For decades, Sawtelle-based RadNet Inc. has steadily built up a nationwide chain of owned and operated outpatient radiology imaging clinics. Its 442 imaging centers comprise the largest such network in the nation, generating roughly $2 billion in revenue last year.
But late last month, RadNet made a bold move to enter the hospital-based imaging market, acquiring Phoenix-based ONRAD Inc., which specializes in hospital-based radiology staffing services and teleradiology.
The transaction includes $350 million in up-front cash, 5 million RadNet common shares (assuming the Oct. 26 closing price of $70 a share, about $350 million in value) and an earnout of up to $210 million, depending on the company meeting a specified EBITDA (earnings before interest, taxes, depreciation and amortization) target next year.
The goal of the acquisition, according to RadNet Chief Executive Howard Berger, is to turn RadNet into a full one-stop radiology/ imaging services company.
“This is the next step in building an imaging company with comprehensive solutions that brings technology, radiology professional services and imaging operations together to address some of healthcare’s most pressing challenges and needs,” Berger said in the acquisition announcement.
“Connecting RadNet’s established AI-enabled digital health technology and imaging center operational expertise with ONRAD’s teleradiology and professional staffing solutions unites the capabilities needed to address the entire continuum of diagnostic imaging under one company,” Berger added.
Demand from hospitals
The acquisition is designed to bolster RadNet’s ability to serve hospitals and health systems, urgent care facilities and freestanding emergency departments.
In his remarks to analysts on the acquisition, Berger said it is in response to demand from health systems and its joint venture partners due to a nationwide shortage of radiology technicians brought about by an aging workforce. The presentation slide deck noted that nearly one-third of the 36,000 practicing radiologists in the nation are over the age of 55. Meanwhile, demand for imaging services has soared along with the aging population in need of more medical care.
ONRAD, which was founded in 2006, has more than 130 radiologists on staff, serving more than 225 hospital facilities across the nation. The radiologists read about 8,000 images per day. Most of the radiologists work from home.
