Moody’s Investors Service has upgraded its outlook for imaging giant RadNet from “negative” to “stable” amid climbing patient volumes and other positive factors.
It was back in July that the ratings agency first issued its downgrade, citing the risk of a prolonged business impact from the COVID-19 crisis and uncertainty about the future. Los Angeles-based RadNet, like others, was hit hard by the pandemic, forcing it to cut costs and seek government assistance.
A year later, the outpatient imaging center operator has seen a dramatic turnaround, with patient volumes swinging upward. RadNet has updated its investor guidance for 2021 to reflect the rosier picture, and Moody’s took notice, revising its credit outlook on March 24.
“The outlook change to stable from negative reflects the company's rapid return of patient volumes in the second half of 2020 despite the company's concentration in California, which was hard hit by the coronavirus,” the investor service noted. “The stabilization of the outlook also reflects RadNet's cash flow resilience over the past year and its improvement in liquidity.”
Moody’s said it expects patient volumes will recover fully in 2021 after sharp declines last year due to COVID-19. It also noted that RadNet’s $195 million revolving credit line is largely undrawn, offering the imaging firm further flexibility. Strong competitive positions in its core markets, diversification of imaging modalities, and payer diversity are all further positives.
On the negative side, however, Moody’s said RadNet is “constrained” by its geographic concentration in six states. The operator also has “moderately high” debt leverage, heavy fixed costs and interest expenses, and mandatory term-loan amortization.
“The ratings could be downgraded if the company's operating performance and/or liquidity position weakens due to reasons including the change in trajectory of the pandemic,” the update noted.
RadNet bill itself as the leading provider of freestanding, fixed-site outpatient imaging services in the U.S. It operates a network of 331 such centers, with concentration in Arizona, California, Delaware, Florida, Maryland, New Jersey and New York. The firm recorded some $1.1 billion in net revenues in 2020.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.