US Radiology Specialists faces upside and execution risk in debt-fueled expansion plans: Moody’s
Moody’s sees potential execution risk in US Radiology Specialists’ debt-backed bid to grow this year, but also several reasons for optimism.
The investor service shared its take on USRS in a periodic review published Feb. 4, highlighting the Raleigh, North Carolina, practice’s high leverage and modest scale. On the plus side, the provider boasts concentration in Texas, North Carolina and Georgia, which together account for more than 70% of its consolidated revenues.
“The company's rating benefits from a strong competitive position in the markets where it operates [and] good business diversity as it offers both outpatient imaging and radiology physician services in an integrated manner in many of its markets,” Moody’s said.
US Radiology Specialists has been on a deal streak recently, acquiring ImageSouth, one of Alabama’s largest outpatient radiology providers, in December. The move came after USRS had also added Windsong Radiology Group and its five New York state centers the same month, altogether ballooning its total to 145 across 14 states. That same month, leaders shared plans for double-digit growth in 2021 after an “extremely challenging” 2020. CEO John Perkins said he hoped to add 1,000 positions in the next 12 months while moving into a new, expanded office.
In an analysis published Dec. 3, Standard & Poor’s noted that USRS was taking on loans to finance three near-term acquisitions. Those include $100 million in revolving credit due 2025; $790 million in term loans due 2027; and $135 million more to refinance existing debts. USRS previously confirmed that the New York and Alabama additions represented 2 of those 3 deals. A spokesman declined to comment on the Feb. 4 periodic review and could not share any updates on the third transaction as of this month.
In its own ratings action back in December, Moody’s revealed further details about US Radiology Specialists’ financial picture, highlighting the imaging operators’ 30% physician ownership and solid payer mix as further positives. About 70% of its revenues are sourced from higher-paying commercial insurers, while the physician compensation structure is highly variable.
Private practice Charlotte Radiology formed USRS in 2018 alongside New York-based investment group Welsh, Carson, Anderson & Stowe, which owned 48% of the imaging group as of December. At the time, 56 of the company’s centers were part of joint ventures with hospital systems. All told, US Radiology Specialists employed 275 physicians and other providers, with $288 million in 2019 consolidated revenues ($597 million if counting its proportionate share of those JV deals).
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.