As the trend of consolidation among imaging centers continues, RadNet, Inc (Los Angeles, California) is at the leading edge, having added 24 freestanding outpatient centers in 2010 alone. The company, founded in 1984, today owns and/or operates a network of more than 200 quality-oriented, cost-effective facilities, and it is poised to continue increasing that number. Mark Stolper, executive vice president and CFO of RadNet, spoke with ImagingBiz about the company’s present and future ambitions.
ImagingBiz: With all the uncertainty that exists in health care today, why is RadNet so confident about the future of outpatient imaging centers?
Stolper: Imaging, in general, is a necessary service that’s in the sweet spot of where health care is today and where it’s going to be in the future. It’s part of preventive medicine. Ultimately, although money must be spent up front for imaging tests, the result is a cost savings to the health-care system. Imaging reduces the need for more invasive alternatives, such as exploratory surgeries, and allows detection of problems earlier in the disease process, when disease is often treatable more economically.
With respect to outpatient imaging within freestanding centers specifically, there’s been a trend toward it and away from hospital-based settings over the past several decades. The reasons are obvious. First, outpatient imaging is a far more effective way of dealing with nonemergency cases. Access is more convenient for the customers, and the customer experience is better because the patient will not be made to sit next to very sick patients. Second, outpatient imaging is far more efficient. Reports are turned around much more quickly. The communication between radiologist and referring physician is better because it’s much more service oriented.
Most important, outpatient imaging within freestanding centers is much more economical for the payors. It is not uncommon for costs to be 30% to 50% lower in freestanding centers than within hospital settings.
ImagingBiz: RadNet has been aggressively shopping for and purchasing outpatient imaging centers. What are the overarching strategic objectives behind these acquisitions?
Stolper: We’re two to three times larger than any other outpatient imaging center player in the United States, yet we’re really only an East Coast and West Coast company in limited markets. What we want to do is drive further penetration into the six states that are our existing core markets—California, Delaware, Maryland, New York, New Jersey, and Florida—in order to make our regional presence stronger.
We’ve settled on this strategy of regional markets because we believe regionally dense networks of facilities are much more efficiently operated than are those with far wider reach. This strategy also nicely accommodates our desire for a stronger negotiating hand with regional health plans, when it comes to pricing.
ImagingBiz: You named six states; why these, in particular?
Stolper: These states are where the opportunities exist most abundantly, we believe: 25% of the US population resides in just that handful. Moreover, these high-population states also happen to have their populations distributed in fairly dense patterns, which makes our efforts to serve them more cost efficient—and, of course, one of those states, California, is where we started.
ImagingBiz: In the past six months, RadNet has expanded beyond the acquisition of imaging centers and has made forays into some other areas. Can you tell us about these ventures?
Stolper: For starters, we’ve diversified into the IT world with our purchase, in October 2010, of a radiology software company, eRAD (Greenville, South Carolina). This now puts us in the PACS business. In addition, we’re developing our own RIS product, which should be completed in 2012. Another diversification area for us has been teleradiology, made possible by our acquisition of Imaging On Call (Poughkeepsie, New York). We’ve also entered the business of breast-cancer–care management. This happened in 2008, when we acquired Breastlink (Orange, California).
ImagingBiz: What drove that acquisition?
Stolper: At the time, RadNet itself was providing a tremendous amount of women’s imaging—over half a million mammography exams annually, many performed in women-focused centers. In the course of this, we observed that the disease-management process for breast cancer is highly fragmented—and, as a result, highly inefficient.