Chris Winkle: Taking MedQuest In-House
Last August, the news that Novant Health, Inc, Winston-Salem, NC, had offered $45 million (with an additional performance-based contingency of $35 million and the assumption of all outstanding debt) for Alpharetta, Ga-based MedQuest set the outpatient imaging world abuzz. The deal, which closed in November, represented what many considered a premium price for MedQuest’s 92 outpatient imaging centers and gave Novant a huge and immediate presence in outpatient imaging in the Southeast. Two years earlier and fresh from an ordeal in which he brought long-term care provider Mariner Health Care, Atlanta, out of Chapter 11 and negotiated the successful sale of that company, Chris Winkle had come on as CEO to turn around MedQuest. The sale to Novant behind him and the Deficit Reduction Act (DRA) notwithstanding, Winkle is looking forward to enjoying life under the Novant umbrella.
"The Mariner turnaround was like living in dog years: the outcome was great, but it wasn't much fun on a day-to-day basis. Having seen the good, the bad, and the ugly in health care, it's really gratifying to have a solid organization such as Novant as our owner. You can see the big picture. They are the kind of organization that when they talk about a 10-year vision, you know they are going to live it and fulfill it." — Chris Winkle, CEO, MedQuest
Winkle agreed to share his experiences to date with the readers of Tell us about life under Novant Health since it purchased MedQuest’s 92 imaging centers in August of last year. How has your job changed? Winkle: The deal didn’t close until November. To date, my job really hasn’t changed. There is an earn-out period during 2008, and as such, my job has not changed in the short term. At this point, I do not expect it to change in the long term, either. Health systems have recognized the importance of outpatient imaging to hospital revenue and are taking steps to be more competitive. From the perspective of someone who has been on both sides, what are the advantages of being under the hospital umbrella? Winkle: First of all, I like being part of a larger organization. We are now a part of a larger health care strategy: delivering remarkable patient care to the numerous communities Novant serves. Whether it be with physicians or different services, we are developing more relationships and are a part of a broader approach to community service. Perhaps the largest advantage of the transaction is that now we are part of a large not-for-profit system that clearly has a mission to service its communities, as opposed to operating as a single business line that is being held as an investment. From the same perspective, can you comment on the well-known competitive disadvantages of the hospital environment, such as the layers of bureaucracy, slower reaction times, and the lack of incentive-based compensation plans? Winkle: It’s probably too early to comment on that because we are not very integrated, but I will tell you that I have nothing but positive things to say about the Novant organization, to this point. It is a large organization, and I know that many large organizations are associated with bureaucracy, but I haven’t seen it here, nor do I expect to. What is the chain of command in the management of the centers and reporting to hospital personnel? Who are the key members of the hospital management team, and what resources do they bring to the enterprise? Winkle: Nothing has changed there. We are a wholly owned for-profit subsidiary, so nothing has changed. We have interaction with the ownership, being part of a larger system, but nothing has changed. Freestanding imaging centers historically have had a clear advantage over hospital-based centers in most aspects of customer service. Have you taken any steps to maintain that competitive edge, and if so, what were they? Winkle: Clearly, MedQuest’s customer service was something that Novant was aware of in the markets we interacted in before the transaction. They felt that we were everything that we always said we were from a customer service perspective. They looked at that as one of the key values that we brought to the table, so they in no way, shape, or form want to do anything that would weaken our customer service. I really think that if I said doing this or that affected customer service, it would get their attention. Customer service has always been a MedQuest strength, and that even predates me. It is a core philosophy—a core strength that the organization has and will continue to have. At a multiple of 12 times the trailing 12 months’ EBITDA, MedQuest’s sale price represents one of the industry’s best deals since the DRA. What did MedQuest have that led Novant to pay top dollar? Winkle: We have a phenomenal network of very good locations that are in strategic areas that are important to Novant, and obviously many of them are certificate-of-need states as well. We just happened to have a very well developed, deep network in key states. We were, frankly, the perfect match for them. What are your first-year objectives under the Novant umbrella? Winkle: They are really status quo: to move forward and accomplish our operating agenda. There is nothing dramatically different from just continuing to run our business and, from the integration perspective, we are doing the things that make sense: coordinating activities to learn about both organizations. Nothing is being forced on us; it’s really about trying to do things the right way and taking advantage of the best of both worlds. We are well aware of, and becoming even more familiar with, the benefits of being part of a larger organization. This was not a desperation merger where we had to throw things together to cut costs. This is about how to offer the best possible imaging services the right way. Have you been charged to grow? If so, how? Winkle: Not at this point; growth is something we are always