Outpatient Imaging Affiliates News

Radiology sector has come full circle in past decades

Radiology sector has come full circle in past decades

The proliferation and growth of outpatient radiology companies, typically lumped in the ancillary category, are signs of the resurgent health care services sector–a sector currently under close watch by the local venture capital community. New technology, backed by government reimbursements, and a stabilized pricing scheme are catalysts for the recent spurt of outpatient imaging centers, says Frank Morgan, analyst with Jeffries and Co. And, says Morgan, it’s also symbolic of the cyclic nature of health care. “It [the outpatient imaging industry] completely washed out,” says Morgan, recalling a prolific growth period in the late 1980’s/early 1990’s.
Throughout the 1990’s, Morgan says there was a “shakeout” in the industry, due to lots of syndication and declining reimbursements for procedures such as MRI’s. “I’d say it’s a very good time to look at the business again,” he says.
Timing was indeed part of the decision behind the formation of Outpatient Imaging Affiliates. A main component of the company’s business plan is the utilization of PET (Positron Emission Tomography) technology, commonly used for cancer diagnosis. The machine, previously used primarily in research arenas, just gained approval for Medicare reimbursement. PET scanners cost between $900,000-$1.7 million. Reimbursement rates for the machine are about $1,900-$2,200 per scan. Medicare reimbursements for other technology commonly used in outpatient centers are $436-$970 per scan for MRI’s and $184-$330 per scan for CT’s.
The reaction of businesses to changing reimbursement rates has also been a key part of the imaging industry’s evolution. “If you look at reimbursement rates for MRI’s, they’re less than half of what they were 10 years ago,” Morgan says. Still, there’s about 2,700 diagnostic centers in the United States, up from 1,300 in 1998, he says.