DVI lists in New York;funds center buildup

DVI Health Services of Irvine, CA, switched its stock listingfrom the NASDAQ over-the-counter market to the New York StockExchange last week. At the same time, DVI offered 1.525 millionshares of common stock in New York at $10 per share. The companytrades on the NYSE under the symbol "DVI."

DVI was formed in 1985 and listed initially on NASDAQ in August1990, according to the firms' prospectus for the recent stockoffering. Funds raised from the offering will help DVI build itsimaging center business.

Until a year ago, DVI was strictly a lessor of medical imagingand therapeutic equipment nationwide (see charts). The firm branchedinto ownership of freestanding imaging centers last year followingfederal and state moves to restrict referring-physician ownershipof medical centers to which they refer patients, according tothe prospectus.

Two subsidiary companies were formed to operate the new servicebusinesses:

• DVI Healthcare Operations acquires, builds and operatesimaging and therapeutic centers.

• A/R Advantage offers clinical support services, suchas billing, collection and patient management.

DVI has acquired interests in two existing outpatient facilitiesand developed six centers that are now in operation. The firmis improving an additional outpatient center. All but one center,which provides renal lithotripsy services, involve diagnosticimaging services, the prospectus said.

Equipment financing remains the largest business for DVI, althoughthe firm expects clinical operations and support services to becomeincreasingly important.

The leasing business has been good over the last 18 months.Scanner vendors have offered volume discounts, and interest ratesfor acquisition of the equipment have dropped more than DVI'sleasing charges, the prospectus said.

Revenues rose 55% for DVI during its third quarter (end-March),from $5.4 million in 1991 to $8.4 million this year. Net earningsrose 52% from $471,000 in the third quarter of 1991 to $714,000in the same period of 1992 (see graph).

DVI intends to provide equipment to its centers through thesame lease arrangements used in its existing financing business,the firm said.

The company has also recently moved into the provision of fee-per-scanservices (SCAN 5/6/92). DVI does not expect this type of financingto become a material part of its business, however.

According to DVI, two major risks of the imaging services businessare:

• declining reimbursement for imaging procedures; and

• a possible drop-off in referrals due in part to growinglegal restrictions.

"Because of growing national concern with rising health-carecosts and improvements in the use of costly medical equipmentsuch as MRI systems, the amount that government and other third-partypayers reimburse for individual outpatient health-care procedures,including diagnostic imaging, is likely to be reduced," DVIsaid in its prospectus.