interested in, and we keep our eyes open on a continual basis to look at good opportunities in the marketplace. It is more about opportunistic growth, which is something I would have said we were focused on prior to the Novant transaction. How would you describe your primary markets? Winkle: The Southeast is our core market—anything from Virginia through the Carolinas and Georgia. Those are Novant’s key markets as well. Novant was historically primarily in North Carolina, but with the recent deal in which they bought a minority interest in the North and South Carolina Health Management Associates facilities, they have now expanded further into South Carolina, so South Carolina is now a much bigger presence for them than they had even three months ago. MedQuest is also in the Midwest and Southwest, though. Winkle: Those centers are part of MedQuest, and even though they may not be in markets that are a core focus for Novant, they are part of MedQuest; we will continue to manage and grow in those areas where it makes sense. Will the centers be rebranded as Novant properties? If so, what will that involve? If not, what was the thinking? Winkle: I don’t believe so. It’s not something we are looking at actively at this moment. I wouldn’t rule it out, nor would I say there is a reason to do it. Most of the MedQuest centers have local operating names that reflect the communities they serve. In North Carolina, MedQuest centers operate under North Carolina Diagnostic Imaging, so the MedQuest name isn’t used. In a lot of the Novant markets, the Novant gentle arch is recognizable, but the Presbyterian name (for example, in Charlotte, NC) is the name that most people recognize. ImagingBiz: Are there any new leadership muscles you are being called on to develop under the Novant umbrella? Winkle: Not to date; my task has been to run MedQuest. I don’t really see that it takes more or less effort than it ever did, but I like the idea of a long-term association—I like being part of a larger system. It is essentially life as usual. You mentioned that being a part of a nonprofit that has a mission is something you enjoy. Has that affected how you run the centers? Winkle: I wouldn’t say it has yet, but I think that it may as we move forward. Novant is a class organization. I have been in health care for 25 years now, and everyone will say that they really care about quality and doing the right thing. I believe this organization means it and lives it. They are focused on doing the right thing, providing a remarkable patient experience, and that is where, in the future, we will drive MedQuest: absolutely to live and breathe that vision. I like that. I’ve worked for a lot of organizations. I’ve done turnarounds, and a lot of the time you are dealing with situations. You are always trying to improve a business, but any time you are part of something bigger, it’s more inspiring. I feel that way about Novant, and I think the rest of the organization does too. What about the hospital premium that the freestanding outpatient world admires: can you enjoy that as a wholly owned subsidiary? Winkle: We are now part of a larger organization, which can, theoretically, put you in a better position, whether you are dealing with payors or other strategic opportunities. I clearly prefer it to being a lone wolf. Could you share some of your career highlights of the past 25 years? Winkle: I started out in the specialty hospital business. I went to Integrated Health Services in the early 1990s and was part of the big move to put subacute programs in nursing homes. I left Integrated in 1998. I saw that the company was really not prepared for the changes that I saw coming in reimbursement, and I walked into Mariner, which was really a similar situation. It was clear that Mariner was going to go through a restructure. Two months into the Mariner bankruptcy, I was put into the CEO role. That was literally being thrown to the wolves in a very complicated turnaround, but we took Mariner out of Chapter 11 two years later, and two years after that, we sold the company. After I left postacquisition Mariner in August of 2005, I thought I was going to take some time off and then the MedQuest opportunity came up, and once again, it was another turnaround. I literally walked in and found the DRA on the doorstep, so my timing couldn’t have been better. One of the bankers said to me, “Before you switch to another industry, let me know.” Now we are in a similar situation, where we took this company through a sale, but I have really enjoyed what I’ve done here, and I really enjoy this company and being a part of Novant. I’ve been asked before, “What are you going to do next? What is the next turnaround?” Frankly, I’ve had my fill of those. The Mariner turnaround was like living in dog years: the outcome was great, but it wasn’t much fun on a day-to-day basis. Having seen the good, the bad, and the ugly in health care, it’s really gratifying to have a solid organization such as Novant as our owner. You can see the big picture. They are the kind of organization that when they talk about a 10-year vision, you know they are going to live it and fulfill it. I’ve been with a lot of organizations that can’t see beyond 6 months, whether it was for financial reasons or other ownership-related reasons. In the for-profit companies, in particular, things can change dramatically, and it is tough to have a long-term vision. What I like is that this organization has a long-term vision, and we can be a part of it. What do you perceive as the future of outpatient care in general? Winkle: Anybody in health care sees that outpatient care, and the ancillary side in particular, is going to continue to grow and flourish. I like being part of that process because I do see that every year, it continues to represent more and more of health care delivery than before, and I think it is going to continue to head in that direction.