In which we have the nonphysician CEO of the largest radiology company/practice in the country—one that employs 10% of the workforce, just received $720 million in rescue funding, and is valued at several billion dollars—taking the time to troll an individual radiologist on X (née Twitter):
Clearly, a man delighting in his bailout.
Update 2/27/2024:
S&P broke down the uses of that $720MM investment: $380MM to pay off the revolving credit line. $168MM for the company’s term loan. $68MM will cover its secured notes. $100MM to transactional costs and people’s pockets.
So that $500MM in “cash and liquidity” RP reported isn’t much cash. It’s mostly liquidity in that they can draw on the credit line again now that it’s been paid.
If RP invests in “growth” as promised, it won’t really be with this $720 million. That’s mostly spoken for. It will be with more freshly borrowed money from the revolver.
I’ve heard unverfied reports that the main investment here was apparently a $600MM rescue from venture firm NEA, RP’s first investor. If true, it represents a massive doubling down to prevent their initial investment from going to zero in a bankruptcy. Given the S&P breakdown, the amount they put in seems like the minimum required to get the refinancing deal done and not just a random doubling of previously published expectations due to high investor confidence.
If this all goes south one day, will make an excellent case study for the sunk cost fallacy.
They may not know how to run a radiology business, but they inarguably understand how to play the finance game: Radiology Partners completed its “comprehensive set of financing transactions to strengthen its financial position.”
In doing so, they ended up raising $720 million in preferred equity. They successfully used the promise of a substantial equity raise to get their debtholders to refinance, then used the promise of successful refinancing to further raise an additional ~$400 million.
This impressive fundraising success is going to be an even more substantial dilution of the current radiology shareholders. Radiologists now own less of this company, and because this preferred equity is reportedly paid in kind (as we discussed here), the dilution will increase over time. If you’re an RP shareholder, don’t worry though: you’ll also have the chance to participate in this fundraising round if you’d like to invest more of your money in the “leading radiology practice in the U.S.”
Of the new equity, $500 million will be used to “fund continued growth and investment in innovation.” That’s enough to buy a few more practices, but I suspect most of it will go to operational cash burn (particularly fluffing current practices negotiating for more money) and possibly some AI investments. In my view, doubling down on AI is RP’s real long-term hope and plan.
I’m running low on my stash of Cometeer coffee. If you’re interested, you can get $20 off your first order and help subsidize my terrible caffeine addiction. (Full review here. Not an ad, but I do like cheaper coffee.)
Another wide-ranging radiology conversation, this time for an episode with the resident-run radiology podcast, Clinically Correlate.
The gaming company Valve started in 1996, became initially successful with the award-winning game Half-Life, even more famous for the early multiplayer mods/games Team Fortress and Counter-Strike, expanded to change videogame distribution with the Steam store/platform, made the innovative/beloved genre-bending puzzle shooter Portal, and even recently released the powerful handheld gaming device, the Steam Deck.
But in addition to (or perhaps, enabling) all that commercial success, they have an unusually flat organizational structure.
We could summarize the approach as: hire great people and don’t stop them from doing great work. At Valve, employees themselves choose what to work on and how to be valuable.
So, from–of all things–the Valve new employee handbook from 2012:
What about all the things that I’m not getting done? It’s natural in this kind of environment to constantly feel like you’re failing because for every one task you decide to work on, there will be dozens that aren’t getting your attention. Trust us, this is normal. Nobody expects you to devote time to every opportunity that comes your way. Instead, we want you to learn how to choose the most important work to do.
While people occasionally choose to push themselves to work some extra hours at times when something big is going out the door, for the most part working overtime for extended periods indicates a fundamental failure in planning or communication.
What a revelation: Working too much is a failure. Focus, flexibility, and rest are important.
If the work can’t done in a reasonable amount of time, then there is a problem somewhere in the process from the conception to scope to plan to execution.
Imagine the typical modern doctor charting at home on a routine basis after a full clinic day: this is an unadulterated system failure.
Dovetailing with Productivity is a Trap, this type of overwork often suggests that we are trying (or being forced) to do too many things. After all, good care is inefficient (also discussed here and here).
And while it’s not feasible in all work settings, at least for ourselves we can learn focus and self-accountability through the Basis of No.
What if I screw up? Nobody has ever been fired at Valve for making a mistake. It wouldn’t make sense for us to operate that way. Providing the freedom to fail is an important trait of the company— we couldn’t expect so much of individuals if we also penalized people for errors. Even expensive mistakes, or ones which result in a very public failure, are genuinely looked at as opportunities to learn. We can always repair the mistake or make up for it. Screwing up is a great way to find out that your assumptions were wrong or that your model of the world was a little bit off. As long as you update your model and move forward with a better picture, you’re doing it right. Look for ways to test your beliefs. Never be afraid to run an experiment or to collect more data. It helps to make predictions and anticipate nasty outcomes. Ask yourself “what would I expect to see if I’m right?” Ask yourself “what would I expect to see if I’m wrong?” Then ask yourself “what do I see?” If something totally unexpected happens, try to figure out why. There are still some bad ways to fail. Repeating the same mistake over and over is one. Not listening to customers or peers before or after a failure is another. Never ignore the evidence; particularly when it says you’re wrong.
I like that Valve made a new employee handbook like this. How many jobs in healthcare have expectations and culture so baked in (and that anyone would actually read or believe)?
Cognitive bias is universal, but how you deal with it varies. I don’t know if their culture of failure acceptance and learning works in real life as it does on paper, but something tells me people are more generous in this setting than the finger-pointing that our typical internal reporting and medical malpractice so often devolve into.
For reference on how not to create a culture of accountability and improvement: Simple Sabotage.
We are all stewards of our long-term relationship with our customers. They watch us, sometimes very publicly, make mistakes. Sometimes they get angry with us. But because we always have their best interests at heart, there’s faith that we’re going to make things better, and that if we’ve screwed up today, it wasn’t because we were trying to take advantage of anyone.
We do not have a growth goal. We intend to continue hiring the best people as fast as we can, and to continue scaling up our business as fast as we can, given our existing staff. Fortunately, we don’t have to make growth decisions based on any external pressures—only our own business goals. And we’re always free to temper those goals with the long-term vision for our success as a company. Ultimately, we win by keeping the hiring bar very high.
The need for growth–growth as an intrinsic good, growth at all costs–has clearly ruined a lot of things. Compromising quality for growth poisons the well and destroys culture. It’s a short-term play that fundamentally changes organizations in ways that are often irreversible.
In healthcare, an old academic medical center turned into a sprawling regional healthcare network is almost unrecognizable. But there are so many other examples. The question we often forget to ask is: is this decision really good for patients?
In some ways, hiring lower-powered people is a natural response to having so much work to get done. In these conditions, hiring someone who is at least capable seems (in the short term) to be smarter than not hiring anyone at all. But that’s actually a huge mistake.
The typical business argument is: When you take a group of A-caliber people and hire a bunch of Bs, the non-stars don’t rise to the level of the old status quo, they inevitably drag the caliber down, bit by bit, hire by hire. If the argument that Bs hire Cs is true, then it’s no surprise that growth often results in dilution to the point of unrecognizability.
A little over a year ago, I found Oliver Burkeman’s Four Thousand Weeks: Time Management for Mortals to be one of the most excerpt-able books I’d read in a while.
In it, Burkeman describes cosmic insignificance theory, the perhaps counterintuitive argument that I would summarize as, “You really don’t matter very much in the grand scheme of things, so stop getting so worked up.”
You could consider the aspirational approach to be a form of happy nihilism.
Here are some of my favorite passages:
The world is bursting with wonder, and yet it’s the rare productivity guru who seems to have considered the possibility that the ultimate point of all our frenetic doing might be to experience more of that wonder.
Except the people who want to amass experiences like a collector hoarding trinkets.
I also always love references to Keynes and his prediction for the 15-hour workweek:
None of this is how the future was supposed to feel. In 1930, in a speech titled “Economic Possibilities for Our Grandchildren,” the economist John Maynard Keynes made a famous prediction: Within a century, thanks to the growth of wealth and the advance of technology, no one would have to work more than about fifteen hours a week. The challenge would be how to fill all our newfound leisure time without going crazy. “For the first time since his creation,” Keynes told his audience, “man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares.”
But Keynes was wrong. It turns out that when people make enough money to meet their needs, they just find new things to need and new lifestyles to aspire to; they never quite manage to keep up with the Joneses, because whenever they’re in danger of getting close, they nominate new and better Joneses with whom to try to keep up. As a result, they work harder and harder, and soon busyness becomes an emblem of prestige. Which is clearly completely absurd: for almost the whole of history, the entire point of being rich was not having to work so much. Moreover, the busyness of the better-off is contagious, because one extremely effective way to make more money, for those at the top of the tree, is to cut costs and make efficiency improvements in their companies and industries. That means greater insecurity for those lower down, who are then obliged to work harder just to get by.
That summarizes a lot of depressing things about the modern human condition.
Not to mention the downsides of being effective. In many industries, that means the more you are able to do, the more you get to do.
Productivity is a trap. Becoming more efficient just makes you more rushed, and trying to clear the decks simply makes them fill up again faster. Nobody in the history of humanity has ever achieved “work-life balance,” whatever that might be, and you certainly won’t get there by copying the “six things successful people do before 7:00 a.m.”
Heh. No matter how much you do, you can’t do it all–so stop being so dramatic.
