Diagnostic Health Services files for Chapter 11

Diagnostic Health Services filed for Chapter 11 bankruptcy protection while officials try to restructure the 300-employee company and whittle down debt brought on by recent acquisitions.

The Dallas-based outsourcing company buys radiology and cardiology systems on the open market and supplies them to hospitals, along with personnel to operate the systems, for as long as the hospital needs the equipment. The hospital is charged a negotiated fee. The company operates in 17 states, and has a large presence in Texas, California, Missouri, and Oklahoma.

Diagnostic Health Services buys equipment from such companies as ATL, Acuson, and Hewlett-Packard. The company got into debt because of some partial and full acquisitions in the late 1990s, said Christopher Turner, Diagnostic Health Service’s CEO. The acquisitions included MR centers in California and ultrasound companies in the South, he said.

“The company used to have an aggressive acquisition history. From that the company acquired a lot of debt,” he said.

Their November 1999 quarterly report states that the firm’s performance declined due to deterioration in the ultrasound business it acquired from Advanced Clinical Technology. The company spent most of 1998 restructuring the acquired businesses and re-pricing or resigning from unprofitable accounts. Gross revenue declined $1.4 million during the nine months ending Sept. 30, 1999, from the same period the previous year. Due to the continued lack of resources, the company has been unable to pursue significant new business opportunities.

When asked if Diagnostic Health Services would try to crawl out of its debt by signing up new customers and taking in more income during its bankruptcy protection, Turner said he wasn’t sure.

“We haven’t made a determination on that. There is an abundance of prospects that utilize our services,” he said.

Turner said current customers won’t suffer from the Chapter 11 filing.

“We will continue to provide services to the hospitals. It will not affect our service to customers,” Turner said.

In January, the company hired Glass & Associates, a national consulting firm that specializes in corporate turnarounds and restructuring. Diagnostic Health Services laid off 100 employees at the end of last year, he said.

Turner would not provide any further information about how the company intends to restructure itself, except to say that it will be done quickly.

“We would like to do it as efficiently and as expeditiously as possible,” he said.

The company’s competitors include Inside Health Services, Alliance Imaging, and U.S. Diagnostics. The company’s stock has no value.