Rx Medical plans imaging expansion

August 26, 1992

Rx Medical Services will leverage its experience in clinical laboratoriesinto a position in medical imaging. The company, based in NewportBeach, CA, last month made the first of what it hopes will bemany imaging center acquisitions with the purchase of

Rx Medical Services will leverage its experience in clinical laboratoriesinto a position in medical imaging. The company, based in NewportBeach, CA, last month made the first of what it hopes will bemany imaging center acquisitions with the purchase of High DesertImaging of Victorville, CA.

"We're aggressively pursuing acquisitions," saidDes Levin, a consultant to Rx Medical. "We have between fiveand 10 candidates with whom we're in different stages of discussionand negotiation."

Rx Medical purchased High Desert for $4 million from a groupof limited-partner physicians. The multimodality center is equippedwith a low-field Diasonics MR scanner, which will be replacedwith a 1.5-tesla GE Signa. High Desert's GE 9800 CT scanner hasbeen upgraded.

Rx Medical operates clinical labs in 15 locations. The acquisitionof High Desert will bring Rx Medical's annual revenues to over$20 million. High Desert had revenues of over $3.3 million in1991.

Physician concern over self-referral regulations was not aprimary factor in Rx Medical's decision to diversify into imaging,Levin said. But the company's acquisitions strategy thus far hasbeen shaped by the ongoing battle over self-referral.

A number of doctors who had been investors in High Desert beforeRx Medical's buyout were self-referring, Levin said. That potentialconflict with federal safe-harbor regulations was resolved withthe acquisition.

Self-referral regulation on the state level wreaked havoc withthe company's plans to expand in Florida, however. About fiveacquisitions were in the planning stages when the Florida Legislatureenacted a strict self-referral law that also included a pricecap on imaging procedures. Rx Medical tried to reassess centervaluations in the wake of the law's passage, but the task provedfutile and the deals fell through.

"The situation regarding the (Florida self-referral legislation)absolutely destroyed the deals we had planned," Levin said."We could not make sense of any of the deals and so we literallywalked away from them."

The price cap was declared unconstitutional last month (SCAN7/29/92), and Rx Medical is reexamining expansion in Florida.

As Rx Medical plans further acquisitions, the company hopesthat its ability to offer both clinical lab and medical imagingservices will have a synergistic effect on marketing efforts toreferring physicians.

"There is some cross-pollination," Levin said. "Ifwe're providing good lab services to a physician, we can say,`We also operate imaging centers, should you require that service.'"