NightHawk eyes big expansion and more day reads

NightHawk, a leader in off-hours remote reading services, is upgrading its IT infrastructure to double its capacity to six million scans per year and to increase its presence in the daytime radiology market.

As a top player in the $800 million after-hours teleradiology market, NightHawk has its eye on to the primary interpretation of medical imaging performed during daylight hours. In financial terms, the $16 billion market for primary imaging interpretations in the U.S. is 20 times larger than that for late-night preliminary interpretations, according to NightHawk CEO David Engert. Only 1% of the daytime work is outsourced to teleradiology.

Engert and CFO David Sankaran laid out their plans Sept. 15 during the Morgan Stanley Global Healthcare Conference. Diagnostic Imaging monitored comments directed to financial analysts and investors on an online audio feed.

Engert told analysts that NightHawk does not plan to displace radiology groups, who are the firm's biggest customers, but to persuade them that the "model that you trusted us with at night … is just as cost-effective and-probably just as convenient-at other times of the day."

Engert suggested that radiologist groups may want to contract with NightHawk to cover its daytime subspecialty needs or to enable the group to avoid recruiting new radiologists when older ones retire.

"That used to be the last bastion of what radiologists would never want to give up," he said. "But market dynamics encourage them to be more cost-effective and resilient and to provide better and broader services to their customers. Hence, it is a big market opportunity for us."

Since its formation in 2002, NightHawk has built a global network of 140 full-time contracted radiologists, ostensibly making it the largest radiology group practice in the world. About 86% of its business stems from nighttime preliminary interpretations. The staff generates about 11,000 reports on peak nights. The average turnaround time for their reports is less than 17 minutes, Engert said.

Infrastructure modifications under way at NightHawk are designed to address customer retention issues that contributed to six straight financial quarters of slower growth. Two new software releases, one for image management and the other for workflow, will increase NightHawk's imaging capacity from three million to six million studies annually next year, Sankaran said.

Engert stressed that NightHawk favors efficiency over speed for its competitive edge. Productivity is optimized by timing the transmission of unread studies to remotely based radiologists just as they file their last competed scan. Studies are routed to subspecialists, who are most likely to render an interpretation accurately and quickly. The new software will eliminate manual steps still required to move studies from the 1600 U.S. hospitals that use the company's services to its radiologists in Australia, Switzerland, and the U.S. The firm is based in Coeur d'Alene, ID.

Former customers that have returned to NightHawk are contributing to increased market share, Sankaran said. New services accounted for about 24% of the publicly traded firm's total revenue in the second quarter of 2009, up from 20% in the second quarter of 2008. Profit margins are 20%.

Increasing price pressure, hospital demands for radiology contract renegotiations, and changing marketing dynamics since the 2008 financial crash all work in NightHawk's favor, according to Engert. Teleradiology is cheaper, better, and faster than conventional radiology practice.

"We are told that as much as 60% to 70% of radiology is not practiced with the patient in the room, so most radiology is done in the back room of the hospital on a short wire so to speak," he said. "Our business lengthens that wire and connects radiologists across the globe, so they can fill in one another's unproductive times."