investing in an imaging center

[benign_user]

Hi,

 

I have an opportunity to invest in an imaging center. Does anyone have any experience with this? Any tips from someone whose done this?

 

Thanks!

[jjandjab]

I am a radiologist. I have chosen not to invest in any centers (although there is now only one in my area - there used to be two). I am admittedly a cautious investor. I prefer saving and regular investing.

There are just so many factors, most of which are generally tilted against you making any money in the current environement. Of course this is colored by my knowledge that the local imaging center, in which some local rads invested heavily and built up, ended up being crushed by the local medical center when their relationship went sour and they lost the entire investment. All of those guys were scrambling to rebound financially well into their late 60s and early 70s. They may still be trying to recover for all I know.

I would think in most areas, the hospitals or larger national companies have picked all the good spots. Or if you are being asked to buy someone elses share, be very wary of why they are trying to get out.

But again I'm quite conservative in this type of area. If you are of a business mindset, have the resources, want to diversify your assets and feel it is a good opportunity after researching/doing your due diligence, then perhaps give it a try

[VagabondMD]

I am an investor in a successful group of imaging centers, a partnership with our hospital and an independent company, and we have done well over the last 12 years. My radiology partners and I have a small stake, so our risk is relatively low. As well as we have done on the business side, the greater benefit has been on the professional side as the added volume in MRI and CT has allowed our group to grow and become more subspecialized. Here are some of my thoughts:

1. It is a very mature market, and the easy money has been made.

2. Per #1, in order to make money in this business, you will have to take volume from someone else. Can you identify "someone else"?

3. Make sure your center is operating legally-- no billing shenanigans and no kickbacks. Docs go to prison every year for imaging center foul play. EVERY YEAR.

4. Try to buy under 4x EBIDTA and sell for 6x EBIDTA. If you do not know what EBIDTA is, don't buy until you understand it.

5. Don't buy into a center with junky old low end equipment. Or else, you might have the opportunity (cash call) to upgrade it!

Edit: 6. Like other areas in medicine, the smaller "mom-and-pop" players are increasingly getting crushed by the bigger players--either failing or getting sold.

There are many, many considerations, but the first one is to not buy into an obvious losing situation. If you have specific questions that might benefit others, I would be happy to respond here. Feel free to shoot me a private message if you think I can help.

[benign_user]

Thank you

[pulmdoc]

I would be cautious simply because of Vagabond's #6: independent ancillary services are being set up to be crushed by the direction medicine is moving. In my metro area of >1M, the vast majority of primary care docs are employees of one of the big health systems, with more joining every year. There are obvious incentives in place (and a Stark exemption) to refer imaging to the hospital radiology department. That leaves independent imaging centers having to slash prices to compete for patients.

[VagabondMD]

^^ I live in a Top 25 metro area, and there is no shortage of potential referrers: independent ortho and spine surgeons, ENTs, urologists, pain management docs, chiros, etc. Our centers are mainly for MRI and CT, a primary care is a small percentage of our referral base, maybe even single digit. But it does bring up a good point (and related to #2), where are your patients coming from?