Beset by massive declines in procedure volume due to the COVID-19 pandemic, healthcare provider Mednax announced June 5 that it is restructuring the company in a plan that includes selling off its radiology business. The company plans to return its focus to pediatrics and obstetrics services.
Mednax said that it had already been reviewing strategic alternatives for its Mednax Radiology Solutions business prior to the COVID-19 outbreak and had been in "advanced discussions" to sell the group. The company did not provide additional details on the status of the divestiture.
Mednax first made its mark in the radiology industry with its $500 million acquisition of teleradiology services provider vRad in 2015. Following that deal, the company went on an acquisition spree, buying up local radiology practices in a bid to create a national radiology group.
But these deals saw the company take on additional debt; indeed, Mednax in February 2019 issued $500 million in senior notes that it said it would use to pay down debt. The company said that in 2018 it began reviewing its business model with the goal of reducing debt and achieving operational efficiencies. The company sold off several business units, such as its American Anesthesiology medical group in May 2020 and its MedData business, which was sold in 2019.
The COVID-19 pandemic hit Mednax particularly hard. In its first-quarter financial results, Mednax reported that procedure volume in its radiology business fell 50%-60%. The company was forced to implement a variety of measures to conserve cash, including salary reductions and furloughs for nonclinical employees.
Prior to the COVID-19 crisis, the radiology business contributed about $550 million in revenue and $90 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), according to the company. Mednax did not provide an estimate of the unit's contribution after the effects of COVID-19.
As it seeks to exit the radiology industry, Mednax said that it plans to return to the company's original focus as a provider of obstetrics and pediatric services and would be reinstating its original corporate identity of Pediatrix Medical Group. The company's shareholders will vote on the change at the firm's annual meeting in August.
Pediatrix Medical Group will consist of a network of 2,200 physicians who provide services across 17 subspecialty lines and provide care to over 1 million babies a year, across the company's Pediatrix and Obstetrix medical groups. The two businesses together generated about $1.8 billion in annual revenue, according to the company.
