Teleradiology business Medica has been on a transformational journey since CEO Dr Stuart Quin took over in 2019. He talks to Maria Davies about what it has been like to expand and diversify during a health crisis and where the company is heading as health services turn their attention back to the day-to-day
Teleradiology business Medica Group has had a busy year. In the space of 12 months, the London listed company has made two major acquisitions, diversified into new geographies, entered the clinical trials market and begun rolling out a major programme of technical investment, including AI assisted reporting. And all of this against the backdrop of a major health crisis, which has hit hard on the company’s core business and its bottom line – albeit temporarily.
‘We’ve grown into the Irish markets, into the US and through joint venture into Australia and New Zealand as well so the business is very different from what it was in 2019 and is well placed to come out of the pandemic and to continue to grow very strongly in future years,’ says CEO Dr Stuart Quin.
Quin joined the company from Synlab in September 2019 – just six months before the UK-wide Covid lockdown and the pause on NHS elective activity, which represents a significant part of Medica’s UK business.
Despite continuing to grow its out-of-hours business Nighthawk during the pandemic, revenue from elective activity dropped almost 50% causing turnover to plummet 21% in 2020 to £38.8m.
But Medica has weathered storms before. Started 15 years ago above a flower shop in Battle, East Sussex, the company listed on the London Stock Exchange in 2017. Despite achieving sales growth of 20% in its first year as a public company, it didn’t quite hit the ambitious targets it had set out to the market.
Quin was brought in the following year. He had started his career as an immunologist studying malaria before completing an MBA in France and moving into health investing – first as a venture capitalist in early-stage health businesses and later in more sizable private equity deals. One of these was Paris-based Labco, which he helped establish as the UK’s largest provider of laboratory diagnostics prior to its acquisition by Cinven-backed Synlabs in 2015.
‘Medica had had a bit of a bumpy ride on the market until more recently and so when I had the opportunity to come in and join them, really for me it was an opportunity to come in and look afresh at the business,’ says Quin. ‘The sort of things we have being doing since then have really been looking at investing to underpin the future growth of the business.’
Acquisitions have followed at pace. In November, it bought Irish teleradiology business Global Diagnostics Ireland from Centric Health for around £14.5m. It followed this up in February with the launch of MedX – a joint venture with Australian Stock Exchange listed Integral Diagnostics which provides teleradiology reporting in Australia, New Zealand, Ireland and the UK.
Then in March, it made the transformational move into the US with the £15.6m acquisition of imaging contract research organisation RadMD. The business is highly niche, providing the design and execution of imaging for clinical trials.
Given Quin’s track-record at Labco, where he led the acquisition of businesses operating in the drug and alcohol, food and allergy testing and veterinary pathology markets, diversification into the $1bn global clinical trial imaging market should not come as a surprise.
‘For me it’s a very similar sort of business model, but with a different end customer base,’ he says. ‘And I think that to diversify into a very fast-growing market with pharmaceutical biotech and medical device companies as customers is an exciting opportunity for us as a company.’
Diversification is now firmly embedded in Medica’s growth strategy. However, Quin says it remains targeted, and the company is only looking at businesses and geographies where it thinks it can add value based on its expertise in the UK. It is not out purely for pan-European roll-up.
‘If you look at Ireland for example, we believe that market is probably somewhere around five years behind the UK in terms of the way teleradiology provision is working and that’s a real opportunity for us to use the processes, systems and the expertise that we have in the UK to bring to bear in Ireland,’ he says. ‘That’s exactly what we’re doing, so we’re helping the team there to develop a market leading offering based on a lot of the expertise we have in the UK.’
Similar to the UK, Ireland is facing a massive backlog of patients due to the Covid-19 pandemic. Like the UK, it also has a scarcity of radiologists. The UK has one of the lowest rates of radiologists per capita in Europe – around eight per 1,000 population compared to roughly 13 in France and Germany – but Ireland has even fewer. And it is less developed in terms of its remote reporting capability, particularly for out-of-hours services, which are still largely provided on-call.
Quin believes this presents significant opportunities for Medica, which has a proven track-record of providing solutions for its predominantly NHS customers.
‘At the end of the day, there’s a fundamental lack of radiologists and so the solution that we put in place allows radiology departments to flex their staffing without having to hire expensive temps,’ he says.
But it’s not just staffing solutions that Medica offers the NHS, says Quin. It can turn reports around in just over 20 minutes, which is important in the diagnosis of urgent conditions such as stroke and heart attack. Because it aggregates small numbers of scans from lots of different hospitals and sends them to a single radiologist, it can also facilitate highly specialised reporting.
‘It really helps make sure that you’re getting sub-specialist reporting,’ he explains. ‘So, for example if it’s a brain image, we’re getting real experts to do the reporting.’
