NightHawk Publishes Business Ethics Guidelines

Drawing a line in the shifting sands of the radiology marketplace, David Engert, CEO, NightHawk Radiology Holdings, has gone public with a list of the terms under which the teleradiology company would consider providing service directly or indirectly through a practice management organization [PMO] to a hospital. Coupled with a statement of commitment to radiology practices, NightHawk’s rules of engagement were released in response to the current predatory practices in the teleradiology market, Engert told ImagingBiz during a telephone interview.ImagingBiz: What prompted the development of what you are calling your rules of engagement? Engert: It’s something we developed well over a year ago as a result of a situation: We were indirectly providing services to a Toledo, Ohio hospital through a PMO, and had been for multiple other sites before that, but this one didn’t turn out well. It wasn’t managed well by anyone in the picture, and when we got in there, it blew up. We didn’t want to see that happen, that was never our intention. That was the impetus for us to say we inadvertently or indirectly can’t get involved in something like that again. We decided to create an internal set of rules of engagement that would be our guideline for not letting that happen. Why we decided to go public with it now is related to something we see happening in the entire radiology industry. We have never engaged in disintermediating a group or becoming competitive or predatory with any of our customers. But, we have seen several, many, other teleradiology companies become very predatory, some overtly, and some not so overtly, but they are going after hospital contracts and going after business that either was currently provided by a group or was very recently provided by a group. We want to send a clear message to the marketplace, so that our customers and anybody who might ever think about being our customer understands that we are publicly committed to following a very well-defined course that precludes us from becoming predatory with our customers, our radiology groups, in general. We are making the statement publicly now, even though we have been living and breathing it for a year.ImagingBiz: Your third rule of engagement states that you would consider supporting a PMO’s bid for a hospital contract only if the hospital initiates an open competition and none of the competing groups were a client. Could you clarify?Engert: In rule number 3, if there is an incumbent radiology group, and they are not a NightHawk customer, and an open and fair competition for the business develops, and no other group pursuing that business is a customer of ours, we would consider providing services to a PMO if they won the business. It is important to clarify that under our rules, if the incumbent group is not our customer and another radiology group competing for that business is our customer, we would participate with that group, and not a PMO.ImagingBiz: You allude to some missteps in your press release and some hard lessons. Are you referring to NightHawk’s role in the Mercy Health Partners/Consulting Radiologists relationship? What is your current role there? Engert: If I look back at Toledo, I would say that was not done with an open and fair competition, because it was not done with a public RFP. In the business world, if something happens that we didn’t plan on but inadvertently and indirectly results in an outcome we don’t like, all I can do is try to make sure it doesn’t happen again. That’s the hard lesson we learned. We are contractually committed [to provide services at Mercy Hospital through Imaging Advantage]…. The original contracts with Imaging Advantage were signed when Paul Berger was still CEO. ImagingBiz: Did this decision result in you losing some of your customers? How significant of a loss was it and what were the lessons you learned?Engert: Yes, but I am not going to comment on who and what. It hasn’t had a dramatic impact on our financials, but I am not proud of losing any customers. I think it is apparent in the rules of engagement: What we are trying not to see happen is a group getting displaced that we have any direct involvement with, ever. ImagingBiz: What has been the response from your customers to your new initiative? Has it tempered their fear that NightHawk is a predator?Engert: Overwhelmingly positive. The marketplace has been afraid that NightHawk might be a competitor since 2003. [Radiologists] fear teleradiology in general because they have helped enable a very large, significant industry to become quite substantial in what it does. We are more than 140 radiologists now, which is significantly bigger than any other group in the United States. So I can see why they would have natural concerns: What if we [NightHawk] really wanted to do something? That’s why I want to make sure they know that that’s not our game, that’s not something we’re going to do, and make sure they understand when and only when we would do something, as well as the times when we won’t. What we are trying to do is take a leadership position on this. I believe if you take care of your customers, they’ll take care of you.ImagingBiz: What about Wall Street and your investors? Do you think the new strategy can bring you enough growth to satisfy your investors?Engert: They don’t run my company, believe it or not, I do. And I’m not a Wall Street guy, I’m a health care guy. If you ever listen to any earnings call—and I’ve been on six of them since I’ve been running the company—the first question out of every investor’s mouth is, ‘When are you going to go after hospitals directly?’ After I get asked that repeatedly every quarter, every time, I tend to believe that is what they think we should do. And every time they ask, I say, ‘I don’t think that is smart to do.’ I am not going to go after hospitals directly at the expense of radiology groups. That’s a short-term prospect and a clear signal to our customers that [NightHawk is] a competitor. That doesn’t mean I don’t want to grow. Growth is good, especially if it is profitable growth. But I don’t run the company based on what investors say. I want to do it smart, and I want to do it the right way, and I am really in it for the long term. I do like to make good honest profits, but not at the expense of the people who enabled us to become who we are. Everyone talks about the downside of publicly traded companies in radiology, like NightHawk. Let me tell you the good side: Making a comment in the publicly traded market like I just did, publicly, I have to follow it. And that’s a good thing. I am accountable every day for what we do.