Center firm sells MRI to managed-care groups

January 16, 1991

Declining Medicare reimbursement for magnetic resonance imagingscans combined with bargain-shopping by managed-health-care groupsspells trouble for high-field MRI centers, said Leonard F. Vernon,president and CEO of Imaging Management Associates. Centers

Declining Medicare reimbursement for magnetic resonance imagingscans combined with bargain-shopping by managed-health-care groupsspells trouble for high-field MRI centers, said Leonard F. Vernon,president and CEO of Imaging Management Associates. Centers thatcan ride the low-cost MRI wave, however, stand to profit substantiallyfrom the trend, he added.

IMA of Jersey City, NJ, began as a single limited-partnership-ownedMRI center in 1987. The firm went public last June following thecombination of several partnerships into one operating company.It gained a listing on the NASDAQ market late last year. IMA nowoperates eight MRI centers and plans to expand further with theacquisition of independent physician-owned centers, Vernon said.

Virtually all of IMA's MRI scanners are low-field Toshiba Accesssystems. The firm markets low-cost, non-claustrophobic imagingto referring doctors and HMOs and PPOs, he said.

While many radiologists still like the pretty pictures thathigh-field MRI scanners produce, they accept low-field imagesonce they gain experience and realize the images are of diagnosticquality, Vernon said.

Low-field MRI systems break even at a much lower throughputlevel than high-field units, so a center can sell low-field MRIservices to managed-care groups for substantially less per scan.IMA's fee for an MRI examination is $600 or less, while some high-fieldcenters charge over $1000, he said.

"People with high field have to pump 10 to 15 (patientsthrough the center) a day to break even. My break-even (point)is below four (patients)," Vernon said.

About 30% of IMA's gross revenue comes from contracts withseven HMOs and PPOs. The company earned $4 million in direct equity-proportionedrevenue from its centers in 1990 and expects to earn $8 millionto $10 million in revenue this year, he said.

Vernon likes the open design of the Access system, which isa marketing plus for claustrophobic patients, he said. The Toshibaname, low examination price and low siting costs are other marketingadvantages of the system, he said.

"If you are going to have a low field unit, you have tohave something to market with it," Vernon said.

IMA is not wedded to Toshiba, however. The company is consideringthe Hitachi low-field MRI system and purchased an Instrumentariummobile MRI this month. It plans to upgrade the Instrumentariumunit to that vendor's new 0.1-tesla Mega-4 system (SCAN 10/24/90),he said.

"We were going to buy an Access (MRI), but Hitachi iscoming in with nice deals and we are thinking about that. Hitachiis Toshiba's biggest competition for the Access," he said.

The center firm also carries its low-cost, compact-system philosophyto computed tomography imaging. IMA runs three GE CT Max systemsand has a fourth on order, Vernon said.