Private Equity Investments Draw Mixed Reactions in Radiology

Partnership discussions should include questions about effects on patient care, radiologist workload and long-term viability of the practice

Gavin P. Slethaug, MD,
Frank Lexa, MD
Christoph Lee, MD,

This is the final story in a series of RSNA News articles addressing issues facing private radiology practices. Read the first and second story of the series. 

Private equity investment in radiology practices is nothing new. But the impact such investments have on the practice and on the radiologists is very much open to debate.

“Investor-backed entities can be a good idea if done correctly and for the right reasons,” said Gavin P. Slethaug, MD, associate chief medical officer for growth at the equity-backed Radiology Partners.

According to Dr. Slethaug, outside investment, when done right, can open the door to new clinical programs, new technologies like AI and enable more subspecialty imaging care. It can also increase financial stability and operational excellence within a practice while lowering administrative costs.

“In my experience at Radiology Partners, such investments have benefited radiologists, referring physicians, hospitals and, most importantly, patients,” he said.

Frank Lexa, MD, professor and vice chair of the Department of Radiology at the University of Pittsburgh School of Medicine, is of the view that private equity tends to be a poor investment match for successful radiology groups, although he believes it does present an opportunity to improve hospital infrastructure.

“If done correctly, such investment could enable the purchase of new equipment and technologies,” he said.

On this point, Christoph Lee, MD, professor of radiology, health systems and population health at the University of Washington, tends to agree.

“Being under a larger private equity umbrella can help scale technological advances if there is a unifying, enterprise- wide PACS and information systems used across practices,” Dr. Lee said. “Such a setup could help alleviate the overhead costs that smaller practices face while allowing for the types of population-based imaging technology evaluation that can move the field forward.”

“Simply put, a group of 3,600 radiologists is able to make investments that a 200-radiologist practice can’t, or that a 10-radiologist practice—the median size for radiology groups in the U.S.—can only dream of,” Dr. Slethaug added.

The Challenges of Profit-Driven Private Equity in Radiology

However, as Dr. Lee pointed out, such tech-driven investments will only happen if the private equity firm has a very strong business case for doing so. Unfortunately, this often, isn’t the case.

“One downside of private equity is the required short-term horizon for profits,” Dr. Lee said.

Dr. Lexa added that private equity’s focus on achieving large profit margins in a short amount of time can translate into higher quantities of reads without guarantees of maintaining quality.

“This essentially turns radiologists into commoditized workers rather than owner-stakeholders, inevitably leading to higher productivity requirements and burnout among radiologists and further burdening an already depleted workforce,” he explained.

Dr. Slethaug disagrees, highlighting the many ways radiologists stand to benefit from private equity investments.

“Radiologists not only benefit from new clinical programs, AI and IT solutions, and professional development opportunities, but also from the peace of mind in knowing that appropriate decisions and investments are being made to ensure that the practice continues to thrive,” he said.

Drs. Lee and Lexa aren’t so sure, noting that after a practice is purchased, young radiologists tend to see an increase in workload, a decrease in salary and a curtailing of their long-term prospects within the group.

“The lack of transparency in buyout negotiations can further deteriorate the professional experience of younger radiologists just starting their careers and negatively impact their long-term commitment to the profession,” Dr. Lee said.

“If you look at the private equity model that’s currently being used, it’s quite good for the radiologists who are selling their practices,” Dr. Lexa added. “But it’s hard for me to see the upside if you’re a young radiologist.”

“I enjoy these discussions about practice models and strongly believe there is room in the health care ecosystem for all models, including traditional private practice, investor-backed private practice, employed and academic.”


How Private Equity Affects Patient Care in Radiology

When private equity prioritizes the bottom line, it could also have a negative impact on patient care.

“If outside investors make decisions solely in the interest of profit, then this would obviously not be in the best interest of the patient,” Dr. Lexa said.

But Dr. Slethaug believes this is the exception, not the rule.

“Meeting the expectations of radiologists and health systems drives radiologist recruitment and retention and drives growth within our health care systems— and growth is critical to any investor- backed entity,” Dr. Slethaug said. “At the end of the day, smart outside investors will be aligned with the best interests of patient care.”

To hold private equity accountable, Dr. Lexa recommends that radiology societies and the profession in general demand that equity firms be able to demonstrate how making a profit contributes not only to efficiency gains, but to a greater public good.

“They should be held accountable for accelerating technological innovation and adoption and be able to show how their investments help maintain—even improve—the quality of patient care,” he said.

Not for Every Practice

Clearly, private equity investment isn’t for every practice, and just because it works for one doesn’t mean it will work for the other.

“Each group is unique and will have different reasons for engaging in partnership discussions,” Dr. Slethaug said.

To help determine whether an investment is a good fit, Dr. Slethaug suggests each radiologist considers two questions prior to voting to proceed with a partnership: One, will the group be better off post-partnership, and two, will the individual radiologist be better off post- partnership?

“I’ve said it before and I’ll say it again, I enjoy these discussions about practice models and strongly believe there is room in the health care ecosystem for all models, including traditional private practice, investor-backed private practice, employed and academic,” Dr. Slethaug concluded.

Read previous RSNA News stories on issues related to private practice radiology: