Smart Choice MRI, which charges patients a flat rate of $600 or less rate for scans, has raised $7 million from Edward-Elmhurst Health.
Smart Choice CEO Rick Anderson says his company will use the latest financing to help fund its rapid expansion. The growth of the Mequon, WI-based business has so far been contained to the Midwest, but it could move into other parts of the country as soon as next year, he says.
The investment from Edward-Elmhurst, a three-hospital system based in Naperville, IL, follows a $6.5 million fundraising round Smart Choice announced in December. In February, the company revealed that nearly half of the total came from ThedaCare, a network of hospitals and clinics based in Appleton, WI. ThedaCare put another $1 million into Smart Choice about six weeks ago, Anderson says. That brings the total amount the company has raised to $14.5 million.
Edward-Elmhurst now owns a 10 percent stake in Smart Choice, Anderson says. That would value the company at $70 million, a sharp increase from Smart Choice’s $30 million valuation a year ago.
Anderson says that while his company continues to receive—and consider— proposals from private equity and venture capital groups, the fact that the two most recent investments into Smart Choice came from health systems is not a coincidence.
“I think you’re going to see more of this from us,” he says. “Health systems understand our business intimately. I can explain very quickly what we’re doing, and they get it as fast as we do.”
Anderson says leaders at Edward-Elmhurst reached out to Smart Choice after they found out the MRI provider was planning to open several imaging centers in and around Chicago—the second metropolitan area Smart Choice has entered, after Milwaukee.
Pam Davis, Edward-Elmhurst’s president and CEO, says that the investment is part of a “major retail strategy retooling” at her organization.
“We have to meet the needs of our existing population, which includes millions of millennials,” Davis says. “What this group of people wants is easy access to care, scheduled under their own needs. Smart Choice MRI is a retail-based organization and has the expertise to plan and execute this type of facility.”
As deductibles have risen during recent years, paying out of pocket—rather than through one’s health insurance—for procedures like MRIs has become more common. From 2010 to 2015, the average deductible increased 67 percent, according to the Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits Survey released last September. That outpaced increases in single premiums, workers’ wages, and general inflation, which rose 24 percent, 10 percent, and 9 percent, respectively.
Bill Kottmann—who will become president and CEO of Edward Hospital, part of Edward-Elmhurst Health, on July 1—has joined Smart Choice’s board, Davis says.
Smart Choice currently has six imaging centers in Wisconsin, and three in Illinois. The company plans to open four locations in the Twin Cities this year. And by the end of 2017, Anderson says he expects that Smart Choice will have moved into four or five additional metro areas. Indianapolis, Denver, and Salt Lake City are among the cities on its short list, he says.
“It’s not simply geographic—it’s not like we’re spreading west or spreading south,” Anderson says of Smart Choice’s expansion. “We’re looking for a significant spread between the cost of a hospital MRI and a low-cost MRI provider. If we can be close to the price of the low-cost [provider], we’re going to pick up market share.”
