ADAC buys network management group, plans for radiology networks

Unit will help radiologists deal with managed care

ADAC Laboratories has made no secret of its ambition to evolvebeyond its core nuclear medicine market into businesses with strongergrowth opportunities. The Milpitas, CA, company may have shattereda few taboos concerning the relationship between vendors and customers,however, when it announced that it has purchased Medical TransitionStrategies of Atlanta, a management organization that developsradiology networks.

ADAC made the announcement at this month's Radiological Societyof North America meeting. The company said it has formed a newAtlanta-based division, ADAC Radiology Services, to incorporateMTS. The new division is ADAC's third business unit, joining ADACMedical Systems, which includes ADAC's gamma camera business,and ADAC Healthcare Information Systems, which markets productsin that segment.

Medical Transition Strategies developed radiology networksthat then contract with managed-care organizations for radiologyservices. The networks help give individual radiology groups thescale necessary to negotiate with payors, which prefer to dealwith networks that have broad coverage in a region rather thanindividual groups.

The first radiology network developed by MTS was Georgia RadiologyNetwork, which was formed in 1994 and began negotiating managed-carecontracts last year (SCAN 8/30/95). GRN now has seven contractswith HMOs, PPOs, and workers' compensation organizations. ErnestBerger, executive director of GRN, will join ADAC Radiology Servicesas vice president of network development, with the mission ofreplicating the GRN model in other regions.

As GRN did in Georgia, ADAC Radiology Services will build networksof radiologist groups in a state or region, then pursue contractsbetween those networks and managed-care organizations and otherpayors, according to Tom Trobaugh, ARS vice president of marketing.

"We are structured as a management services organizationthat will have a relationship with the doctors, or radiology networks,and then be the mediator between those networks and the managed-careorganizations or insurance companies," Trobaugh said.

One such network, Empire Diagnostic Imaging, is being formedin upstate New York, and six or seven more are in the pipeline.

Customer/vendor partnering has become increasingly commonplacein medical imaging, as evidenced by the large number of vendorconsulting programs introduced at this month's RSNA conference.Still, ADAC Radiology Services seems to be pushing the envelopein this trend by directly involving a vendor in the practice ofits customers.

ADAC has seen some resistance to the radiology network conceptfrom radiology groups in areas where managed care has not penetrated,according to Trobaugh. Physicians in those areas may resent payingmanagement fees to a network management company when their businesshas not been impacted by HMOs.

In regions where managed care is prevalent, however, radiologistswelcome the concept, Trobaugh said. They realize that networkscan help stem the price erosion brought on by the early impactof HMOs, which often make high-priced radiology services one oftheir first targets for cost-cutting.

ADAC's strategy behind the MTS acquisition is consistent withthe company's desire to grow beyond the nuclear medicine market.ADAC has a commanding market share in that modality, but nuclearmedicine's long-term growth prospects are in question, due tocompetition from other modalities. In 1995, ADAC ramped up itsposition in the information systems market with the acquisitionof Community Health Computing (SCAN 12/14/94).

"We are cognizant of the changes in the healthcare environment,and we'd like to divest into some other areas," Trobaughsaid. "One that seems natural is in management."