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Upright MRI The Company's diagnostic imaging equipment is manufactured by Fonar, Inc. (Nasdaq: FONR) and referred to by Fonar as the Fonar Upright MRI. Currently only 75 of these units are installed in the United States. ASC chooses to enter markets that have no other such units installed and therefore competition is very limited. The Fonar equipment is unique in the industry as it is the only MRI with multiple positions and the ability to do weight bearing or position of pain testing. In general, each patient will receive several scans on the Fonar, as opposed to the traditional "one patient - one scan" scenario.
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Open MRIs on the Fonar have enjoyed a great deal of success in the patient community as both the claustrophobic and obese patients have been able to receive scans. However, the limitation of these systems has been the magnet strength. Magnet strength is the deciding factor in the clarity of the images acquired by the MRI device; the higher the magnet strength, the clearer the image. The Fonar Upright has a field strength of 0.6 Tesla, one of the highest for Open MRI devices. Additionally, the patient care opening is one of the largest in the field. |
Tremendous potential exists for the majority of MRI scans to be Upright Fonar MRI scans in the near future. The Fonar Upright? MRI system uses a custom-built adjustable bed that allows patients to sit, lie on their backs, side or stomach at any angle to be scanned. Dynamic full ranges of motion studies of the joints in virtually any direction are now possible. Diagnostic imaging services are noninvasive procedures that generate representations of the internal anatomy and convert them to film or digital media. Diagnostic imaging systems facilitate the early diagnosis of diseases and disorders, often minimizing the cost and amount of care required and reducing the need for costly and invasive diagnostic procedures. The market for diagnostic imaging services in the United States was estimated to be approximately $7 billion in 1999. The number of non-hospital affiliated imaging centers has grown due to a number of factors. First, when Congress reformed Medicare in 1983 by putting strict controls on inpatient reimbursement, this led to the expansion of all types of freestanding outpatient services, including outpatient surgery and imaging centers. Second, the use of MRI, CT and other equipment became more prevalent due to the quality and quantity of diagnostic information, technological improvements and increased government and third-party reimbursement. Although MRI was developed in the late 1970s, it was not approved for Medicare reimbursement until 1984. Ultrasound and low-dose mammography technology improved in the late 1980s. New technologies and procedures continue to be developed, although some, such as Positron Emission Tomography scanners ("PET") are relatively expensive. Third, the number of hospital and physician joint ventures increased in the 1980s as hospitals were eager to minimize their financial exposure for expensive equipment and physicians were seeking investments at a time when traditional tax-sheltered investments were being eliminated or were less economic. Thus, between 1984 and 1991, the number of outpatient imaging centers in operation in the United States increased from roughly 700 to over 2,000. Outpatient Surgical Centers Surgical centers are used by doctors to perform a variety of procedures that do not require the patient to remain in a hospital for more than 23 hours. Typical procedures are orthopedic, hand, eye, plastic surgery, podiatry, ear, nose, throat, pain management, endoscopic and laparoscopic. Outpatient surgical centers also called ambulatory surgical centers (ASC) are a lower cost and more convenient alternative to hospitals. Hospitals generally have a higher cost structure, limited availability of operating rooms and can't guarantee schedules to patients, physicians and staff. Most centers have between 2 and 6 operating rooms. The U.S. Outpatient Surgery Center industry generated approximately $9 billion in revenue in 2004. The industry is made up of 1,500 companies that operate 3,500 freestanding centers. The Outpatient Surgery Center industry is highly fragmented with the 50 largest companies accounting for only 30% of industry revenue. Only a few national players exist in the market. Health South is the largest company in the industry with 200 centers (representing only 6% of the market). Management believes there is a significant opportunity to leverage the ASC concept by partnering with physicians to take over troubled OSC locations. Many physician managed centers have encountered serious problems and this presents an opportunity for the Company. Having a corporate partner is also a good idea because it provides an exit strategy for the physician. Ambulatory Services Corporation. has the ability to attract physicians with large case loads by offering corporate management and collection services in addition to an equity position in the center. Building and expanding relationships with the physicians is the key to success in the surgery center business. Reimbursement amounts in the industry have either been stagnant or decreased, and physicians are looking at ways to augment their income or at least hold onto it. Partnering in a surgery center with ASC can provide additional income while not requiring physicians to manage and staff the center. This gives ASC an advantage over the competition. |
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