bringing machine learning tools to Intelerad’s customers, but again, offering less control than an equivalent platform owned by Intelerad. Furthermore, those companies that have so far been acquired continue to effectively sit as a ‘house of brands’ rather than a single cohesive whole.

This is understandable, the integration of such a range of capabilities into one holistic platform is no trivial task. However, the imaging IT market is slow moving, with opportunities to tender for contracts and displace incumbents few and far between. To stand a chance of securing such deals, the vendor does not need to have a fully-integrated cloud-based system ready to deploy right away, but it should at least offer potential customers an outline of its plans. Even simply offering a roadmap would help the vendor give confidence to providers attracted to the potential offered by Intelerad’s acquisitions, but hesitant to commit to the company’s system.

This guidance for customers and potential customers should be among Intelerad’s priorities for RSNA. There will likely be some outline for existent customer and key targets already being quietly shared behind closed doors. But, by committing to a roadmap at the industry’s largest event, promoting its vision and building momentum for its upcoming integrated solution, Intelerad can ensure that the acquisition of Life Image adds not just a strongly performing company to its already impressive roster, but, adds a toolset that can help with a much larger ambition.

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Signify Premium Insight: RadNet is Full Screen Ahead with AI Acquisitions

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Last week, imaging services provider RadNet announced it had acquired Dutch artificial intelligence developers Aidence and Quantib. Aidence is a radiology AI vendor which specialises in the development of clinical solutions for pulmonary nodule detection and lung cancer screening, while Quantib is an AI developer which, offers solutions for prostate cancer and neurodegeneration.

Aidence and Quantib will build on the AI capability RadNet acquired when it purchased Nulogix and DeepHealth in 2019 and 2020 respectively and leaves the American company with considerable potential in the field of cancer screening, an area in which RadNet will increasingly focus.

The Signify View

Many investors are impatient creatures. This impatience often serves them well, allowing them to spot a suitable opportunity and make a tidy return in a relatively short time frame. For the companies they invest in, however, this impatience can force them to alter and adapt their strategies, and ensure they must react to opportunities.

This flexibility is particularly important if a company is running at a loss of around $4-$5m dollars a year, against a figure of just $13m raised from venture capital investors. This is the situation that Aidence and Quantib found themselves in. Both vendors had developed promising AI technology but, with AI adoption in its infancy, commercialising and capitalising on this technology is still something of a challenge.

RadNet believes that in acquiring Aidence and Quantib, it will be able to address this issue. In combining Aidence and Quantib, with the AI capability it already possesses (via DeepHealth) as well as the extensive network of more than 290 outpatient radiology centres, the American provider believes it can create a powerful cancer screening network. It will also look to bolster the capability it has now assembled in breast, lung, and prostate, with colon cancer screening, to be able to offer a screening solution that detects around 70% of cancers that are imaging detectable at an early stage. Currently breast is the only cancer that is widely screened for, but RadNet’s strategy will see it increasingly push for greater levels of screening of these (and other) cancers, aiming to see them become as mainstream as breast screening. As this happens, RadNet will be able to leverage both its new and older acquisitions to be able to offer and deliver multi-cancer screening, capitalising on the comparatively vast numbers of patients that this would entail.

As a strategy this is shrewd, as offering screening is an additive rather than binary development. RadNet can, in the immediate term, use its breast AI tools for breast screening, offering lung and prostate scans as diagnostic clinical decision support tools, but, deriving increasingly greater proportions of revenue from them as these screening types become more common.

Screening’s Scale

The fact that potentially vast numbers of patients will be imaged under screening programmes also reinforces RadNet’s decision to turn to AI tools. As a provider, RadNet will be competing with other outpatient imaging centres, as well as acute sites. This growing competition means that investments which give a provider such as RadNet even a slight competitive advantage will be worth considering. Bringing separate companies and their technology to create an efficient screening solution at present, when screening programmes outside of breast cancer are nascent, is somewhat speculative, but it will give RadNet an advantage, enabling it to drive forward and help create the market for such practices.

Even without the additional impetus given by screening programmes, prioritising the acquisition of AI capability is a sound strategy for RadNet. Both of RadNet’s latest acquisitions, but particularly Quantib’s solutions, are focused on time consuming medical imaging examinations. These involved examinations are comparatively expensive requiring large amounts of radiologist time. Radiologists are among RadNet’s most significant expense, with the provider, according to CEO Howard Berger, spending around 20% of its global net revenue on this resource.

AI solutions which streamline the reading workflow and enable radiologists to be more accurate and efficient, can represent a significant saving for the outpatient imaging provider, and therefore give it increased pricing flexibility and bolster its competitive credentials. This will both allow it to compete directly with other providers, as well as establish itself as an outsourcing option for larger providers for these highly time-consuming exams. If acute hospitals realise that an AI-equipped RadNet can perform and read imaging exams, take a share of the revenue, and still undercut acute centres, then those centres are likely to simply outsource some imaging procedures to them, rather than trying to compete with them on cost. This outsourcing looks particularly attractive for high volume and time-consuming examinations, such as brain MRI and prostate MRI exams.

