Consolidation and Medicare Issues Continue to Impact Diagnostic Imaging Centers
The diagnostic imaging center industry is fragmented and consolidation has been steady for the past decade. RadNet is the fastest growing consolidator in the industry. The company believes the “Fear of survival and many more sellers than buyers are driving acquisition multiples downward…. Marginal operators are choosing to close and can now be acquired a 3–4x EBITDA.”
Private payer, Medicare and Medicaid reimbursements account for a significant portion of industry revenue. For the past ten years, consistent Medicare reimbursement cuts have caused a downward trend in reimbursement for diagnostic imaging. According to Becker’s Hospital CFO Report, CMS issued its update to the 2018 Medicare Physician Fee Schedule on July 14th, which includes a proposal to implement the Medicare Appropriate Use Criteria Program for advanced diagnostic imaging. Furthermore, citing a Journal of the American College of Radiology study, “Forty-six percent of noninvasive diagnostic radiology codes are identified as potentially misvalued compared to 22 percent of remaining codes,” according writes Morgan Haefner in Becker’s Hospital CFO Report.