It’s been a while since MEDNAX (NYSE: MD) surprised the healthcare industry with its $500 million acquisition of Virtual Radiologic Corporation (NASDAQ: VRAD). Since May 2015, in fact. Consider the wait over. The MEDNAX M&A juggernaut is rolling into the radiology arena.
The acquisition of vRad added approximately 350 radiologists to MEDNAX’ payroll back then, at an average of $1.4 million per radiologist. It also added a telemedicine component, which was previously missing from MEDNAX’ dealings with hospitals on behalf of its anesthesiology and neonatology divisions.
Essentially, vRad physicians read and interpret more than 5 million diagnostic imaging studies annually and provides radiology coverage to more than 2,100 healthcare facilities across all 50 states and internationally. Its proprietary technology and workflow platform, extensive database and analytic capabilities enable real-time distribution of studies.
In late January 2017, MEDNAX announced the acquisition of Radiology Alliance, PC and Infinity Management, LLC, both based in Nashville. Radiology Alliance is the largest private practice radiology group in Tennessee, with 64 physicians. Infinity Management is a medical management platform owned by the company.
Financial terms were not disclosed, except to say that this was cash-and-equity transaction. That’s a departure for MEDNAX, which usually goes with all cash.
Radiology Alliance provides diagnostic radiology, interventioanl radiology, women’s imaging and nuclear medicine services to nine TriStar Health System hospitals in middle Tennessee, southern Kentucky and many other treatment and outpatient imaging centers.
This marks the first on-site radiology group to join MEDNAX, but it won’t be the last. CEO Roger Medel noted in a press statement that the combination “make[s] us an extremely valuable partner to radiology practices.”
But 2017 doesn’t look like a break-out year for MEDNAX. Stifel analyst Chad Vanacore published a note on January 13 noting that the vRad acquisition was a drag on Q4:16 results thanks to the need to recruit more radiologists at vRad to meet higher demand. MEDNAX’ earnings call is scheduled for February 7, and Vanacore, for one, will be waiting to hear about radiologist recruiting, since the company set goals to grow that headcount to 500 just to meet demand, leverage economies of scale and improve margins on the business.
The repeal of the Affordable Care Act could also adversely affect MEDNAX in its anesthesia division. Stifel’s Vanacore suggested in his recent note that the repeal could negatively impact anesthesia volumes and payor mix as fewer patients opt for surgeries. The concept also applies to inpatient volumes for hospitals and even ambulatory surgery centers, which have been so popular with investors in recent years.
As of this writing, repeal of the ACA is a forgone conclusion. All that’s left is the timing, which appears to hinge on when the Republican-controlled houses of Congress can agree on a replacement that won’t cost them the 2018 and/or 2020 elections. In other words, don’t hold your breath.