Disruptors in the Medical Imaging Industry

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Market research for the medical imaging and
clinical diagnostic instruments markets
© 2018 BioInformatics Inc & IMV, part of the Science and Medicine Group
Market research for the medical imaging and
clinical diagnostic instruments markets
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Disruptors in the Medical
Imaging Industry
Webinar |August 2018

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Bioinformatics Capabilities
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Presenters
Proprietary capabilities enable bespoke research
Matthew B. Klusas
Lead Consultant
Matt Klusas is the Lead Consultant at
Matt served as Chief Commercial Officer for OmniSeq, a
molecular diagnostic laboratory startup focused on
cancer therapy selection. At OmniSeq, Matt led the sales,
marketing, business development, billing, managed care, and
customer service functions. Prior to joining OmniSeq, Matt
Thermo Fisher Scientific, where he led a business focusing
large scale deployments of genetic analysis technologies,
including next generation DNA sequencing, Capillary
Electrophoresis sequencing, qPCR, and other technologies.
also held management roles at the American Type Culture
Collection (ATCC), Life Technologies, and McKinsey & Co.
was published in the Journal of Commercial Biotechnology,
McKinsey Quarterly, and the Credit Union Journal. In 2015,
State University selected him the Young Alumni of the Year.
received an MSc in Economic History from the London
Economics and a BS in Communication from the Illinois State
University. He also studied at Magdalen College, University
Oxford.
Greg Thompson
Senior Vice President
Business Development
Greg is an experienced business analyst with extensive
laboratory experience. Before joining BioInformatics, Greg
was a Manager, Proposal Development, at Eurofins
Medinet a leading provider of contract research services for
the pharmaceutical and biotechnology industries. In this role
he was required to conduct extensive market research to
determine market size, necessary test menu additions,
capital investment needs, market message, and sales target
generation for new services. He is well versed in the bio-
tools market having negotiated purchases of capital
equipment and consumables appropriate for Eurofins’
business’ performance and client’s needs. He is the author
of multiple technical reports describing the development,
qualification and validation of these assays. Greg received
his M.B.A. from Georgetown University, his M.S. in
Biochemistry from Louisiana State University, and his B.S.
from Millsaps College.

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Executive Summary
A survey of 147 radiologists highlight the importance of reimbursement changes
– both “appropriateness” measures and value-based medicine – as the most
significant factors that will impact the imaging market
 Approaching instrument purchase cycle: Nearly one-third of imaging instruments could be replaced within the
next two years (excludes incremental purchases)
 Appropriateness: Weighted measures of procedure volume show mixed results by technology; radiology
benefit managers and new technology could lead to more reductions in test volumes
 Value-based medicine: 45% of survey respondents report that they do not have a good sense for how value-
based medicine payments are calculated while nearly the same percentage report a decrease in revenue of at
least 2% as a result of its implementation
 PET: The most transformational technological change occurring in imaging is the use of Positron Emission
Tomography (PET) in cardiac imaging with important proof of concept success
 Artificial Intelligence (AI): More than 75% of Radiologists surveyed expect AI to reach it’s potential to detect
and interpret radiology findings within five years, but many challenges remain
 Impact of tariffs: Only 15% of radiologists expect tariffs to impact their purchasing of new medical imaging
equipment; 27% expect to negotiate with suppliers to minimize the effect

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Overview of Imaging Market
Instrument Census byTechnology, 2017
Number of Units
GE & Siemens represent over half of imaging market
* Ultrasound
2017 data
extrapolated
from 2016
survey.
Sources: IMV
Market
Outlooks.
20,040
63,840
16,220
1,455
CT Scanner
Total
Ultrasound*
PET
MRI
X-Ray
12,235
13,890
35%
21%
18%
8%
5%
13%
Other
Market Share across Imaging by Company,
2017
Percentage, 100% = 63,840 units

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Imaging Instrument Replacement Cycle
Install Base Acquired in 2007 or
Prior byTechnology
Percentage
24%
21%
36%
31%
36%
29%Total
PET
CT Scanner
Ultrasound*
MRI
X-Ray
Significant instrument purchase cycle approaching
* Ultrasound 2017 data
extrapolated from 2016 survey.
Sources: IMV Market Outlooks.
0
2
4
6
8
10
12
14
MRI X-RayPETCT Scanner
Median Projected Replacement Cycle
byTechnology, 2017
Years
2007

