Private sector imaging – does it have a future?
publication date: Jan 7, 2010
Medical imaging should be a huge growth market over the next decade in Europe. Alliance Medical expects it to grow by 6-8% a year. And outsourcing opportunities are likely to grow fast as budget deficits force public sector healthcare to retrench. Alliance and other outsourcers say they can dramatically increase productivity. And yet...
And yet achieving decent levels of profitability seems to be very hard. That reflects the huge amounts of capital tied up in expensive machinery. Nor are radiologists cheap – one operator said that their salary alone represented 27% of costs. Talking to diagnostic businesses who run both labs and imaging arms, the executives all say how much more attractive labs are.
One operator says: “In labs most big operators can achieve EBITDA margin of 20% and sometimes 25% or even over 30%. In imaging EBITDA margins can reach 20-21%, but a lot of capital is involved. This makes it much harder for us to invest in imaging.” Dr Evangelous Spanos at Bioatriki, the Greek diagnostics group said that he felt imaging centres provided a good living for 1-2 radiologists, but were not investable businesses otherwise.
Even the head of Curagita, Dr Johannes Schmidt-Tophoff, a German buying group which brings together over 100 mid-sized radiology outpatient centres, admits that it is not clear that there is enough margin to interest private equity investors.This reflects falling margins as prices in southern Germany cut by 30% over the past four years.
Margins and risk should be better on long-term outsourcing contracts than in outpatient centes but figures we have seen suggest that it is hardly a goldmine. Tellingly, excluding teleradiology, where the operators do not have any capital costs, there do not appear to be any pure-play quoted medical imaging service groups anywhere in the world.
We wonder whether it isn't time that imaging suppliers such as GE and Siemens started to shoulder more of the risk burden as Boeing and Airbus do in airplane leasing.
And yet achieving decent levels of profitability seems to be very hard. That reflects the huge amounts of capital tied up in expensive machinery. Nor are radiologists cheap – one operator said that their salary alone represented 27% of costs. Talking to diagnostic businesses who run both labs and imaging arms, the executives all say how much more attractive labs are.
One operator says: “In labs most big operators can achieve EBITDA margin of 20% and sometimes 25% or even over 30%. In imaging EBITDA margins can reach 20-21%, but a lot of capital is involved. This makes it much harder for us to invest in imaging.” Dr Evangelous Spanos at Bioatriki, the Greek diagnostics group said that he felt imaging centres provided a good living for 1-2 radiologists, but were not investable businesses otherwise.
Even the head of Curagita, Dr Johannes Schmidt-Tophoff, a German buying group which brings together over 100 mid-sized radiology outpatient centres, admits that it is not clear that there is enough margin to interest private equity investors.This reflects falling margins as prices in southern Germany cut by 30% over the past four years.
Margins and risk should be better on long-term outsourcing contracts than in outpatient centes but figures we have seen suggest that it is hardly a goldmine. Tellingly, excluding teleradiology, where the operators do not have any capital costs, there do not appear to be any pure-play quoted medical imaging service groups anywhere in the world.
We wonder whether it isn't time that imaging suppliers such as GE and Siemens started to shoulder more of the risk burden as Boeing and Airbus do in airplane leasing.