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.
Another wide-ranging radiology conversation, this time for an episode with the resident-run radiology podcast, Clinically Correlate.
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?
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.
As you might recall, UnitedHealthcare sued Radiology Partners in April 2023 for an alleged pass-through billing scheme during an ongoing arbitration process about underpayment initiated by RP’s subsidiary group Singleton Associates in April 2022. RP called shenanigans. The judge made them fold that complaint into the ongoing arbitration process, in which there are currently three phases:
Last fall, RP won an interim award from the initial phase of that process to the tune of $153 million. United’s statement at the time: “We do not agree that Singleton will recover an award from UnitedHealthcare.”
In October, RP then quicky filed an application hoping to treat the “interim” award as a “final” award and get that money ASAP. United filed their own application to “vacate” that “interim arbitration award” (if you’re curious, the actual filing is linked from that page).
Their stated reason? Among other things, the arbitration panel might be vacating its own award itself. Err…what?
I’ve recently added a couple more short entries on top of my initial 4-post series on radiology setups/hardware, ergonomics, and productivity.
For convenience, here are the articles:
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1. The Best Radiology Setup/Workstation Equipment
Here’s what I have idiosyncratically landed on as a stable happy set-up that balances efficiency and comfort (and an editorial selection of those favored by others).
Life is too short to use what comes with your computer.
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2. How I Use the Contour Shuttle for Radiology
This post could have been titled: Why and How to Use an Offhand Device for Radiology, Or maybe even: How to Make the Most of All Those Extra Buttons on Your Gaming Mouse or Similar Device
More buttons! Better scrolling! Save your wrist! Feel like a PACS ninja!
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AutoHotkey is powerful free software you can use to control your computer and generate simple (or complex) macros to automate tedious or repetitive tasks.
Achieve frictionless hands-free dictation (and more!)
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4. Making the Most of PowerScribe
PowerScribe is ubiquitous in radiology practices across the country, and it’s the only dictation software I use in my job. It has many flaws, but there are plenty of things we can do to make the most of it…Here are some tips for making PowerScribe (360) suck less.
Don’t be a passive victim of bad corporate software.
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For the use-with-your-hands part, here are some quick contexts and a single choice for each that you can implement wherever you work:
Quick highlights: Optimizing is a worthy investment of time/energy/money.
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6. Using the Zelotes C18 for Radiology
The Zelotes is the cheapest vertical mouse that doesn’t suck, and it has enough buttons that it’s useful for everyday PACS functionality no matter where you work.
How to think about mice for radiology with a special focus on a very inexpensive “vertical mouse” (along with some alternatives).
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Feel free to bookmark this post, because I’ll also add any follow-ups here.
Radiology Partners is in the news more (especially now), but here’s an interesting compare/contrast from S&P back in March 2023 looking at RP vs US Radiology (free account required).
From that, an interesting chart for a bird’s eye view:
Note: this chart is almost a year old and predates a lot of recent developments including RP’s proposed recent restructuring and USRS’s launching of its outpatient teleradiology practice Connexia.
Excellent piece on Prenuvo’s whole body scans by Dr. Dhruv Khullar in The New Yorker:
Doctors sometimes use a barnyard analogy to talk about the vast differences between cancers. A tumor can be a turtle, a bird, or a rabbit, depending on its speed and ability to escape; the goal of screening and treatment is to fence the cancer in. Turtles move so slowly that, fence or no, they’ll never make it out. Birds are so flighty that fences are irrelevant; even if you spot them, there’s no real way to stop them. Only the rabbits can actually be fenced in. By some estimates, at least a quarter of cancer diagnoses can be considered overdiagnoses. These tumors are turtles; they never would have left the barn.
South Korea inadvertently illustrated this point when a government program, starting in 1999, offered free screenings for several common cancers. A thyroid-cancer screening wasn’t included, but many patients opted to add one for a fee. Between the early nineties and the early twenty-tens, rates of thyroid cancer soared fifteenfold—a development that would have been worrying, except that death rates from thyroid cancer never rose, and remained very rare. Diagnosing these cancers wasn’t saving lives: almost all were papillary thyroid tumors, which are present in as many as a third of all adults and rarely cause problems. Nonetheless, tens of thousands of South Koreans had their thyroids removed and started taking lifelong hormone supplements. They’d fenced in turtles.
Excellent, accessible illustration of what screening is for and why more isn’t always better. There will always be happy individual narratives of people saved by screening even when, on the whole, a particular screening test is net harmful. Judging a population tool that results in society-wide costs based on individual unaggregated results is a fool’s game.
Quoting a scene from Scrubs, the most accurate medical television show of all time:
In a 2004 episode of the sitcom “Scrubs,” Bob Kelso, the chief of medicine at Sacred Heart Hospital, runs into a fellow-doctor, Perry Cox, in the hallway. “I am considering offering full-body scans here at Sacred Heart,” Kelso says. “What do you think?”
Cox looks appalled. “I think showing perfectly healthy people every harmless imperfection in their body, just to scare them into taking invasive and often pointless tests, is an unholy sin,” he says.
“Does sound a little sketchy ethically, doesn’t it?” Kelso says. “Thanks, Perry.”
It’s feasible there could be a future world where very frequent low-cost whole-body screening is helpful, particularly if the follow-up for turtles was nearly always just more low-cost whole-body screening and not something costly and/or invasive. But today, in our current strained inefficient system with its high costs–and its current players and their financial motives–this is unlikely to be the case.