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Imaging – Summary of Disruptions
erformancetructure onduct
External
shock S C P
 Regulation
Changes: First
U.S. FDA
approval of a
whole slide
imaging system
in 2016,
Consolidated
Appropriations
Act (CAA) of
2016, and new
tariffs in the U.S.
 ValueCreation:
Transition from fee-for-
service to value-based
(e.g. CMS in U.S.)
 Technological Progress:
Positron Emission
Tomography (PET) in
cardiac imaging
 Capacity Change:
"Appropriateness“
toward elimination of
unnecessary testing
creates contraction
 Economics of Supply:
 Artificial Intelligence:
Interpretation,
macrostudies (e.g.,
population health)
in radiology
 Digital Pathology:
Changing workflows,
capital investments in
IT infrastructure
Disruptions will result in significant impacts

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Imaging Ranking of Disruptions
“Appropriateness of care”
Value-based medicine
Artificial intelligence
Recent FDA approvals
Digital Pathology
Proposed tariffs on medical imaging devices
“Rank the following trends in order of importance to the field of medical imaging”
Weighted rank, n = 147
1
2
4
5
6
Changes in reimbursement schemes weigh heavily
3

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“Appropriateness” – Unnecessary Testing
Increase in systems that assist providers with assessment
 Started in U.S. in 2012 as campaign
against overuse of testing,
treatments, and procedures
 Campaign spread to <20 countries
worldwide through 2018
 Significant challenges ahead to
achieve widespread effect on the
quality and safety of care
 Advancements in implementation
and evidence showing the positive
effect on clinical outcomes are
necessary to build upon
CT and MRI Utilization Annual Rate Per 1000
person-years in San Antonio, Texas 2005-2014
Index, 2005 = 100%
52% 50%
60%
89%88%
75%
88%
84%
UltrasoundCT MRI Plain Film
Commercial HMO
Medicare PPO
Sources: Powell, A. C., Levin, D. C., Kren, E. M., Beveridge, R. A., Long, J. W., & Gupta, A. K. (2017). 2005 to 2014 CT and MRI Utilization Trends in the Context of a Nondenial Prior Authorization Program. Health Services Research and Managerial Epidemiology, 4, 233339281773201.
doi:10.1177/2333392817732018. Levinson, W., Born, K., & Wolfson, D. (2018). Choosing Wisely Campaigns. JAMA, 319(19), 1975. doi:10.1001/jama.2018.2202

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Appropriateness Showing Mixed Impact
40
50
60
70
80
90
100
110
120
2004 2006 2008 2010 2012 2014 2016
Ultrasound
Plain Film
MRI
CT
Medicare Part B Procedures byTechnology per 1000
Beneficiaries, 2004-2016 Index,
2004 = 100
Sources: CMS 5%
Research Identifiable Files,
David C. Levin, MD.
Technology and RBMs likely to drive further reduction
 Some technologies, such as MRI
and CT scans, have seen little
reduction in volume in over a
decade of measurement
 Other technologies have
dramatically reduced usage (e.g.,
plain film, ultrasound)
 One explanation could be impact of
radiology benefit management
companies (RBMs) introducing new
checks on orders
 Further checks set to be
implemented in 2020 as part of
MACRA include computerization
clinical support mechanisms

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Fee-for-Service to Value-Based Payments
 Efforts to move away from fee-for-service (FFS)
reimbursement are driven by belief that FFS pushes up the
cost of health care by incenting more procedures
 Questions around extent to which imaging professionals
“drive” volume as opposed to external factors: individual
patient demand, defensive medicine, and aging population
Sources: Radiology Today,
Health Care Payment
Learning & Action
Network APM
Measurement: Progress of
Alternative Payment
Models, 2017. Gray zone: Fee-for-service under value-based rules?
Percentage ofTotal U.S. Health Care Payments by Payment Models, 2015-2016
Percentage
62%
15%
23%
43%
28%
29%
Category 3&4
Category 2
Category 1
2015
2016
Traditional fee-for-service
or other legacy payments
not linked to quality
Pay for performance or
care coordination fees
Value-Based payments (e.g.,
shared savings, bundled)
2015 Medicare Access and CHIP
Reauthorization Act (MACRA)
established significant financial
incentives for value-based payments

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Reimbursement Impacts On Revenue & Volume
1
21
28
46
9
4
1
17
Decreased by >20%
Do not know/not sure
Decreased by 10-20%
Increased by 10-20%
Increased by 2-9%
Decreased by 2-9%
No change (± 1%)
Increased by >20%
“During the last three years, how
have ‘appropriate use criteria’
changed the number of cases
processed?” Number, n =
147
More impact from value-based payments
2
17
47
39
15
1
26
0
“During the last three years, how have
value-based payment structures
changed your institution’s revenue?”
Number, n = 147
Only 55% of
respondents feel they
understand how value-
based payments are
calculated

