IMV: Single-Site Imaging Centers to Take Brunt of DRA

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A survey of imaging center administrators polled right after the first quarter revealed that more than half the administrators anticipated significant, measurable declines in revenue in 2007, according to Mary C. Patton, director, market research, IMV Medical Information Division. “Some of that is due to DRA and some is not due to DRA, but in general, about 44% said that they were going to see revenue declines in the 10% to 25% range for full year 2007 versus 2006,” she said. “And another 16% said they expected those declines to be greater than 25%. You’ve got to know that a lot of those centers were marginally profitable in 2006. Those types of declines, we are guessing, took many from a profit position to a loss position.”

More than half of the administrators reported reduced capital budgets, and more than 70% reported that they will alter the way they plan to evaluate capital equipment purchases in at least one of the following options: more willing to purchase refurbished equipment than previously; more willing to lease equipment; and willing to consider nontraditional financing. “Again, what we found was that only about 30% of the sample have not made any changes to their cap equipment investment policies,” Patton reported. “The other 70% are considering one or more of those types of changes. One thing that we found was that the single-location imaging centers were significantly more likely to be considering changes in their equipment acquisition policies than were the multi-location imaging center changes. This is very logical because it reiterates the fact that the single site imaging centers are seeing a greater impact of the DRA cuts. They are feeling it more simply because they are less diversified. And certainly the predictions on the part of the multi-location imaging center chains are that the single center locations are the ones that will be going down.”

However, in the imaging center business, hope springs eternal. According to Patton, fewer than 10% of the sample expected to close their doors or sell this year. “However, what we found in the comments was that everyone is expecting the guy down the street to close,” Patton revealed. “A general conclusion is that there is a general expectation among freestanding imaging centers that there will be widespread closures. And most of them believe that the single-location imaging centers are at higher risk than the multi-location centers.”

Figure. Percentages of imaging facilities which have changed their organization's equipment purchasing policies based on the DRA. The possible types of policy changes included in the question were:

More willing to lease equipment than previously

More willing to purchase used/refurbished equipment than previously

More willing to consider non-traditional equipment financing arrangements

Change in scope of pro forma analysis required for equipment investment

Reduction in the Internal Rate of Return required for equipment investment

Longer payback period allowed for equipment investment