Under LOI:Very Well-Established, Well-known in Community, Excellent Location, Consistent Revenue
This Center is Under Exclusive LOI
This is a very well-established and profitable imaging center with two locations and provides MRI/CT, US, Digital X-ray, Fluoroscopy, Myelogram, X-Rays, Thyroid Bx, Pain Management, Paracentesis, and Thoracentesis services. The Center is the only one with an open, high-field (1.2T) MRI within 40 miles, and only one of two within 200 miles. The Center has been around this location for about 20 years and has an excellent reputation in the community.
The centers are adequately and thoughtfully staffed with skilled personnel from within these two small, close-knit communities, where word-of-mouth brings in the best marketing results.
Like most other MRI centers in the US, their finances had been affected in 2020 and to a smaller extent in 2021 due to Covid. However, the scan volume and the reimbursements, both have already caught up to the pre-Covid numbers and are holding well.
Note that in addition to running these two imaging Center locations, the Company also used to provide professional reading services to two hospitals. This was a very significant revenue source for the Center, providing revenue of about $3M-$4M per year until September of 2020. They gave up this contract so that the radiologist owners can have more free time.
In our Financials, we have removed the revenue from the reading services to these two hospitals, and have just focused on the revenue generated by the two locations of the Company.
The Imaging Center has been generating a very healthy revenue of about $3 million per year from its two locations. According to general trends, a multilocation imaging center typically would have an EBITDA margin of about 20-25%, or roughly an EBITDA between $600K-$750K. However, the radiologist owners of the Center were also providing professional reading services to two hospitals, bringing an additional revenue of between $3-4 million for the Center with relatively small additional costs in staffing. The radiologists ended the contract in 2020. In 2020, they still received about $2.3M in revenue from professional reading fees from the Center.
So overall, with the professional fees from the hospital work included, the Center was doing extremely well and was very profitable until the end of 2020. As a result, the Center really didn’t have a strong incentive or a reason to rein in costs. When one looks at the revenue just from the two centers alone (without the outside professional fees), it was running at a loss. When the contract for the professional component with the hospital ended, the Center had extra staff but some of them were voluntarily leaving for other jobs, and others were about to retire and so the management chose not to lay anyone off and absorb the loss for the time being.
The financial analysis of the Center is done after considering some of the cost savings that can be generated by decreased staffing and a few other cost savings. The Center does generate positive EBITDA now. However, a larger strategic buyer, such as a hospital group or a larger chain can extract much larger profits out of this Center because of three reasons:
- Better sharing of costs between multiple locations (in case of a chain of centers)
- Superior reimbursement arrangements
- Stronger Marketing
These factors can improve the bottom line dramatically for the buyer.
The financials of the Centers are summarized below:
(Imaging Center plus Professional Reads for Hospitals)
(Imaging Center Only)
*Significant professional reading income was coming till 2020 with hospital contracts.
This contract ended in Sep 2020.
We are inviting offers at a fair asking price from a strategic buyer that can leverage and enhance the performance of this Center with its two locations via buyer’s better reimbursement rates, cost savings, and better marketing. The Center has major assets valued at $1.1M as per an appraisal done in December 2021 and is offered debt-free. The Center has a solid and consistent revenue of around $3M. The only reason its bottom line currently looks somewhat weak is that till recently it had a cushion of an additional $3 million to $4 million in revenue from professional fees and hence was very profitable and had little incentive to rein in costs.