The company has seen a month-on-month increase in its volumes since posting its 2020 results. On the elective side, where volumes plummeted by 95% at the start of the pandemic, recovery is accelerating as the NHS works its way through the backlog.
The main limiting factor for Medica, says Quin, is the ability of the NHS to scan patients.
Even before the pandemic, the UK lagged behind many of its European counterparts and indeed much of the developed world when it came to imaging capacity. Analysis by the King’s Fund in 2017 found the NHS had one of the lowest per capita levels of MRI and CT scanners in Europe with 6.1 MRI scanners per million population compared to an EU average of 15.4. The gap was even wider for CT scanners, where the NHS had just 8 per million population compared to an average 21.4 in the EU.
The pandemic has compounded the issue, reducing capacity still further due to staff absence and cleaning protocols designed to ensure patients are scanned in a Covid-safe environment.
However, Quin believes volumes will continue to pick up as the NHS looks to sweat its assets with extended operating hours and, longer term, the opening of community diagnostic hubs.
‘What these community diagnostic hubs want to do is to separate out the ill and the chronic patients from those that are having routine scans or less invasive procedures,’ he says. ‘That’s a longer-term plan but in the meantime the NHS is working very closely with private providers to increase that scanning capacity because that’s what’s going to really make the difference to get patients back, to get patients operated on and to reduce this backlog that’s building up in the system.’
The other key constraint on growth is the ongoing shortage of radiologists. By 2025, it is estimated that the UK radiologist shortfall will reach around 4,000, which represents roughly 44% of the actual numbers required to provide a full service without needing to outsource.
In recruitment terms, Medica does have some advantages. Radiologists can work flexibly, in their homes and from almost anywhere in the world. This all fits in with the Millennial preference for work/life balance and portfolio careers. Radiologists, says Quin, like working for the company.
Up until recently, one of the main metrics used to determine the company’s performance was how many new recruits in could onboard. But it has shifted over the last couple of years and is taking a more strategic approach to recruitment while simultaneously introducing productivity-enhancing technology.
It has recently signed an agreement with Swedish company Sectra Medical to roll out its new picture archiving system (PACS) – which Quin describes as the ‘workhorse of radiology reporting’. The system will have more functionality, is more user-friendly and, crucially, automatically allocates the images sent in by the 100 or so hospitals Medica works with to those radiologists available.
‘What we want to do is to automate that process to really speed it up, but also with the new system, it will mean that the environment is much better for the radiologist to report, it will allow us to put in some new advances – things like AI – to help them to report their cases,’ he says.
Medica has partnered with Indian company Qure AI to launch what it believes is the first fully rolled out AI solution to help radiologists to detect stroke in urgent cases during the night.
Quin says the system has already proved ‘incredibly successful’. It works through an algorithm which pre-screens images for possible stroke patients by flagging up regions of the brain where there is a potential haemorrhage.
‘When radiologists are looking at their primary image, they can have the AI image alongside which really helps them to make sure they’re not missing anything,’ he explains. ‘There are some difficult-to-spot haemorrhages and AI does pick those out very successfully, so we’ve seen that as being a real improvement in quality. As our radiologists get more familiar with the tool, it will also hopefully improve the speed of reporting.
‘That’s one example, but AI across a number of different areas will absolutely have an impact on the speed and accuracy of reporting going forward.’
Looking ahead, Medica plans to continue on the trajectory set out by Quin shortly after he took post. Investment in new technology as part of its FutureTech programme alongside integration of its US and Irish acquisitions will be key, but so too will be supporting its customers to meet the enormous challenge of the Covid backlog – something no one could have foreseen back in 2019.
‘I think the new public health challenge is moving away from hospitalisation of patients with Covid to dealing with this vast number of patients with long term diseases that have manifested over the period of the pandemic. That’s going to a big challenge and the NHS knows this and is absolutely focused on making sure that the elective work can proceed even if we get an uptick in Covid patients,’ says Quin.
Covid may still have some surprise cards to play, but the underlying fundamentals suggest it will not be too long before Medica exceeds pre-pandemic activity levels. In the clamour for growth, that could well attract the attention of private equity but, for the time being at least, Quin says the company is happy on the public market.
‘If you look at what we’ve achieved over the last 12 to 18 months – we were able to do two acquisitions during the pandemic, we were really supported by our shareholders, we raised a big chunk of equity and we managed to refinance our debt. For a company like us, the benefit of being listed is that we’re able to do transformational M&A and have a very supportive, knowledgeable base of investors to support that,’ he says. ‘But also, as a listed company, we provide a lot of transparency for our customers, we have to conform to the regulations of being listed and have market leading governance in that sense, which I think provides real reassurance for our clients.’