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Corey Palasota, CFA

As valuation professionals, we actively follow publicly traded companies in the healthcare industry.  These companies provide insight into how company management and investors evaluate the opportunities and risks faced by a particular industry.  Challenges in the diagnostic imaging business are not unique; nearly all ancillary healthcare service companies are experiencing similar macroeconomic headwinds. However, ancillary healthcare stocks have continued to demonstrate gains.  

Few would disagree that it’s increasingly difficult to operate as a freestanding imaging-service provider. Reimbursement continues to face pressure, patients have become more savvy regarding their copayments, and increased competition from hospital operators has caused industry participants to become intensely focused on cost efficiencies. We have entered an environment where economies of scale and focused expertise will correlate with enhanced competitive advantages; consequently, we find evidence of increased partnerships and consolidations. One factor that stands to accelerate the partnership/consolidation trend is often left out of the conversation: The impact of the recession on capital investment in imaging equipment might soon create accelerated market activity, however.