U.S. slump sends Enertech abroad

July 28, 1993

Impending national health-care reform has led to a dramatic slowdownin the U.S. modular imaging facility market. With no recoveryexpected for 18 to 24 months, transportable facility vendor Enertechis looking abroad to make up for lost domestic business,

Impending national health-care reform has led to a dramatic slowdownin the U.S. modular imaging facility market. With no recoveryexpected for 18 to 24 months, transportable facility vendor Enertechis looking abroad to make up for lost domestic business, accordingto Del Ogle, president of the Monroe, OH-based Enertech Group.

"Our marketing emphasis, dollars and thoughts are on theexport market," Ogle told SCAN.

Enertech International, a new corporation also located in Monroe,is developing Enertech's global interests. Aside from two modularhospitals shipped to Saudi Arabia last August, however, the internationalmarket has yet to bear fruit for the company.

"It takes a long time to develop overseas contacts andcommunicate back and forth," Ogle said. "Foreign governmentsdon't make up their minds and get all their ducks in a row asrapidly as domestic customers."

The key to the modular facility export market appears to beproduct diversity. Enertech will expand its focus from strictlyhigh-tech imaging to include other types of medical imaging andgeneral medical equipment, Ogle said.

Enertech is working on a full-service hospital project in Chernobyl,Russia. Each hospital unit will have about 21 connected modules.The hospital will have three operating rooms, facilities for surgery,x-ray, examination and about 100 beds, Ogle said.

"This is totally different from the one to five-modulesingle imaging center projects that we have done for the domesticmarket," he said.

Enertech has reduced its operations to a skeleton staff asbusiness dropped off to a quarter of what it was last year. Thedownturn began last summer when a Clinton presidency seemed imminent.Hospitals began to hesitate about proceeding with projects thathad been planned for months, Ogle said.

"For that reason, we had to start making cutbacks in personnelto keep our overhead in line with our sales and revenue,"he said.

Tom Zimmerman, previously vice president of sales and marketing,left Enertech and the industry in October. Ogle has since addedsales and marketing responsibilities to his role as president.

The recession is not to blame for the sluggish market, Oglesaid.

"Hospitals are afraid that any new legislation will haveas a component a restructured Medicare reimbursement schedulethat will make it impossible for them to recover their investmentbecause an MRI exam may go down to 50% or 60% of what it is now,"Ogle said. "With that kind of reimbursement schedule, youcan't pay for an MRI."

Health-care changes have led to a drop in sales of new medicalimaging systems. Enertech's fortunes, dependent on imaging systeminstallation volume, fell right along with the declining fortunesof the scanner OEMs, Ogle said.

"Fewer numbers of systems being sold means fewer numbersof modules sold, and the prices are very competitive," Oglesaid.

Over the past six months, half of Enertech's installationshave been General Electric systems, with the other half usingToshiba, Philips and Siemens equipment, he said.

The design/build division suffered the same downturn as themodular/mobile business. Enertech's sales and planning officein Milwaukee was closed in February, Ogle said.

"That business was operating at such ridiculous profitmargins," Ogle said. "It just wasn't worth dealing withand taking the risk of cost overruns."

Enertech has no plans to become involved with fixed-site facilities,he said. The firm also dropped its engineering consulting business.

"We're just doing the modular (business), which has amobile component to it," Ogle said. "It's almost thesame product with wheels on it."

Enertech is increasingly working with used medical equipmentvendors such as Atlanta-based Equipment Solutions, Ogle said.

"They package their used equipment with our modular/mobilebuilding and trailer and make the sale to the customer,"he said.

Sales of Enertech's modular unit, Enerspace, have also beenaffected. Enerspace is designed to link up with a mobile van andprovide extra support space needed to convert the van to a fixed-siteimaging facility (SCAN 4/24/91).

"It's just the same as the rest of our business, wherethere hasn't been much activity," Ogle said.

BRIEFLY NOTED:

  • Philips Medical Systems scored a coup this month witha large contract to supply medical imaging equipment, service,and training to the government of Zimbabwe. PMS had some helpfrom Dutch interests.

The 44 million guilder ($23 million) contract will be financed40% by the Netherlands' Ministry for Development Cooperation.Remaining funds will come from a loan arranged by the InternationaleNederlanden Bank.

While the Zimbabwe contract does involve some advanced medicalimaging equipment, the bulk of installations will be of basicx-ray and ultrasound equipment that can be operated by battery.Philips will place imaging equipment in 77 small government andprivate clinics throughout the country over the next two years.

Philips has been in the forefront of efforts by the World HealthOrganization to develop a Basic Radiological System (BRS) foruse in developing areas (SCAN 6/16/93).

  • Agfa signed an estimated $2.4 million medical film contractlast month with Nashville center firm ImageAmerica. Agfa willbe the primary supplier of medical imaging film for ImageAmerica's14 freestanding imaging centers and 231 imaging sites in physicianoffices, hospitals and medical buildings (SCAN 6/2/93).