RadNet exploring expansion outside of its 8 core markets in 2025

Publicly traded outpatient imaging center operator RadNet Inc. is exploring expansion opportunities outside of its eight core markets in 2025. 

Chief Financial Officer Mark Stolper spoke virtually during investment firm Oppenheimer’s 35th Annual Healthcare MedTech & Services Conference on Monday. He discussed the Los Angeles company’s business model and growth plans this year and beyond. 

RadNet operates nearly 400 freestanding imaging centers across Arizona, California, Delaware, Florida, Maryland, New Jersey, New York and Texas, and leaders are mulling where to go next. 

“Part of the growth algorithm is acquisitions,” Stolper told attendees March 17, estimating there are 6,000 total outpatient imaging centers in the United States. “There are always natural sellers in a fragmented industry this size,” he added later. “We are able to buy small mom-and-pops in our existing markets and, from time to time, we’re looking to go outside of the eight states that we currently operate-in with a more substantial acquisition. We’ve got a pipeline of some of those opportunities today, and we’re hopeful we can execute and expand the footprint geographically.” 

He did not specify cities or states, but RadNet has typically targeted dense areas, operating in New York, Los Angeles and Baltimore. The company last expanded geographically into Texas in 2024, starting with the acquisition of Houston Medical Imaging and its seven centers. RadNet now operates 14 centers in Texas, spanning Fort Bend, Harris and Hidalgo counties. 

Clustering in concentrated markets has helped bolster negotiating power with health insurers. RadNet is the largest outpatient imaging provider in “almost all of the markets we operate,” Stolper notes. 

“One of the benefits we’ve gotten from that strategy is we have a seat at the table with the commercial insurance companies to establish long-term, fair and equitable pricing,” Stolper told Oppenheimer Conference virtual attendees. “In recent years as costs have gone up in providing these services, and as labor has been scarce and increasing in terms of the cost, we’ve been able to go back, effectively, to the commercial insurance companies and negotiate better pricing. And they also recognize that we’re part of the solution and not part of the problem, meaning that we are partners with them in trying to move this business out of the much more expensive hospitals.” 

Prior to Texas, RadNet entered Arizona in 2020 via a joint venture with hospital giant Dignity Health. The partnership kicked off with the acquisition of AZ Tech MRI & Radiology, which operated eight imaging centers, and RadNet also acquired seven Phoenix-area locations from health insurer Cigna. Today, the company operates 18 imaging centers across Arizona’s Maricopa and Pinal counties. 

Stolper said RadNet continues to eye additional hospital joint ventures. About 38% or 152/398 of its imaging centers are now held through JV deals, and he sees that number climbing to 50%, serving as a “big growth engine for us moving forward.” 

“The hospitals, the health systems are recognizing that they are losing more and more of this business to the ambulatory sites of care,” Stolper said. “What we’re giving them with the joint venture strategy or structure is the ability to participate … as opposed to continuing to fight the trend, where we allow them to be our partners. The quid pro quo is we ask them to use their influence and their relationships with community-based physicians to try and drive those referrals into our jointly owned facilities.”

Stolper also touted RadNet’s continued expansion through newly constructed, “de novo” imaging centers. The company has “struggled” over the last few years with rising demand in its markets, causing backlogs of requested exams. RadNet has sought to “aggressively expand” capacity via construction. It now has 13 projects in the pipeline for 2025 and already built nine new centers in 2024. 

Typically, to erect a 5,000- to 10,000-square-foot facility that offers multiple imaging modalities, it costs about $5 million to $7 million, he said. Often, it can take 1 to 3 quarters of the year for the center to begin “contributing meaningfully” to RadNet’s returns. Stolper estimated each facility brings in revenue of around $6 million, bringing down 15% to 20% EBITDA (earnings before interest, taxes, depreciation and amortization) margins to the company’s bottom line. 

“When we’re building these sites, we’re looking for a 15% to 25% return on investment capital, which is similar to buying facilities if you’re paying say 5 to 7 times EBITDA,” he added. 

Stolper reiterated the desire to grow through acquisitions, noting the company now has about $740 million in cash to fund such deals. 

“We’re interested in expanding, not only in our existing markets but in new markets to the extent there are acquisitions available that can give us some size and scale from the get-go,” he told virtual attendees. “We have an active pipeline right now and we hope and expect to be able to announce some interesting acquisitions this year on the core imaging center side.” 

You can watch the full recording of the conference session for free here.