Lack of Investment in Imaging Equipment Might Contribute to Accelerated Consolidation

Published by ImagingBiz

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. Over the past several years, the industry has announced several notable partnerships. Examples of imaging chain–hospital partnerships include those of Alliance HealthCare Services (Newport Beach, California) and Emory Healthcare (Atlanta, Georgia); RadNet (Los Angeles, California) and Barnabas Health (West Orange, New Jersey); and Texas Health Resources (Arlington, Texas) and Envision Imaging (Mansfield, Texas), among others.

As a testament to a potentially increased imaging chain–hospital partnership trend, Larry Buckelew, interim CEO of Alliance HealthCare Services, says, “In this environment we’re in, we’re finding hospital partners more interested than they’ve ever been before.” The most notable freestanding transaction occurred in July 2012, when Insight Imaging (Lake Forest, California) acquired the majority stake in Center for Diagnostic Imaging (Minneapolis, Minnesota) for $231 million.

While the industry continues to consolidate, smaller freestanding facilities are generally focused on trying to maintain their market share and profits. The response to industry headwinds varies by service market, but evidence points to the potential for the industry to reach a turning point during which partnerships/consolidations accelerate due to the lack of capital investment in equipment in recent years.

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