2012’s Top 20 Imaging-center Chains: Third Annual Report

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Despite serious reimbursement pressure, the imaging-center market appears to be on the move again, adding 131 sites as of the first quarter of 2012. While this year’s expansion does not approach the tremendous growth rates of the period between 2000 and 2008, when the market more than doubled (from 3,068 centers to 6,431), it does return the sector to slightly more than the size it was in 2008 (6,514 centers), before it contracted.¹ Readers might wonder why the total number of sites in this year’s report is 691 more than last year’s total, instead of the 131 reported (Table 1). Due to a discovery by our data source of 560 diagnostic imaging centers that had not been counted before, it turns out that the market is 560 centers larger than previously thought. We are reporting the total size of the market at 7,074 sites, which includes the 560 previously unreported imaging-center sites, as well as the 131 new sites.

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Table 1. Chain Affiliation

For the purpose of assessing growth, we have excluded the new centers from the total count, but have noted the new total market size parenthetically in Table 1. We were, however, unable to carve out the newly discovered centers from the other tables in this report. Therefore, all centers added this year are considered new centers, for the purpose of analysis. Why, in this era of extreme reimbursement pressure, do we see any growth at all? Anecdotally, we hear that hospitals receive multiple requests annually from imaging-center owners interested in selling their sites. One trend that could be behind the growth is that of payors pushing imaging into lower-cost outpatient sites, causing hospitals and networks to expand their footprints in the outpatient setting. Another is the consolidation of centers in the hands of sharply run imaging-center chains that have the operational expertise necessary to survive on increasingly small margins. Our data set, including the newly discovered centers, shows just one more imaging-center chain than last year (Table 2). Whether in anticipation of an estimated 31 million new patients (who could become insured under the Patient Protection and Affordable Care Act) or simply by following care into the lower-cost outpatient arena, those chains appear to have added 144 centers in the year ending March 31, 2012.

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Table 2. Chain Growth

This is the third annual report on the imaging-center market produced by Radiology Business Journal and its data partner IMS Health, which recently acquired SDI (formerly Verispan). IMS (and SDI, in the case of the previous two reports) provided the data on which this report is based, as well as the comparison information that the company collected and analyzed in earlier years.² The scope of this report is freestanding imaging centers only; imaging centers on hospital grounds are not included in the counts. In 2012, the top 20 imaging-center chains (Table 3) experienced their own miniboom, totaling 114 more than 2011’s top 20 for an aggregate of 1,048 centers held by the country’s largest imaging-center chains. RadNet maintained its number-one position, adding 32 centers (and another 12 since the end of the first quarter of 2012), for a total of 220. HCA maintained the number-two position, with a total of 100 centers (six more than last year). The total of the number-three chain, Novant Health, declined by one, to 80 centers, while its wholly owned subsidiary, Medquest Associates, bulked up by 13 centers, for a total of 78. SimonMed Imaging leapfrogged three chains, by acquiring 21 centers, to occupy the fifth spot, with a total of 56 centers (displacing CDI). Owned by a physician-based practice, SimonMed bills itself as the largest and most advanced medical-imaging provider in the Southwest, with 10 3T MRI systems and comprehensive breast-imaging services. Since forging a partnership with Catholic Healthcare West (now Dignity Health) in 2009, SimonMed has expanded its footprint outside the Phoenix, Arizona, area (where it began) into California, Florida, and Nebraska. Had the imaging-center count been taken today, however, CDI—through its merger with the ninth-largest imaging-center chain, Insight Imaging—would easily have claimed the number-two spot. Black Diamond Capital Management, which owns a controlling interest in Insight Imaging, facilitated the merger by leading an investment in Insight Imaging that will make possible the buyout of CDI’s owner, Onex Corp. The top 20 welcomed three chains into the ranking this year: Dignity Health, which has 40 hospitals in California, Nevada, and Arizona, entered the top 20 at number 10, with 50 imaging centers. Dignity Health has moved aggressively into the outpatient arena through partnerships with SimonMed and with United Surgical Partners International, as well as through its recent acquisition of U.S. HealthWorks, which operates 172 occupational-health and urgent-care facilities in the United States.

