2011’s Top 20 Imaging-center Chains: Second Annual Report

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The growth of imaging-center chains was flat last year as owners absorbed a new round of reimbursement cuts in the form of higher equipment-usage rates and multiple-procedure payment discounts. Independent-chain owners primarily held their own or shed centers—and despite reports of hospital buying sprees, the chill extended to the country’s largest hospital-affiliated chains as well (though hospitals overall continued to bulk up through relationships with outpatient imaging centers). The good news is that procedural volumes and patient visits continued the upward trend that began last year as owners absorbed clientele and sought efficiency gains to offset reimbursement cuts. Radiology Business Journal and SDI (formerly Verispan), Plymouth Meeting, Pennsylvania, are cosponsors of this second annual report on the imaging-center–chain market. SDI provided the data on which this article (and last year’s report1) are based, as well as the comparison information2 that the company collected and analyzed in earlier years.

Table 1. Top 20 Chains

The top 20 imaging-center chains (Table 1) added just 10 centers in 2011, for a total of 934 (compared with 924 in 2010)—a mere 1% growth rate. By comparison, the top 20 imaging-center chains grew 7.5% between 2008 and 2010. More chains contracted than grew in 2011, with 10 chains shedding centers, three (and possibly five) chains adding them, and three remaining the same. Two new chains appeared on the list this year, and one was displaced. The remaining two chains, Novant Health (Winston–Salem, North Carolina) and MedQuest Associates (Alpharetta, Georgia), were counted as separate chains this year because MedQuest is a wholly owned subsidiary of Novant Health. After Novant Health purchased the outpatient imaging-center chain in 2007, however, SDI counted the combined imaging-center holdings of both companies as one. Last year, the combined company had 87 centers; this year, it has 81 (for Novant Health) and 65 (for MedQuest), indicating that one or both of these chains went on a buying spree. With 188 centers, RadNet (Los Angeles, California) once again was the largest imaging-center chain by far. Following several years of torrid growth, however, the company shed 10 centers in 2011. It made up for its inactivity in the imaging-center market with the acquisition of a PACS company and a teleradiology company in 2010. Two of the three chains that added centers grew significantly, adding enough to offset the losses of the majority. One was the independent SimonMed Imaging (Phoenix, Arizona), which gained 12 centers in 2011 (for a total of 35), leapfrogging up to eighth position. The other was Tenet Healthcare Corp, Dallas, Texas, which added 14 centers, for a total of 49. In spite of the difficult operating environment, the total number of imaging centers in the United States—including single-site operations—reversed its downward trend and logged a modest increase in 2011, adding an additional 72 centers, for a total of 6,383 (Figure 1).

Figure 1. US imaging centers (by state and region), 2011.

California and Florida continue to swap positions as the states with the most imaging centers. In 2011, Florida took back the number-one position, with 622 centers. That state added 10 imaging centers in 2011, compared with the three added by California (total: 619), mired in state budget problems. New York (510), Pennsylvania (360), and New Jersey (280) rounded out the five states with the most imaging centers. Ohio added the most capacity in 2011, with 16 new centers, followed by Michigan (13), Arizona (12), and Indiana and Florida, each of which added 10 new centers.

Figure 2. Growth/decline of US chains, 2003–2011.

The number of imaging-center chains—defined as companies that own two or more centers—in the United States continued its slide, from a peak of 1,066 in 2008 to 902 in 2011 (Figure 2). At the same time, the number of centers owned by chains increased from 4,383 in 2009 to 4,533 in 2011, suggesting that existing chains are availing themselves of buying opportunities.

Figure 3. Growth/decline of the top five chains, 2007–2011.

With the exception of MedQuest, however, the top five imaging-center chains pared their totals rather than adding centers, indicating that cash flow at the top of the chart might have ebbed due to reimbursement cuts—and that efficiencies were not easy to find (Figure 3). The declines, however, are in line with a recently established pattern of alternating years of growth and contraction among the top five chains. For most of the largest chains, a decline in the number of centers was preceded by a year of growth, so the decreases could be part of the natural attrition following acquisition, in which nonperforming centers and those with overlapping markets are shuttered.

Table 2. Growth/Decline of Imaging Centers (by Region), 2010–2011

Modest gains in the overall number of US imaging centers were, for the most part, spread across regions. Just two regions (Table 2) lost access in 2011, compared with five regions in 2011. The Mid-Atlantic states lost eight centers, and the New England region was down three. The remaining regions added centers, with the greatest growth in capacity seen in the Great Lakes region (4.63%), the Rocky Mountain region (4.02%), and the South Central region (3.55%). In the regions that lost centers, the totals declined just slightly: the Mid-Atlantic region declined a scant 0.69%, and the New England region was down 0.97%. In the Southeast, which lost 56 centers between 2008 and 2010, the decline in the number of centers has finally been reversed. The region added one center this year, for a total of 1,398.

Figure 4. Affiliation of imaging centers with chains, 2003–2011.

