Radiology provider RadNet Inc. has inked a new hospital joint venture partnership and plans to “materially” expand another existing one, leaders announced on Wednesday.
Both deals are with Cedars-Sinai, a nonprofit academic healthcare organization based in California. RadNet and the hospital are launching a new JV called Los Angeles Imaging Group (where both organizations are based), which will initially have three locations. Plus, the already-established Santa Monica Imaging Group is adding seven more centers, five of which will be contributed by Cedars-Sinai.
“The expanded relationship with Cedars-Sinai is designed to increase patient access to outpatient radiology by broadening the ambulatory network of imaging centers throughout Los Angeles, including certain underserved communities,” RadNet President and CEO Howard Berger, MD, said in a Nov. 8 announcement from the company. “The ventures will streamline and improve patient care by improving workflow, providing better access to records and producing more timely and accurate results for patients and referring physicians.”
Altogether, RadNet now boasts a network of 366 owned or operated outpatient imaging centers spanning Arizona, California, Delaware, Florida, Maryland, New Jersey and New York. With the deal, nearly 36% of its locations are held through health system partnerships.
Imaging business strong
RadNet also reported its third quarter financial results on Wednesday, logging revenue of $399.1 million from its imaging business, a 14.3% uptick over the same period in 2022. Adjusted earnings (before interest, taxes, depreciation and amortization) from the segment totaled $60.4 million in Q3, a 20.3% year-over-year uptick.
Berger said increases were driven by “strong” procedural volumes in the three months ending Sept. 30, including 4.2% same-store and 8.6% aggregate growth at its centers. MRI volumes were up 11.7% year over year in Q3, while CT climbed 10.9% and PET/CT 17.7%. Overall volume—which includes X-ray, ultrasound, mammography and other exams—was up 8.6%. When only counting the same imaging centers that were operational in Q3 of 2022 and 2023, MRI volume increased 6.9%, CT 6%, PET/CT 15.2% and routine exams 4.2%.
Given the promising results, RadNet is revising its financial projections for 2023. The company now anticipates collecting upward of $245 million in adjusted earnings from its imaging center segment this year, an increase from the previous projection of $242 million.
“We have been consistently outperforming our internal budget, which is a result of strong procedural volumes and revenue and improved margins through active expense management,” Berger said in the announcement. “We also raised our capital expenditure guidance range to account for the continued aggressive reinvestment of our cash flow into expanding capacity, de novo facilities, hospital joint ventures and information technology solutions.”
Artificial intelligence still in the red
Meanwhile, RadNet did not revise guidance levels for its artificial intelligence segment, anticipating upward of $13 million in EBITDA losses from the business line in 2023 (on net revenues of $11-$13 million).
Berger highlighted steady growth from AI, with Q3 revenues up 220.8% year over year and 21.4% compared to Q2 of this year. RadNet is hoping its Enhanced Breast Cancer Detection program, or EBCD—which charges women a $60 out-of-pocket fee to have AI analyze mammography results—eventually turns into a big moneymaker.
EBCD drove AI revenue growth in Q3, with the service now rolled out at all of RadNet’s mammography centers on the east coast. The company has now begun implementing the program in California and anticipates the process will conclude by the end of 2024’s first quarter.
“We are experiencing close to a 35% adoption rate on the east coast, a metric we expect to increase as we continue to educate patients and referring physicians about the significant advantages of electing EBCD,” Berger said. “We are on target to meet our AI segment guidance for 2023 and continue to work towards break-even adjusted EBITDA from the AI segment by the end of next year.”
When including results from its AI segment, RadNet logged Q3 revenue of $402 million, up 14.8% from the same period last year. Adjusted earnings were about $57.9 million, up 26.5% when factoring in losses from artificial intelligence.
RadNet has scheduled a third-quarter earnings call for Nov. 9 at 10:30 a.m. Eastern Time, with a live/archived webcast available here.
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.