Sold on Strategy?

One of the more unexpected aspects of RadNet’s acquisition of Aidence and Quantib is the provider stating its ambition to expand its presence both in North America and Western Europe, and positioning itself as  an imaging IT and AI vendor as well as provider. RadNet intends to use its newly curated multi-cancer screening AI tools as a potential lead for its self-developed eRad products. This will prove a challenging task, with the imaging IT market increasingly saturated  in mature regions making organic growth hard to come by. Most providers are already committed to lengthy deals with better established vendors, meaning that RadNet or other vendors eying a provider’s custom will, in most cases, have to wait several years before even having the opportunity to tender for their business. What’s more, providers are becoming less likely to “rip and replace” their existing imaging IT platform. Challenger vendors therefore need to present a significant value proposition that makes the time and cost a worthwhile investment for a provider.

RadNet, for its part, has pushed acquired centres to use its eRad products, regardless of the incumbent solutions or deal lengths. Although this has worked to date, it is less likely to translate to outside of outpatient imaging in international markets.

RadNet does have some advantages, though. As a provider itself, the AI solutions and eRad products will be used internally, and meet the company’s own need, as such, revenue brought in by the sale of the imaging IT software will, in the near term at least, be supplementary to RadNet’s core business. It is deriving another revenue stream, even if small, from already sunk cost.

If RadNet can bring its DeepHealth, Aidence and Quantib acquisitions successfully into a multi-cancer screening solution it could also hold a seriously advantageous position in the cancer screening market. While there are some AI developers that have focused on breast screening solutions, such as Volpara Health, RadNet will be among the first to offer a more broadly capable package targeting multiple cancers. This could put it in a particularly strong position if screening for other cancers becomes more common. Guidance around lung screening in particular is becoming more encouraging, with bodies broadening the criteria for which screening can be used and new studies (the latest taking place in France, funded by the Ministry of Health and the National Cancer Institute), all helping to build momentum for screening. RadNet’s position makes it look likely to capitalise on any rapid increase in screening, from both a vendor and a provider point of view. In fact, RadNet’s unique position may even enable to become a driving force for other cancer screening programmes beyond breast cancer to be adopted. However, whether it commits to such a plan highly depends on whether it has the appetite to champion such initiatives at a legislative level whilst growing its AI division.

A Matter of Timing

Although RadNet’s move to acquire Aidence and Quantib harbours some risk in that it is counting on cancer screening programmes growing in prevalence and becoming more widespread, it is a move that makes sense. The AI market is maturing and, as highlighted by MaxQ’s failure last month, developers that have been surviving off shrinking venture capital (especially in Europe), and which have failed to gain significant market traction will find themselves in increasingly precarious positions. RadNet has therefore chose an appropriate time to make such acquisitions. This timing will look particularly well-judged should the cancer screening market beyond breast cancer, take off as the provider expects.

In their decisions to sell, Aidence and Quantib also acted prudently. Their VC investors have enabled them to grow into companies harbouring competent, regulator approved solutions, but, on their own, both would face uphill battles trying to commercialise their solutions, a process that could be difficult to sustain given the losses they are making. To sell now allows the developers to, as part of a larger company, build on these foundations and become part of a more valuable whole.

Many AI developers that are finding further VC funding hard to come by, and watching their bank balances dwindle, will be hoping to be as fortunate. The AI market continues to move on, as it does, more companies will follow RadNet’s lead and decide it could well be the right time to jump on board.

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Signify Premium Insight: Intermountain Subsidiary Leaves Hospitals Behind

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Amid growing pricing pressure on medical imaging in the US, Intermountain Healthcare recently announced it is launching an outpatient imaging subsidiary under the Tellica Imaging brand name. The first three locations of the new chain of standalone outpatient imaging centres are set to open in late 2021, with five more set to follow in 2022.

As well as operating under a new brand name, the outpatient imaging centres will also offer MRI and CT scans at flat-rate prices which are lower than the same imaging exams in a hospital-based setting.

The Signify View

Some types of imaging examinations will always need to be performed in hospitals. The nature of emergency or interventional imaging, for example, negates the possibility of it being performed elsewhere. For many non-emergency diagnostic imaging exams, however, there is a growing trend for some exams which would typically have been performed in a hospital, to increasingly be taken on by outpatient imaging centres.

The Covid 19 pandemic has been one factor in this shift, with providers trying to keep patients out of hospitals wherever possible in order to minimise their potential exposure to the coronavirus. However, in a bid to rein in healthcare spending in the US, payors have also been increasingly pushing their customers towards outpatient imaging centres, where the cost of imaging exams can be significantly less than in a hospital setting.

