Publicly traded imaging center operator RadNet Inc. is launching a new joint venture with Providence health system, leaders announced Tuesday.
The partnership will operate under the brand name Tri Valley Imaging Group and start with seven locations across California. Los Angeles-based RadNet will contribute four centers to the new company while Providence is pitching in three more. They also plan to open an additional new center while upgrading existing ones previously operated by the hospital group.
This is the second JV deal between RadNet and Providence in Southern California.
“We are excited to expand our partnership with RadNet and leverage its expertise in imaging diagnostics,” Karl Keeler, chief executive, Providence L.A.-San Fernando Valley Service Area, said in a April 2 announcement. “Through this new joint venture, we are furthering our shared vision of improving patient access to high quality imaging services across the San Fernando and Santa Clarita valleys.”
Two RadNet locations in Burbank, and two more in Panorama City and Santa Clarita, will now operate under the Tri Valley Imaging Group name. Providence’s contributed locations span Santa Clarita, Mission Hills and Porter Ranch, with the new center slated for Burbank. RadNet also highlighted the partnership’s plan to increase access to imaging services for physician practices such as Facey Medical Group, the Providence Medical Institute, Providence Medical Associates and Providence Specialty Medical Group. They’ll seek to integrate RadNet’s eRAD and DeepHealth solutions with Providence’s Epic EHR system.
RadNet bills itself as the “national leader” in fixed-site outpatient imaging services, operating a network of 377 centers and counting. Providence Southern California, meanwhile, is the region’s largest health system with 11 hospitals and over 100 clinics. It’s part of the larger Providence organization, which operates 51 hospitals and employs 34,000 physicians.
Ratings upgrade
In other news, Moody’s Ratings issued a credit upgrade for RadNet on March 28.
Analysts increased the organization’s corporate family rating from B1 to B2 while lowering the probability of the company defaulting on its loans. In making the decision, Moody’s cited RadNet’s “creditor-friendly” financing policies, “healthy” organic growth and “very good” liquidity.
“Moody's thinks RadNet is well positioned to experience above-market growth rates due to the continued shift in care setting from hospitals to outpatient facilities, the aging U.S. population, a fragmented imaging center landscape and continued development of the company's digital health segment,” analysts Adam Chaim and Ola Hannoun-Costa wrote Thursday.
RadNet has raised about $460 million of equity from two recent public stock offerings, Moody’s noted. Over the last 12 months, it has used this money to fund tuck-in acquisitions, fuel the building of new centers, bolster its cash balance and repay $30 million in debt.
However, the agency cautioned that RadNet is constrained by its geographic concentration in seven states, with most centers in California, New York and Maryland. High fixed costs—including “significant” capital expenditures and “sizeable” interest expenses—also may impact future growth prospects.
“The ratings could be downgraded if the company's operating performance and/or liquidity position weaken,” analysts noted.
RadNet logged a total of $1.6 billion in revenue last year. Moody’s expects the company to be supported by about $6o million to $80 million in annual free cash flow over the next year and a half, along with $525 million more in cash on hand. RadNet also had about $187 million available to draw on its revolving credit line and faces only “modest” mandatory amortization of its loans ($15 million).
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.