The percentage of imaging centers affiliated with a chain increased steadily from 2003 (48%) to a peak of 75% in 2006, but then gradually declined to 70% in 2010. In 2011, the imaging-center chains gained one percentage point in market share (Figure 4). It will be interesting to see whether that trend continues as health care in general undergoes consolidation. Integrated health networks (IHNs) have definitely expanded their footprints in the outpatient imaging space since last year’s report. As defined by SDI, an IHN aligns health-care facilities in order to deliver integrated health-care services to payors (by improving quality and reducing costs in a defined geographical area).

Figure 5. Number of imaging centers affiliated with integrated health networks, 2002–2011.

The total network of imaging centers associated with IHNs increased significantly, from 1,519 imaging centers in 2010 to 1,620 in 2011—an increase of 101 imaging centers (Figure 5). This trend has been picking up steam since 2005, when IHNs reported relationships with 842 outpatient imaging centers. The number has nearly doubled since then. Considering the fact that the total number of imaging centers increased by just 10 in 2011, quite a few imaging centers must have changed hands last year. This is consistent with reports of radiology practices and entrepreneurs either selling out to or partnering with hospitals, which can command significant reimbursement premiums beyond what nonhospital owners are able to negotiate. As health care moves toward greater accountability for patient populations, health systems have stepped up efforts to build a broader presence in their communities, and outpatient imaging fits into those plans. Hospitals also are addressing the cost of care delivery as they prepare for 30 million new patients to enter the health-care system; delivering imaging in an outpatient setting is less costly than it is in the hospital.

Table 3. Integrated Health Networks With the Most Imaging-center Relationships

Nonetheless, the IHNs with the greatest number of imaging-center relationships did not grab a greater share of the total IHN-affiliated pie. In fact, they (Table 3) claimed a lesser share of the total network: 25.8%, compared with the 27.5% share enjoyed by the top 10 imaging-center–affiliated IHNs in 2010. There was, however, some swapping of positions among the top 10: HCA (Nashville, Tennessee) now holds the greatest share of network relationships, at 5.3%, followed by 2010’s leader, Novant Health, at a 5.2% share of the network. A newcomer to the list of the 10 IHNs with the most imaging-center relationships, Memorial Hermann Healthcare System (Houston, Texas), showed up with 21 imaging centers and a 1.3% share of the network. The lack of activity at the top of the IHN list, however, belies IHN imaging-center–acquisition activity in the middle and at the lower end of the IHN scale. For instance, a major, $100 million joint venture involving eight locations was recently reported by Saint Thomas Health (a five-hospital system based in Nashville, Tennessee). Another indicator of hospital interest in the outpatient imaging-center space is the continued growth of the Alliance Imaging division of Alliance HealthCare Services (Newport Beach, California), which operated 136 fixed-site imaging centers at the close of the first quarter of 2011. Because the vast majority of imaging centers operated by Alliance Imaging are joint ventures with hospitals and hospital systems, Alliance Imaging does not show up on the list of the 20 largest imaging-center chains; most of its centers are counted under the banners of the company’s hospital partners. Alliance Imaging would rank as the second-largest chain if its centers were not already counted elsewhere. Unlike the largest chains on the top 20 list, which have undergone alternating periods of growth and contraction in recent years, Alliance Imaging has grown steadily, from 106 sites in 2009 to 119 in 2010 and 136 in 2011—suggesting that its strategy of partnering with hospitals, rather than focusing on wholly owned centers, has worked well for the company.

Table 4. Average Patient Visits per Imaging Center (by Region)

While growth was flat in the overall imaging-center market, patient visits were up in nearly every region (Table 4). Only the North Central and Southwest Central regions reported a decline in the number of patient visits. The biggest gains were logged in the Pacific region, which reported 15,573 visits, compared with 13,300 in 2009; in the New England region (13,727 visits, compared with 11,755); and in the Rocky Mountain region (16,522 visits, compared with 14,595). Despite the fact that the Rocky Mountain region added the greatest number of centers last year, the centers there logged the highest visits per center for the second year in a row: 16,522. New England lost three centers last year, which might have helped to boost its figures for per-center visits.

Figure 6. Average number of procedures per week performed at imaging centers, 2000–2010, based on data from 6,033 of 6,321 US imaging centers.

Imaging centers hit a milestone in 2010, with an average of 298 visits per week (Figure 6), exceeding a decade’s high of 291 visits per week, seen in 2002. Volumes increased dramatically between 2000 (at 216 visits per week) and 2002, but slid precipitously to 267 in 2003, a year in which more than 1,000 new centers were added to the total inventory. 2002’s visits-per-week number was not exceeded until this year. Clearly, operators of imaging-center chains had a strong motivation to tighten operations and increase throughput, which was likely to have been a response to the latest round of reimbursement reductions. Demographic trends suggest that volumes will continue to increase as the baby boomers move into their peak years of health-care use. Nonetheless, the continuing targeting of outpatient imaging for reimbursement cuts by CMS and lawmakers casts a shadow over the immediate future of the sector. Thus far, those cuts appear to have inspired greater operational efficiencies. Independent and entrepreneur-owned chains are clearly shedding centers, however, because the increase in hospital-affiliated centers (100) exceeds the increase in the total number of outpatient imaging centers (72). Cheryl Proval is the editor of Radiology Business Journal and vice president, publishing, for imagingBiz, Tustin, California.