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PET in Cardiac Imaging
 Myocardial perfusion imaging with PET
allows accurate global and regional
measurements of myocardial perfusion,
myocardial blood flow and function at stress
and rest in one exam
 PET is considered the gold standard for the
myocardial flow reserve measurement
 New cardiac PET imaging techniques are
being developed to investigate plaque
inflammation in the cardiovascular system
 PET can help eliminate unnecessary
diagnostic cardiac catheterizations to focus
on revascularization therapies – at
Intermountain Health, reduced by 10%
 UsingCardiac PET can create better image
quality, more accurate clinical information,
safer testing, and more efficient throughput
compared to traditional SPECTAn example of relative quantification for myocardial perfusion PET
Sources: Slomka, Piotr, et al. “The Role of PET Quantification in Cardiovascular Imaging.” Clinical and Translational Imaging, vol. 2, no. 4, 2014, pp. 343–358.,
doi:10.1007/s40336-014-0070-2. Siemens Healthcare. Partha Ghosh, MD, Siemens Healthcare. “Cardiac PET•CT: Integrated CT Angiography and PET Myocardial
Perfusion in Multivessel Disease,” October, 2012.
Some practices report PET utilization rates of 90%+

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Artificial Intelligence (AI) in Radiology
Skin Cancer Classification of 21 Dermatologists (a)
and the Convolutional Neural Networks (CNN) (b)
Area Under The Curve (AUC), as listed
Sources: Esteva, A., Kuprel, B., Novoa, R. A., Ko, J., Swetter, S. M., Blau, H. M., & Thrun, S. (2017). Dermatologist-level classification of skin cancer with deep neural
networks. Nature, 542(7639), 115-118. doi:10.1038/nature21056. Aunt Minnie.
Massat, Mary Beth. Applied Radiology, Technology Trends, March, 2018. “Artificial Intelligence in Radiology: Hype or Hope?”
The CNN achieves performance on par with all tested
experts across both tasks, demonstrating an
artificial intelligence capable of classifying skin
cancer with a level of competence comparable to
dermatologists
 In one study,Artificial Intelligence
interpreted radiology reports with
91% accuracy
 In another study, the BioMindAI
system reportedly made correct
diagnoses in 87% of 225 cases in 15
minutes versus a 66% accuracy for a
team of 15 senior doctors
 CT and MRI systems are utilizing
machine-based algorithms for more
intelligent exams—helping reduce CT
and PET dose and faster MR exams
 May need to think beyond EMR- or
PACS-centric view of information
infrastructure for radiology to fully
consume the power of AI
 Trust of AI systems with radiologists
appears to be a qualitative
bottleneck to adoption

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Potential Impact for AI in Radiology
Near-Term
 AI could start impacting order
optimization and post-dictation analytics
correction within the next few years
Medium-Term
 Sweet spot for machine learning andAI is
to make radiologists’ job less onerous -
counting lesions on chest CT
“Good infrastructure for data
importation is more important than
slick software packages.”
- Northeast Key Opinion Leader
Includes methods for storing data,
tools for data handling APIs,
enabling quick access, cleaned,
and indexed well
Long-Term
 Formidable barriers to solving mathematics
(e.g., non-random noise) for AI interpretation
 Significant infrastructure and regulatory
hurdles (HIPAA) to wide-scale adoption
AI will support radiologists while interpretation improves

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Transforming Radiology with Artificial Intelligence
“In which of the following areas do you
believe artificial intelligence (AI) will have the
greatest impact on medical imaging?”
Number, n = 147
66
21
21
17
15
6
Detection and
interpretation of findings
Order scheduling
and patient screening
Automated radiation
dose estimation
Radiology reporting
and analytics
Post-processing
Image acquisition
Radiologists appreciate the challenges with deploying AI
Radiologists believe AI will solve the
detection and interpretation challenge…
…but they may not be prepared
for how long it will take
“AI will change the way medical imaging
results are interpreted within five years.”
Number, n = 139
25%
51%
17%
6% Strongly agree
Agree
1%Neutral
Disagree Strongly disagree

