RadNet will begin executing a cost savings program targeted at saving $30 million of annual operating costs in response to the reimbursement pressure and lower than anticipated utilization the company has experienced this year, announced Dr. Howard Berger, the company’s president and CEO in a third-quarter financials press release.
Overall, the company adjusted EBITDA for the third quarter was $25.4 million, a decrease of 11.3% from $28.6 million in the prior year's third quarter. Diluted per share net loss was $0.01 compared to diluted per share net income of $0.06 in the prior year's third quarter, adjusting for a $0.07 gain from the de-consolidation of a joint venture in 2012.
Of particular concern was that RadNet reported that same center procedural volumes were flat as compared with the third quarter of 2012 and same center revenue declined 3.6% over the same period last year. Because of this RadNet, revised its adjusted EBITDA projections and Free Cash Flow Generation guidance levels for 2013 downward.
At one point on Monday, RadNet stock had lost more than 18% of its value from the opening of the market, before climbing back up a bit toward the end of the day.
Dr. Berger noted that RadNet was not the only imaging provider facing pressure from declining reimbursement levels and lower utilization, and expressed confidence that RadNet’s size would ultimately work to its advantage by enabling efficiencies. Areas of savings for the company include reductions in salaries and personnel, savings from Information Technology implementations, savings from certain supplies and purchasing programs, and corporate savings from changes to RadNet workers compensation, health care and property and casualty insurance, commercial banking fees and physician compensation.
"Our focus is for these initiatives to outpace the continuing pressures in 2014, so that 2014 will show, in addition to continued aggregate revenue growth, improvements in EBITDA and profitability,” Dr. Berger stated in the press release. “I'm further encouraged by very strong volumes we have experienced in the fourth quarter so far, relative to last year's same period.”
Last year’s fourth quarter volumes were affected by Hurricane Sandy closing nearly all of RadNet’s East Coast Centers for several days, so results should improve for this year's fourth quarter.