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Table 3. Top 20 Chains

Outpatient Imaging Affiliates, long a significant player in the outpatient market through joint ventures with academic medical centers, also entered the ranking this year, with 22 centers. Another chain with highly engineered operations, Shields Health Care Group, also showed up on the list, with 22 centers at the end of the first quarter of 2012; the company now states that it has 30 centers (including four radiation-oncology centers) and 15 joint ventures with hospitals. The number of imaging-center chains (owners of two or more centers) grew significantly in the first several years of the past decade and then leveled off in 2007, reaching its peak (1,030) in 2008. Since then, the number of chains has declined, and this year remained flat: 903 chains (up from 902 in 2011), which added 144 centers, in the latest count. As noted in last year’s report,3 imaging centers owned by chains continue to be concentrated in fewer hands, and the trend was particularly evident among the largest integrated health networks (IHNs), defined by IMS Health as entities that align health-care facilities in order to deliver integrated health-care services to payors (by improving quality and reducing costs in a defined geographical area). The 10 IHNs with the greatest number of imaging-center relationships (not necessarily owned, managed, or leased) account for 26.2% of imaging-center relationships with these larger entities (Table 4). The top 10 IHNs increased their number of relationships with outpatient imaging centers from 418 last year to 473. Membership in this elite club remained fairly stable, with a bit of musical chairs among the IHNs on the list for three years running. Bulking up by 15 new centers, HCA, with 100 centers, assumed the top spot this year. It displaced last year’s number-one IHN, Novant Health (80 centers). Ascension Health held its number-three position, adding eight new centers. Dignity Health stormed onto the scene with 50 imaging centers, and Providence Health and Services also made a first-time appearance on the list. Overall, the number of imaging centers increased from 6,383 in 2011 to 6,514 (7,078) in 2012, increasing the percentage of single-site operations to 34% of all sites, up from 29% the year before. At the same time, affiliated centers dropped to 66% (down from 71% the year before), a level not seen since 2005 (Table 1). Considering the increasingly difficult reimbursement and regulatory environment, we can only speculate about the thinking behind these new single-site operations. Are the owners radiology practices with the imaging expertise and ability to meet increasingly strict accreditation requirements? Are they multispecialty (or other physician) practices that can provide a steady stream of referrals? Are they entrepreneurs thinking that a potential 31 million newly insured health-care customers make the imaging business an opportunity again, despite declining reimbursement? Working with the expanded database of imaging-center sites, every region appears to have added capacity (see figure, page 42). The Great Lakes, Pacific, and Southeast regions are 100 centers or more larger since the last count.

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Table 4. Integrated Health Networks’ Centers

Nearly all regions showed an increase in the number of visits per center; New England and the North Central region were the exceptions. The visitor counts, however, were from 2010 (not 2012), so the impact of the increased number of sites on 2012’s average patient visits per site will not be known until 2014, when the 2012 patient-visit counts will be completed. Imaging centers in the Rocky Mountain region continued to have the highest average annual visitor counts (17,646), followed by the Mid-Atlantic (17,096), Southeast (16,645), and Pacific (16,394) regions. Centers in the Great Lakes region registered the lowest average annual patient visits, at 11,904. Imaging centers in all regions except one experienced increased visitor counts, compared with last year’s report.3 Centers in the Rocky Mountain region added 1,124 to their average annual patient visits, for a total of 17,646, giving that region the highest average number of annual visits. Annual visit counts in New England, however, dropped by 517 (to 13,024), perhaps as a result of increased utilization management due to health-care reform in Massachusetts. Just as every region added capacity, compared with last year,3 nearly every state did the same, with the exception of Montana, the District of Columbia, and South Dakota, each down one center (see figure).

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

Some states added significant capacity; they include California (97 centers), Texas (59), Illinois (45), and Pennsylvania (35). Massachusetts, considering that its population is one-fourth that of Texas, also should be included among the states with significant growth, with 22 new centers. Florida, also a populous state with a large Medicare population, added just 24 centers, for a total of 646, retaining its status as the state with the second-greatest number of freestanding diagnostic-imaging centers. With this year’s data from IMS Health arrived the procedure counts for 2010, which leapt to 298—38 more procedures per week than the average for the prior year. Looking back at 2010, the year that we reported1 that the market had shrunk to 6,033 imaging centers (from 6,150 the year before), it appears that weekly procedure counts benefited from the reduced capacity. This year’s increase in the number of imaging-center sites raises a number of questions. As the sector resumes growth, albeit modest growth, how will the increase in the number of centers affect the annual procedure and visitor counts per site—figures that have increased in all of the past three reports (reflecting 2008, 2009, and 2010)? Because these counts lag behind the present by two years, our data will not provide the answer until 2014. Downward pressure on reimbursement has made it difficult for many single-site operators to survive, fueling a consolidation trend in recent years. The market grew by 131 new imaging centers this year, and IMS reports that about half, or 66, are sole proprietors, prompting this question: Will they find the operations expertise needed to survive until the expansion of the health-care market in 2014? About Our Partner IMS Health is a health-care–analytics organization that was founded in 1982. Its clients include pharmaceutical/biopharmaceutical manufacturers, medical- and surgical-device manufacturers, financial institutions, and the federal government, among other health-care organizations; www.imshealth.com.