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Digital Pathology – Catching up to Radiology
 In the United Kingdom, 32% of cellular
pathologists are expected to retire in the next
five years; new recruits tracking well below
replacement rate
 Paperless transmission of digital slides directly
to the pathologist lessens the possibility of a
misidentification or transposition error at
multiple points in the diagnostic workflow,
improving patient safety
 Digital pathology could enable streamlined
double reporting, rapid access to second
opinions, assessment of
immunohistochemistry, and faster access to
molecular/ancillary testing
 Accuracy and convenience of recording cancer
staging parameters could drive up the quality
and reproducibility of cancer datasets
Sources: Williams, Bethany. “The Value of Digital Pathology,” Digital Pathology Association. January 18,. 2018. Blog post.
Williams, B. J., Lee, J., Oien, K. A., & Treanor, D. (2018). Digital pathology access and usage in the UK: Results from a national survey on behalf of the National Cancer Research Institute’s CM-Path initiative. Journal of Clinical Pathology, 71(5), 463-466. doi:10.1136/jclinpath-2017-204808
UK Digital Pathology Hardware: “Does your
department have access to the following?”
Percentage, as listed
Penetration of digital path increasing but utilization lags

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U.S. Regulatory Changes – Global Implications
 April, 2017: Philips IntelliSite
Pathology Solution (PIPS), the
first whole slide imaging (WSI)
system that allows for review and
interpretation of digital surgical
pathology slides prepared from
biopsied tissue
 First time FDA permitted
marketing of aWSI system for
these purposes
 Decision affirms that digital
pathology is equivalent — not
inferior — to a microscope
Section 502 of the Consolidated
Appropriations Act of 2016
 Incentivized healthcare
providers to transition from X-
ray and computed radiography
(CR) to digital radiography
(DR)—and, in the process, help
lower patient exposure to
ionizing radiation
 Reduces reimbursement for the
technical component and also
increases the payment for the
professional component of
multiple imaging services
Sources:
Applied
Radiology,
Health Exec,
US FDA.
Significant financial implications from policy shocks
 As of June, 2018, the U.S.
government has officially put
tariffs in place on $50 billion worth
of products imported from China
for “unfair trade policies”
 Medical imaging equipment,
X-ray, CT and MRI equipment are
all on the list of products included
in this announcement
 Exact impact will take time to
assess in the market

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Potential Impact of U.S. Tariffs on Instruments
“We have serious concerns the proposed
tariffs will impede patient access to medical
innovation by taxing inter-company transfers,
wherein a company will manufacture
component parts in China before shipping
them to the U.S. for final assembly and
export.
Further, under the proposed tariff
environment, rather than immediately halting
component manufacturing operations in
China, which is unfeasible with a mature
supply chain, companies will likely evaluate
the most cost-effective locales for final
assembly operations, including outside of
the United States.”
- June 26, 2018 Press Release
“Tariffs will lead to a lot of very active price negotiating.”
 MRI and X-ray machines contain high aluminum
content and will be affected by the tariffs
 Estimates of the negative annual impact of the
tariffs on the entire medical device industry range
from $1.5–$5 billion
 List price instrument purchases are rare – impact
of tariffs likely to manifest in more challenging
supplier-customer negotiations
 Suppliers may struggle to pass along costs of
tariffs
 Some hospitals will consider using
used/refurbished equipment as a way to avoid
more expensive new equipment
 Tariffs may also lead to acceleration of tools for
improving efficiency of tools already residing in
institutions – reducing overall demand for new
instrumentation in the medium/long term
Sources: Medical Imaging and Technology Alliance, RBC Capital Markets, FierceBiotech, MedTechIntelligence, David Levin, MD.

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Effect of Tariffs on Instrument Purchases
13%
40%27%
12%
6%
3%
I currently have
no plans to purchase medical
imaging equipment in 2019
I will purchase but
look to negotiate other elements
(e.g. consumables, service contracts)
I will purchase
as needed in 2019
I will delay purchasing
medical imaging equipment in 2019
I will consider refurbished
or used equipment as opposed
to new equipment in 2019
Do not know/
not sure
“Anticipated U.S. tariffs are likely to drive up the price of medical imaging equipment.
How will this potential change affect your purchase of medical imaging equipment in
2019?”
Number, n = 147
Only 15% indicate that tariffs will impact their purchasing

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GregThompson
Senior Vice President,
Business Development
g.thompson@bioinfoinc.com
Send RFPs and inquiries to:
Christina Spell
Account Director
c.spell@bioinfoinc.com
Matt Klusas
Lead Consultant
matt.klusas@bioinfoinc.com
Lauren Camhe
Vice President, Business
Development
l.camhe@bioinfoinc.com

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