The day will never arrive when you finally have everything under control—when the flood of emails has been contained; when your to-do lists have stopped getting longer; when you’re meeting all your obligations at work and in your home life; when nobody’s angry with you for missing a deadline or dropping the ball; and when the fully optimized person you’ve become can turn, at long last, to the things life is really supposed to be about. Let’s start by admitting defeat: none of this is ever going to happen.
The lists don’t magically become empty unless you don’t mind them being empty.
The fundamental problem is that this attitude toward time sets up a rigged game in which it’s impossible ever to feel as though you’re doing well enough. Instead of simply living our lives as they unfold in time—instead of just being time, you might say—it becomes difficult not to value each moment primarily according to its usefulness for some future goal, or for some future oasis of relaxation you hope to reach once your tasks are finally “out of the way.”
On the opposite side of binging content in its many forms is the feeling that activities need to be “worth it” by some metric, that you are accountable for your time to any judge but yourself. (Also, I’m a hypocrite.)
I was a “productivity geek.” You know how some people are passionate about bodybuilding, or fashion, or rock climbing, or poetry? Productivity geeks are passionate about crossing items off their to-do lists. So it’s sort of the same, except infinitely sadder.
That’s a good line.
I tried to align my daily actions with my goals, and my goals with my core values. Using these techniques often made me feel as if I were on the verge of ushering in a golden era of calm, undistracted productivity and meaningful activity. But it never arrived. Instead, I just got more stressed and unhappy.
I would never succeed in marshaling enough efficiency, self-discipline, and effort to force my way through to the feeling that I was on top of everything, that I was fulfilling all my obligations and had no need to worry about the future. Ironically, the realization that this had been a useless strategy for attaining peace of mind brought me some immediate peace of mind. (After all, once you become convinced that something you’ve been attempting is impossible, it’s a lot harder to keep on berating yourself for failing.) What I had yet to understand, at that point, was why all these methods were doomed to fail, which was that I was using them to try to obtain a feeling of control over my life that would always remain out of reach.
Inevitably, to Nietzsche:
We labour at our daily work more ardently and thoughtlessly than is necessary to sustain our life,” wrote Nietzsche, “because to us it is even more necessary not to have leisure to stop and think. Haste is universal because everyone is in flight from himself.”
…which is a lot like the classic quote by Pascal: “All of humanity’s problems stem from man’s inability to sit quietly in a room alone.”
In practical terms, a limit-embracing attitude to time means organizing your days with the understanding that you definitely won’t have time for everything you want to do, or that other people want you to do—and so, at the very least, you can stop beating yourself up for failing.
…which then reminds me of the Covid-era essay by happiness professor/guru Arthur C. Brooks: How to Want Less.
Even embracing limitations, it’s easy to want to turn finitude into some sort of productivity paradox like the one thing: the best way to get things done is to do fewer things.
What Burkeman suggests is instead: just be okay with doing fewer things.
For those with an extra ~50 minutes in their lives, Daniel Arnold and I had a wide-ranging conversation on the newest episode of the Radiology Report podcast.
Lower [neuroradiology] shift volumes yielded significantly lower error rates. The lowest error rates were observed with shift volumes that were limited to 19–26 [CT/MRI] studies. Error rates at shift volumes between 67–90 studies were 226% higher, compared with the error rate at shift volumes of ≤ 19 studies.
I wonder, are there any places in the world routinely reading ~20 cases per shift?
There’s a Derek Sivers quote about business in Anything You Want that I think applies well to healthcare. I’ve replaced “customer” with patient”:
Never forget that absolutely everything you do is for your patients. Make every decision — even decisions about whether to expand the business, raise money, or promote someone — according to what’s best for your patients.
One key here is that you can’t just consider what only best for your patients right now, but also what will be best for your patients in the long run. We can ask that question as individual doctors, as groups/practices/hospitals, as specialties like radiology, and as healthcare professionals as a whole.
You, your business, and your industry need to be healthy and strong enough to keep providing the best possible care into the indefinite future.
Last week, Radiology Partners released an announcement that it was “commencing a comprehensive set of financing transactions to strengthen its financial position.”
Going into 2024, RP was already cashflow negative (i.e. losing money) to say nothing of the massive debt payments due this year and next. For a reminder of what was coming, recall this slide:
But it’s more than that: In addition to having no ability to pay these loans back, RP told lenders they’re a month or two away from running out of money period. They’ve been trying to raise equity (i.e. sell a stake in the company) to pay off some of the debt including a big effort last summer, but even their own materials assume the need to refinance. (No big surprise there, it’s common practice in this high-leverage industry.)
However, there’s a chicken and egg problem. Recall that in a bankruptcy, debtholders get paid before equity holders get a dime. No one wants to put fresh money into a failing business about to go bankrupt, so no one in their right mind would invest if the current debtholders weren’t willing to “amend and extend.” But debtholders aren’t going to A&E unless they think their odds of getting money back are improved by pushing back the due date. They want to see a really healthy business or at least fresh capital coming in to keep things afloat.