Specialist
Former senior executive at 21st Century Oncology Inc
Agenda
- GenesisCare and 21st Century Oncology post-integration – company evolution and culture shift
- Key trends and developments relating to GenesisCare’s US market presence
- Major players’ competitive positioning in the US market and different technologies, highlighting Elekta’s (STO: EKTA B) Gamma Knife and Accuray’s (NASDAQ: ARAY) CyberKnife
- GenesisCare’s US reimbursement dynamics, payer mix and main revenue drivers
- Labour challenges and outlook for H2 2022 and beyond
Questions
1.
What did you make of 21st Century Oncology’s – at the time, called Radiation Therapy Services – acquisition of Oncure in 2013? How did the deal shape the combined company over the next several years, post-acquisition and leading into the unfortunate bankruptcy less than five years later?
2.
What happened after 21st Century Oncology settled the allegations that you highlighted and got acquired by GenesisCare? How were the relationships with the various physician groups when physicians were getting integrated into GenesisCare after 2019?
3.
How should we assess the concept of buying firms that are heavily dependent on human capital? For example, you buy a law partnership or a consulting firm where the value is derived from the people. You can have non-competes, but if there’s post-acquisition talent churn, it really damages the value of the transaction and what was expected from the M&A. It seems this is what happened with 21st Century Oncology’s flight of physicians. That’s the bread and butter and what drives revenue, correct?
4.
Can you elaborate on 21st Century Oncology’s post-acquisition shift in culture and how that may have created challenges or been accepted? Presumably, the people who may have been more open to embracing it are still around, although that might be an overstatement, because you could stay on, but still not like it.
5.
Presumably GenesisCare’s evolution shows it can put things together and make it work, but Radiation Therapy presents its own unique problems. What do you think the company is doing right to make the most of its 21st Century Oncology acquisition? We’ve discussed challenges, but what priorities would help realise the most value from this transaction?
6.
How should we understand the different technologies, why they make sense for certain patients and why some are more profitable vs others? My view of the reimbursement backdrop is dated, but you see strategic shifts in procedure mix, often based on whether reimbursement is better or more profitable. Sometimes the efficiency is better as well. Then CMS [Centers for Medicare and Medicaid Services] cuts reimbursement. You make huge capital investments to buy the latest and greatest, to your point, but then get cut off at the knees – that’s always unsettling. Where are we with procedure mix? How prevalent are certain procedure types and what’s the reimbursement outlook for such things? Is there upside vs downside, starting with Elekta’s Gamma Knife?
7.
Accuray’s CyberKnife is also an expensive system, costing USD 3m-5m, and is a new approach in SRS [stereotactic radiosurgery], a highly advanced radiation therapy system with an intelligent robot to develop radiation beams over 200 carefully selected angles. What are your thoughts on the CyberKnife procedure, its outlook and reimbursement?
8.
Can you explain the complexity of the CyberKnife and Gamma Knife, given they are such big-ticket items? What does the SRS approach entail?
9.
I’ll paraphrase something from GenesisCare’s website that suggests IMRT [intensity-modulated radiation therapy] is provided as standard of care for all tumours, unlike other providers, and all IMRT is delivered with IGRT [image-guided radiotherapy] to ensure the precision of the radiation treatments. It seems GenesisCare has a view on standard of care and how it wants most procedures to be performed. Is it fair to say the IMRT with IGRT is the bread and butter in its radiation oncology practice? As reimbursement goes with those procedures with Medicare or Medicaid, and then to the extent of the commercial pay mix, so goes GenesisCare’s radiation oncology practice. Is that fair or is that an overstatement?
10.
How are providers such as GenesisCare dealing with the ageing of physicians and desire for better work-life balance? The ageing US population is a macro trend impacting every industry, and it certainly affects healthcare. Productivity dips, you have retirements. What’s GenesisCare doing to manage that process and recruit physicians aggressively as part of the replacement cycle?
11.
There’s a tight labour market across the US alongside a nursing shortage that’s been ongoing for over a decade, and we’re seeing this need for premium price contract labour at the larger hospitals. It translates to an upward bias towards salary, wages and benefits, which, of course, compresses profitability margins and decreases earnings and free cash flow. Do you think GenesisCare is seeing that same pressure, or is it more insulated because of what it does? I know certain providers are more insulated than others with this SWB [salaries, wages and benefits] upward pressure.
12.
How has GenesisCare positioned itself with referral channels and marketing to drive same-store volume into its centres?
13.
Are there any topics we should have discussed? What final comments distil the themes we’ve covered?