More broadly, changes to reimbursement brought about in the latest fee schedule from the Centers for Medicare and Medicaid Services (CMS) is also set to alter the complexion of the medical imaging market. There is a growing body of evidence that suggests the changes brought about in the fee schedule are going to affect single site imaging centres most severely. These smaller independents will therefore find it increasingly difficult to compete with the larger outpatient imaging networks, which can leverage the economies of scale to be more aggressive on pricing. This is one of the factors driving consolidation in the outpatient medical imaging market, which, to an ever-greater degree, is being dominated by large outpatient networks.

An Equal Fight

Hospital groups will be loath to lose business to these imaging groups, and so, in Intermountain’s case, establishing an outpatient network of its own makes a lot of sense. The newly formed Tellica will be able to compete for outpatient imaging business on an equal footing with the other outpatient networks. It will, like its competitors, be able to offer lower cost imaging than in Intermountain’s hospitals.

Payers in the broader market have also played a substantial shift towards outpatient imaging focus, with a number, such as Anthem and UnitedHealthcare, now refusing coverage for non-emergency hospital-based imaging, such is the current discrepancy in price between in-hospital and outpatient-based imaging.

There are many reasons for the discrepancy. Outpatient groups can focus solely on imaging, so are able to tailor their services to efficiently addressing less complex, higher volume imaging exams. In contrast, hospitals must maintain the ability to conduct a broader array of exams and more advanced scans, even if it means purchasing more expensive equipment that is infrequently used and facing the additional staffing costs that comes with more specialised doctors.

Tellica’s spending can also be more focused. The provider will not, in most cases, have to stretch to purchasing the most premium specialised imaging equipment, and instead invest in imaging solutions that can expedite its workflow and enable it to attend to patients more efficiently. Increasing volume and capacity of imaging can also offset the lower reimbursement rate per scan, while also creating opportunity for the health system to bring in new patients. The deployment of AI tools in the outpatient setting may also have a material impact in terms of efficiency and care quality for the provider given its much more myopic focus, with the outpatient setting expected to experience faster adoption of AI versus the hospital setting.

More, and More Affordable

The effects of this shift to outpatient imaging will ripple out across the medical imaging sector. Modality vendors are likely to see an overall increase in the volume of medical imaging equipment being sold. However, this will be balanced by a fall in the premium models as hospitals, which typically purchase the more advanced products, will require fewer systems. Conversely, there is set to be an increase in mid-range ‘workhorse’ models, which will, in most cases, be an outpatient centre’s preference. As such, the market average selling price of systems will fall. This change in the complexion of the market could also see sales leak from premium international vendors, to other cost-competitive vendors, such as United Imaging, which may not be able to compete in the upper echelons of the imaging market but are competitive in the mid-range and keen on pricing. This will move the focus away from top end features, forcing vendors to highlight the fundamental value and efficiency of their systems more clearly.

These changes are also set to have an impact in the imaging IT market. Providers such as Tellica, which grew out of a hospital network, will likely become license extensions opportunities of the  original hospital network’s imaging IT system, utilising the same vendors and the same solutions. This may give the likes of Tellica an advantage from a deal size perspective, enabling them to take advantage of their larger buying power.

There are still some benefits unique to specialist outpatient imaging networks. The opportunity for imaging IT amongst these newly formed networks, is from their nimble structure, allowing them to be reactive to shifts in the market quicker than larger hospitals. In a similar vein these providers are also typically more innovative in adopting new technology, due to the drive for efficiency to remain competitive and profitable. These growing outpatient imaging networks  are therefore likely to be among the first providers to take advantage of informatics vendor’s efficiency-focused products. This could be particularly true as products are increasingly tailored to address the needs of outpatient imaging providers, such as GE’s recently released TruePACS system, for example.

Scale and Efficiency

Intermountain’s launching of Tellica fundamentally represents a hospital network responding to the changing tides in the medical imaging market, and effectively cutting its pricing in the outpatient space to maintain competitiveness. Intermountain is not the first to make such a move but it does highlight the increasing interest in the space. As this interest in outpatient imaging centres grows and more providers look to compete in the space, prices will continue to fall, and margins will  tighten. This will ensure consolidation continues, with it becoming increasingly unfeasible for small independent imaging centres to thrive given they will be unable to capitalise on economies of scale or take advantage of larger, network-wide plays to adopt tools to drive efficiency forwards.

Resultantly, smaller imaging IT vendors will also find it more difficult to compete. Many of their customers are the smaller, independent outpatient imaging providers; as these are replaced by larger outpatient networks with much larger and complex network-wide deals, some of these smaller imaging IT vendors could falter.

Intermountain’s creation of Tellica shows it is willing to adapt to a changing market. It has entered an increasingly competitive and rapidly consolidating space and is hoping to go toe-to-toe with some of fastest growing providers in medical imaging. It can utilise its broader buying power, and the nimbleness that a new brand affords, but key to this success will also be its ability to scale rapidly. The outpatient imaging market is one where scale and efficiency bring success. If Intermountain’s Tellica can achieve both, then it has a strong future ahead.

 

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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here