Financial woes mark demise of mobile firm

The demise of Anadyne Mobile Medical Technologies taught its founderand president, Edward Slominski, some painful lessons about themedical imaging shared service business.

The Plano, TX, mobile provider closed its doors a year agolast month when it ran out of cash and lost the confidence ofits lenders. Slominski has since left the medical imaging field.

"Reality is that the (mobile operator) who has the bestcost of funds and the strongest relationships with (equipment)vendors can endure and outlast the others," Slominski toldSCAN. "If you don't come into the industry with deep pocketsand an understanding that it is a cost-of-capital game, you aresetting yourself up for disaster."

At its height, the Anadyne fleet consisted of nine magneticresonance imaging systems, 15 computed tomography scanners, threemammography vans, one lithotripter and one digital subtractionangiography system. Peak sales were about $1.1 million a month,he said.

Anadyne was too heavily involved in CT and entered the MRImarket late, Slominski acknowledged. But the firm was also besetby financial difficulties common to the mobile field, he said.

Public accounting firms tended to provide hospitals with alonger estimate of the useful life of their equipment, he said.This discrepancy in accounting between hospitals and mobile operatorsbegan to improve toward the end of Anadyne's life. But by thattime, it was too late. Anadyne's hefty depreciation charges reducedthe value of the company in the eyes of its lenders, he said.

"Mobile operators only get to carry (scanners) on theirbooks five to seven years. When hospitals bought the same equipment--eitherinstalling it in-house or parking a mobile outside--they receivedbetter accounting treatment than we did," Slominski said.

Anadyne also took a financial blow when accountants reclassifiedthe firm's operating leases on its equipment to capital leases.This action chomped $1 million out of the firm's equity, he said.

In theory, such a reclassification of leases has a neutraleffect on a company's value over a five-year period. But capitalleases put the burden on the firm earlier, he said.

"If you are a start-up venture trying to acquire capital,and you have that restatement, the damage is done. You look likea loser," Slominski said.

Once a mobile provider starts to look shaky, hospitals arequick to break contracts that appeared firm, he said.

"The contracts weren't worth the paper they were writtenon," he said. "To quote one of my colleagues in theindustry: `Are you really going to sue your customers when theybreak a contract?'"

COMPETITION IN THE MOBILE IMAGING BUSINESS is more likely to comefrom independent hospital ventures than other large mobile providers.Hospitals cater to their physicians and often subsidize equipmentpurchases that aren't economically justified. This places themobile companies at a disadvantage when they try to establisha route in the same community, he said.

"A lot of people were upset with (Rep. Pete) Stark andhis argument that an overabundance of (medical) services shouldbe regulated. In many communities, however, this (practice) warrantsreview," Slominski said.

Medical imaging equipment vendors can also make life difficultfor mobile providers they do not like, he said.

Anadyne started out in business operating used scanners, sometaken over from individual partnerships that had failed. The mobileprovider later bought new equipment, particularly Diasonics MRIunits. The firm received a cold shoulder, however, from GE MedicalSystems, he said.

"GE basically told its sales people not to see us,"Slominski said. "They were told not to help us because wewere not really buyers. When we finally did become buyers, itwas too late."