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Will we see the first Private Radiology Practice “Unicorn” Emerge before the end of 2018?

Posted on 11/27/16

A “Unicorn” is a privately held company (technically a software company or a technology company) with a post-money valuation of $1 billion or more (https://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/). “Post money valuation” means they were able to raise capital and value the company at close to $1B, and that value combined with the cash they received exceeded $1B. The first Unicorn Radiology Practice may exist already. If that is the case, I don’t know about it so let me know. Unicorns are, after all, rare and hard to spot. If a company does not do some kind of publicly accessible financial transaction that places a value on the company, you may not hear about it.

If we don’t already, when will we have the first Radiology Practice valued at over $1 billion?  It might be closer than you think. vRad was purchased by MEDNAX for $500 million in 2015. The company had $185 million in revenue at the time of acquisition (http://www.radiologybusiness.com/topics/leadership/mednax-acquires-vrad-500-million). Using this multiple, you would need a practice with $370 million in revenue to be given this valuation.

Given that practices are consolidating at an ever increasing rate, we expect that a few Unicorns will emerge in the next few years. It is also quite possible that practices will achieve higher valuation multiples as they employ information technology to build efficient practices that generate more earnings per radiologist.

Perhaps the biggest accelerator to valuation is a practice’s ability to acquire smaller practices and quickly improve their efficiency. They typically do this be integrating the smaller company into the bigger company’s superior IT infrastructure. Consider a smaller practice that is purchased by a bigger practice. The smaller practice might have been limping along with one “IT guy” and older software solutions. The integration of clinical data might be done by the radiologists themselves, searching through different systems. Their workflow consists of radiologists searching through multiple worklists and finding the next exam to read. Their night reads may be outsourced and generating only prelims, and their operations center may be non-existen.

Now consider what happens to that practice when it is acquired. They get access to superior workflow and imaging technology. A full team of IT professionals is available to integrate all of their systems. They have in-house night reads and a fully staffed operations center to keep the radiologists reading.  Radiologists may experience more job satisfaction, less stress, and could even end up owning a stake in a company that could ultimately go public or achieves some other liquidity event. Maybe riding a unicorn is a good idea…

(For a complete list of the current tech unicorns, check out the CrunchBase Unicorn Leaderboard https://techcrunch.com/unicorn-leaderboard/)