Radiology groups aren’t sweating slowdown in imaging market

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You might think that a market’s growth rate tumbling to about 1 percent from 10 percent a few years ago would worry the companies in that market.

But not when that annual market is in the neighborhood of $175 billion annually, according to Scott Seidelmann, CEO of Cleveland-area radiology company Radisphere.

“I’m not focused on the size of the market,” Seidelmann said. “It’s not what I lose sleep over.”

Nonetheless, the advanced imaging market has experienced a significant slowdown in growth in recent years — and it’s likely the days of robust growth for services like Computed Tomography (CT) and Positron Emission Tomography (PET) scans won’t be coming back any time soon, and perhaps never will.

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For advanced imaging, the composite compound annual growth rate between 2000 and 2006 was 9.9 percent, but the rate dropped to 1.4 percent between 2007 and 2009, according to researchers at Thomas Jefferson University in Philadelphia who reached their conclusions through studying Medicare data.

The researchers blamed the slowdown on rising public concern over excessive radiation exposure from imaging procedures and spiraling health costs, plus the weak economy, Aunt Minnie reported.

Seidelmann brushed off those numbers. “I don’t necessarily care if you cut it by 25 percent,” he said. “It’s still an absolutely huge industry.”

Koleman Karleski, managing director with Louisville-based Chrysalis Ventures, largely echoed Seidelmann’s lack of concern about the imaging slowdown. (Chrysalis backs Pittsburgh-based Foundation Radiology Group, which like Radisphere and other competitors, provides outsourced radiology services to community hospitals.)

Radiology remains a “growth market,” just not as hot of a market as it was in the early 2000s, Karleski said. “It was not sustainable to grow at the extraordinary levels we’ve seen in past,” he said.

That unsustainable level of spending in the radiology market was part of the rationale behind Chrysalis’ investment in Foundation Radiology, according to Karleski. Recognizing that the radiology industry would have to place new emphasis on cost containment, efficiency and technology utilization, Chrysalis viewed Foundation as a company that could help accelerate and benefit from that process.

In some regard, the radiology market is a microcosm of the U.S. health system as a whole: Costs have risen so rapidly that the industry simply can’t continue growing as it has in the past, so the challenge for healthcare investors is to find companies positioned to use technology to take costs out of the system while (ideally) enhancing patient care.

Seidelmann and Karleski are confident that their companies will do just that for radiology. The changes in the radiology market, coupled with a high level of competition, means that a substantial slowdown in advanced imaging growth may not represent as much of a threat to radiology companies as it might appear at first blush.

“The pie is growing more slowly, but it’s still growing,” Karleski said. “And market share is moving around pretty rapidly within that pie.”

 

 

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Brandon Glenn

By Brandon Glenn MedCity News

Brandon Glenn is the Ohio bureau chief for MedCity News.
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