RadNet mints new revenues from imaging centers’ distress

September 5, 2007

Twenty imaging centers, foreclosed upon by their lender, are now being managed by RadNet, the nation’s largest fixed-site operator of imaging centers. The company has assumed management of the national chain of centers, known as Nydic Open MRI of America, through its newly created subsidiary RadNet Managed Imaging Services (RMIS).

Twenty imaging centers, foreclosed upon by their lender, are now being managed by RadNet, the nation's largest fixed-site operator of imaging centers. The company has assumed management of the national chain of centers, known as Nydic Open MRI of America, through its newly created subsidiary RadNet Managed Imaging Services (RMIS).

Management services will be provided under an agreement with the foreclosing lender and could add between $3 million and $4 million per year to RadNet revenues, according to Dr. Howard Berger, RadNet chairman and CEO.

Nydic's chain of 20 MRI centers operates in 11 states, producing net revenue of approximately $30 million per year. RadNet created its RMIS subsidiary specifically to capitalize on this opportunity and possibly address others resulting from the harsh economic conditions imposed by the Deficit Reduction Act, Berger said.

"The concept allows us to provide management services consistent with what we would do if we owned the centers but without the financial obligations of the debt or the past history of problems that may have been associated with the centers," he told DI SCAN.

Leading to the launch of RMIS, RadNet had been approached by lenders, equipment manufacturers, equipment vendor financing arms, and other operators to acquire centers that were underperforming as a consequence of DRA pressures. RadNet turned down some of those proposals because they did not fit with its acquisition and operational strategy or worked out management arrangements to handle selected small-scale operations.

Under the deal with Nydic, RMIS will receive a monthly management fee and a percentage of the centers' net revenue for providing services. These include billing and collection, transcription, medical coding, equipment management, medical supplies purchasing, acquisition and sale advisory work, and overall strategic management. RMIS is eligible for additional fees for certain performance initiatives, according to Berger.

In managing Nydic, RadNet will leverage core competencies that evolved as the company grew to operate 138 outpatient imaging centers in six states, becoming the nation's largest fixed-site operator. Having created one of the lowest cost structures in the industry, the company will draw on these resources to decrease those of its clients, according to Berger. And this may be just the beginning.

"Given what we are seeing and what we think our opportunities are, we believe there will be ways to expand this portion of our business into a whole new facet of the company's operating activities," Berger said.