• AI
  • Molecular Imaging
  • CT
  • X-Ray
  • Ultrasound
  • MRI
  • Facility Management
  • Mammography

NMR, Medical Resources combination heralds long-awaited consolidation

Article

Do you hear the sound of the other shoe dropping? Consolidationin the imaging center industry has long been anticipated. Theprocess may be on a roll now following passage of the federalMedicare/Medicaid ban on referring-physician ownership of

Do you hear the sound of the other shoe dropping? Consolidationin the imaging center industry has long been anticipated. Theprocess may be on a roll now following passage of the federalMedicare/Medicaid ban on referring-physician ownership of medicalcenters, effective Jan. 1 1995 (SCAN 8/25/93).

Imaging services consolidation is gathering more steam underthe competitive pressures of managed-care purchasing, which willgrow regardless of the turns in federal government health-carereform.

New Jersey center firms NMR of America and Medical Resourcescould be the first to consolidate in a big way. The two companiessigned a letter of intent to merge last week. If completed, thedeal will result in a combined company with 20 centers, nearly$60 million in assets, about $20 million in shareholder equityand a good bundle of cash for continued center acquisitions.

The combined firm's $20 million equity level will not be closeto the required $75 million equity level stipulated in the federallegislation for referrals to companies in which doctors own stock.But the firm will have over a year to build up to this level.

More important than the number of centers, however, is theirregional density. The combined company will have seven imagingcenters in New Jersey plus additional sites just over the borderin New York, Pennsylvania and Maryland. A stronger regional centernetwork will allow this merged company to capture managed-carebusiness, which is starting to pick up in the Northeast and canonly receive a boost from President Clinton.

"We will be in a position to track the managed-care contractsthat are going to come about as the health-care proposal fromthe Clinton administration starts to unfold," said JosephG. Dasti, president and CEO of Murray Hill, NJ-based NMR of America.

In addition to centers in the New York metropolitan area, MedicalResources has started to build up business in Florida. NMR hasno centers there, but the merged company can be expected to buildthis business as well.

Regional center networks are only one part of the equationin attracting managed-care business however. The second requirementis to have fully upgraded scanners that can provide all typesof procedures.

"They (managed-care purchasers) want one-stop shopping,"said Ernest J. DeSalvo, president and CEO of Medical Resources,based in Clifton, NJ.

Medical Resources brings a strong multimodality focus to themerger as well as an established partnership with imaging vendorGE Medical Systems.

"We are pretty much an all-GE company at this point,"De Salvo told SCAN. "This gives us tremendous economies interms of service costs and longer financing terms. Their equipmenthas also proven to be non-obsolescing."

The larger, combined company will be better equipped to approachoutside sources of capital for acquisitions, according to JohnP. O'Malley, NMR executive vice president and CFO. Even thoughNMR has cut costs and produced cash holdings of $4 million, ithas had trouble attracting financing as a relatively small playerin an industry many financiers are wary of investing in.

"We have a very strong balance sheet, but even that isnot enough to attract the kind of financing we need to take advantageof (acquisition) opportunities," he said.

Apart from their complementary regional placement of centers,the two firms anticipate a good fit in terms of resources andexpertise. Medical Resources is strong on marketing, having producedrevenue growth over the past six quarters, Dasti said (SCAN 11/4/92).On its side, NMR of America brings operating strengths enhancedover the last year of toughening up.

The two neighboring companies have talked several times overthe years, DeSalvo noted. At first, when Medical Resources wasprivate, NMR would likely have been the acquiring firm. As itstands now, the Medical Resources shareholders will receive stockworth 60% of the combined company, with the minority stake goingto NMR. The actual legal status and name of the combined companyis still under negotiation.

NMR shareholders will have an option to raise their stake to50%, and that's all right with DeSalvo.

"It will provide more cash for acquisitions," hesaid.

Related Videos
Nina Kottler, MD, MS
The Executive Order on AI: Promising Development for Radiology or ‘HIPAA for AI’?
Related Content
© 2024 MJH Life Sciences

All rights reserved.