Raytel purchases Merrill Lynch center partnership

December 25, 1991

Raytel emerged as a major player in the medical imaging centermarket this month with its acquisition from Merrill Lynch of MedicalImaging Partners, an 11-center limited partnership.The MIP centers will be merged with CDI Medical Systems, Raytel'sexisting

Raytel emerged as a major player in the medical imaging centermarket this month with its acquisition from Merrill Lynch of MedicalImaging Partners, an 11-center limited partnership.

The MIP centers will be merged with CDI Medical Systems, Raytel'sexisting MR center subsidiary. CDI had operated three MRI centers,two of which were already cooperative efforts with MIP. The totalchain numbers 12 centers.

The MIP centers owned by individual limited partnerships arewithin the bounds of the federal safe harbor regulations restrictingreferring-physician ownership of medical centers. They will bemaintained unless physician partners request to be bought out,said Richard F. Bader, Raytel chairman and CEO.

Raytel has adequate cash on hand for center acquisitions, butdidn't need much of it in purchasing MIP, Bader said. The partnershipwas taken over in exchange for Raytel stock worth about $6 millionand a $1.5 million note to be paid by Raytel with interest ina few years. Raytel took on 497 of the MIP limited partners asshareholders in the company, Bader told SCAN.

The journey of Raytel from a pioneer in picture archivingand communications systems to a major imaging center operatorhas been one of the more interesting transitions in the industry.Raytel spun off subsidiary Olicon Imaging Systems a year ago andpassed on the rights to its PACS technology to the new firm (SCAN12/12/90).

Raytel purchased CDI a year before it finally exited PACS.That firm brought a major business in pacemaker monitoring aswell as the MRI centers (SCAN 12/13/89).

The acquisition of MIP does not leave Merrill Lynch completelyout of the imaging center business. It continues to retain a smallerinterest in two limited partnerships that support four imagingcenters, according to Henry F. Keller, president and CEO of ImagingSciences.

Imaging Sciences, a unit of Merrill Lynch, served as generalpartner in MIP. Keller, a former president of imaging vendor Elscintand group vice president at Picker International, was hired byMerrill Lynch three and a half years ago to clean up the centerbusiness (SCAN 7/6/88). The MIP centers had a positive cash flowin 1990 and will be profitable this year, Keller said.

Keller and Robert S. Goodman, vice president of operations,attempted to lead a buyout of MIP a year ago. The buyout was intendedas a prelude to a merger with imaging services firm MTC Imaging,also of New York (SCAN 11/7/90). That effort failed when the stockmarket soured and the group was not able to initiate a publicoffering to spin the unit off.

Keller, who continues to operate his own management turnaroundconsulting firm, will leave Merrill Lynch now that MIP has beensold. Goodman has helped form Quinmed, a Philadelphia-based medicalcontract management services company, and will continue to helpmanage the remaining Merrill Lynch-financed centers on a contractualbasis.