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RadNet purchase paves way to strategic opportunities

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The Deficit Reduction Act has undercut reimbursements for outpatient centers, ripening the market for consolidation -- and RadNet has been harvesting. The company last week acquired Liberty Pacific MRI of Encino for $2.8 million, the fourth California imaging center RadNet has bought in little more than a month.

The Deficit Reduction Act has undercut reimbursements for outpatient centers, ripening the market for consolidation - and RadNet has been harvesting. The company last week acquired Liberty Pacific MRI of Encino for $2.8 million, the fourth California imaging center RadNet has bought in little more than a month.

But the purchase of Liberty Pacific goes well beyond bargain hunting. RadNet's most recent acquisition creates both tactical and strategic opportunities for the national provider of outpatient imaging.

RadNet operates three other imaging centers in the Encino/Tarzana area. Adding Liberty Pacific MRI to the fold will allow its new owner to shift some MR referrals in the area to the center, which operates a 3T scanner. It also allows RadNet to transfer a 3T scanner from one of its other Encino/Tarzana centers to a site on the other side of the country, Mid-Rockland Imaging in New City, NY.

"We needed to add capacity to the Rockland facility, and it is a lot less expensive to do it this way than having to buy a new scanner in that particular market," said Mark Stolper, RadNet executive vice president and CFO.

The value of Liberty Pacific does not end there. It consolidates RadNet's holdings in the Encino/Tarzana marketplace, which Stolper describes as offering opportunities particularly in neuroradiology, one of the strengths of 3T scanning, he said.

But RadNet plans to extend the reach of the Liberty Pacific center, which to date had been all about MR. It is installing a 64-slice PET/CT in the next 90 days. The new PET/CT will handle the overflow demand for a quad-slice PET/CT operating at RadNet's Tarzana Advanced Imaging Center, as well as enable advanced cardiovascular imaging.

The PET/CT and another 64-slice PET/CT now being installed at a center in Orange County, CA, will drive new cardiovascular applications, which have gained increased clinical and third-party payer support in recent months, according to the company.

Not only does offering PET/CT address a near-term opportunity, it positions RadNet on the leading edge of clinical capability.

"We have a unique opportunity in that market, given that we have so much PET volume that we need more capacity, and that we have numerous cardiologists and cardiovascular surgeons supporting us so that we will start to do more and more of these cardiovascular tests," Stolper said.

Additional reading: In early September, the company announced it had acquired three multimodality imaging centers in Victorville, CA, for $3.3 million and the assumption of debt totaling $1.2 million (DI SCAN 9/5/07, RadNet adds three imaging centers). In late August, the company signed an agreement to manage 20 recently foreclosed imaging centers, signaling a broad-based strategy to use core resources to generate revenue from centers that do not qualify as acquisition targets (DI SCAN 9/5/07, RadNet mints new revenues from imaging centers' distress).

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