A Radiology Partners leader is urging peers to look beyond private equity at the much bigger threats facing the specialty.
Gavin Slethaug, MD, shared his thoughts in a video posted by the nation’s largest radiology practice on Wednesday. Titled “Let’s Talk About Private Equity and Other Outside Investors in Radiology,” the video explores different practice models and investors’ growing interest in imaging.
Slethaug spoke directly to individuals who are concerned about the future of radiology under private equity ownership.
“A reminder to keep your spears pointed outwards,” said Slethaug, who is RP’s associate chief medical officer of growth and executive vice president of practice partnerships. “The biggest threats to radiology aren’t the type of practice models that are being described—the investor-backed entity practice model, the private practice model, the employed practice model, the academic practice model. The biggest threats to radiology and the biggest headwinds in our specialty are a number of factors.”
For Slethaug and RP, the biggest challenges facing radiology include:
- The increased number of studies compared to a decreased number of available radiologists.
- Continued Medicare physician payment reductions.
- A poor rollout of the No Surprises Act and subsequent payer behavior.
On those fronts, Rad Partners recently launched a political action committee to help lobby lawmakers to address these challenges, Slethaug said.
He kicked off the discussion by defining the different types of “investor-backed practices.” These can include private equity (a type of financing involving investment of equity capital in private companies), venture capital (a form of PE, with investment in companies believed to have long-term growth potential), and public entities (whose shares are freely traded on a stock exchange).
Slethaug labeled El Segundo, California-based Rad Partners as a “hybrid” model that incorporates both PE and VC. Radiologists own about 33% of the company (Slethaug also is a shareholder), with private equity firm Whistler Capital, venture capital group New Enterprise Associates and the Australian sovereign wealth Future Fund holding the balance.
He also questioned the current scope of private equity across U.S. medicine. Slethaug challenged a 2021 article from Radiology Business, which asserted that 70% of physicians are “employed by private equity firms or other corporate entities.”
“When you think about your doctor’s lounge, are 70% of these physicians employed by PE firms? Well certainly not in any shape or form, what I’m used to,” he said “I thought this was sort of a crazy article. It didn’t make any sense. And so, I looked at it a little closer.”
In examining the data from consulting firm Avalere, nearly 50% of physicians are employed by hospitals while 20% work for other corporate entities. (In Radiology Business’ defense, the report authors define hospitals/health system as corporate entities.) And that 20% portion is made up of PE and other corporate entities such as insurers, including Optum, which employs more than 60,000 physicians.
“So, be careful what you read,” Slethaug said. “Nevertheless, groups are getting larger.”
He cited previous research showing that about 84% of radiology groups employed 10 physicians or fewer in 1989. By 2018, that number had dropped to 48%, according to the Journal of the American College of Radiology. Today, the median practice is about nine physicians, he said.
A 2015 Radiology Business article listed some of the largest radiology groups across the country, with zero backed by private equity firms at the time, Slethaug noted. But three years later using that same list, about half of the top 30 had gained investor backing, including 11 that joined Rad Partners, one with US Radiology Specialists, another with LucidHealth, and one that joined RadNet Inc.
Radiology Partners itself has skyrocketed in size since it launched at RSNA in 2012. The practice had about 215 rads in 2015, which grew to 322 in 2016, 719 in 2017, 1,229 in 2018, 1,604 in 2019, 2,773 in 2020, 3,259 in 2021, 3,439 in 2022, and 3,624 in 2023. Overall, Slethaug estimated that about 12%-13% of U.S. radiologists work with the top PE-backed practices, including 10% at RP, 1% at US Radiology Specialists, less than 1% at LucidHealth and Rayus Radiology, and less than 2% at Envision Healthcare.
That means about 87% of the specialty are with hospitals or other entities. But are those who make up that 13% harming the specialty in some way?
“Is cosigning with private equity good for the future of radiology? It’s the wrong question,” he said. “The right question: Is access to capital good for radiology? And the answer to this, I believe, is yes. Capital allows scaled investments.”
Slethaug highlighted some of the benefits of size, including investments in clinical programs, artificial intelligence, IT, physician leadership development, people and processes, relationships, and diversification of markets. He also pointed to rapidly consolidating hospital systems and practices’ need to evolve along with them. Systems including Ascension, HCA, Tenet and CommonSpirit each operate vast clinical enterprises with more than 100 hospitals apiece, “making it very difficult for smaller groups who may serve only a handful” of them.
“The clients that we are serving are getting larger and their needs are getting more sophisticated. It is going to take scale to be able to meet those changing needs,” he said.
Slethaug also noted the growing power of payers such as UnitedHealthcare, Aetna, Anthem and Cigna, which dominate their markets and dictate contract terms. “These payers are all getting larger,” he said.
He highlighted payers’ growing power because of the No Surprises Act, with the ability to push groups out of network and drive reimbursement downward.
“These are the biggest headwinds facing our specialty right now. It’s not the type of model,” he closed. “Having said that, this is a great topic. I enjoy listening to these different practice models, hearing strengths and weaknesses about them, hearing challenges, etc., but a reminder to keep your spears pointed outwards.”
You can watch the full video here. The presentation was first shared at RSNA 2022 and updated in summer 2023. Slethaug also published an opinion piece for MedCity News on Monday that discusses how capital can benefit the specialty.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.