Center firm mixes imaging, surgery

May 6, 1992

Imaging & Surgery Centers of America, which operates two multimodalityimaging centers in Dallas and Columbus, OH, and two outpatientsurgery facilities in Boston, is planning to expand operationsthrough facility acquisitions and start-ups to attain a

Imaging & Surgery Centers of America, which operates two multimodalityimaging centers in Dallas and Columbus, OH, and two outpatientsurgery facilities in Boston, is planning to expand operationsthrough facility acquisitions and start-ups to attain a totalof 17 imaging and surgery centers in eight states by mid-1993.

In recent months, ISCA acquired an 80% interest in J.B. Imaging,an MRI facility in Kissimmee, FL. The firm has also opened FairfaxCity Imaging Center, an imaging facility in Fairfax, VA. And ISCAis presently building Suburban Surgicare, an outpatient surgicalcenter in Woburn, MA, set to open in June.

ISCA is planning eight acquisitions and two start-ups duringthe coming year, according to Karen Byrne, ISCA president. Fundingfor this facility growth was provided by two supportive financepartners, she said.

"We have signed a letter of intent to obtain venture capitalfunds for these buy-ups and start-ups from Greylock ManagementCorp. of Boston," Byrne said. "We'll complete two ofthese transactions within a month."

ISCA's Kissimmee venture was jointly financed with MedicalCare International, a Dallas firm that owns and operates 85 outpatientsurgery centers around the country. Two MCI executives, DonaldSteen, president, and Christopher Grant, senior vice president,sit on ISCA's board of directors. ISCA has an exclusive arrangementwith MCI to build or acquire new imaging centers wherever a needis identified.

"Although we (ISCA) have an in-house market research division,they (MCI) know when imaging centers are available for sale orwhen a market need arises," Byrne said. "The synergiesof bundling imaging centers and outpatient surgery centers havemany advantages, with the most important being cost efficiency,which benefits the public."

ISCA's Fairfax City Imaging Center is a joint-venture developmentwith MCI, which has a surgery center adjacent to the project'ssite. The new facility will contain MRI, CT, ultrasound, mammographyand radiography systems. ISCA will manage day-to-day operationsfor the facility.

ISCA's acquisition interests range from 60% to 100% of a partnership'svalue due to the complex safe harbor provisions that the firmmust follow in various states.

"Meeting these provisions makes it more difficult to makea deal because we're a decentralized company and have many localpartners," Byrne noted. "Language in our all contractswith limited partners, however, allows us the option to purchasetheir shares should state or federal laws prohibit ownership andreferral by our physician partners."

ISCA's new imaging centers typically require 3500 square feetof space, while its surgical facilities contain about 10,000 squarefeet. A facility of either type requires $2.5 million in debtand equity to establish, but produces annual revenues in the $2million to $3 million range.

Nevertheless, the customer base in both types of facilitiesis identical--private physicians who refer their patients.

"By the end of the decade, however, our customers willbe health management organizations, preferred provider organizationsand large self-insured employers that will want to deal directlywith medical service firms like ours," Byrne said.

BRIEFLY NOTED:

  • Imaging Equipment Services, a Pittsburgh independent serviceorganization, has chosen new legal representation in its scannerservice court battle with Picker International (SCAN 4/8/92).Stokes and Bartholomew of Nashville will represent IES in BostonFederal District Court, according to Tom Quinn, IES president.

Picker has filed for summary judgment to have the litigationwith IES dismissed, and this motion is still being consideredby the court. Both companies have filed countervailing chargesrelated to competitive scanner maintenance issues.

  • Center firm ImageAmerica (formerly MedInc) of Nashvilleis looking to the public financial markets to support its effortto purchase independent, physician-owned imaging centers (SCAN4/22/92). The firm filed a registration statement last month withthe Securities and Exchange Commission for an initial public offeringof 3.65 million shares of common stock at an expected price of$10 to $12.