RadNet, Inc., a provider of high-quality, cost-effective, fixed-site outpatient diagnostic imaging services through a network of 191 fully-owned and operated outpatient imaging centers, has executed a definitive agreement to acquire Image Medical Corporation, the parent of eRAD, Inc., for $10.75M in a combination of cash and promissory notes.
The acquisition of eRAD is expected to close by the end of September, 2010 and will initially add approximately $5M of revenue to RadNet on an annual basis.
Officials with RadNet said that the company also has assembled a new software development team, consisting of veterans of the radiology software industry, to complement eRAD's product portfolio.
eRAD and the newly hired software development team form a Radiology Information Technology division of RadNet, under the leadership of Ranjan Jayanathan, RadNet's chief information officer.
eRAD, Inc., headquartered in Greenville, South Carolina, has been a premier provider of Picture Archiving and Communications Systems (PACS) and related workflow solutions to the radiology industry since 1999.
Over 250 hospitals, teleradiology businesses, imaging centers and specialty physician groups use eRAD's technology to distribute, visualize and store and retrieve digital images taken from all diagnostic imaging modalities.
Company officials also announced that RadNet has assembled an industry leading team of software developers to create radiology workflow solutions to complement eRAD's current portfolio of products.
All members of this team have significant software development expertise in radiology, and together with eRAD, will create fully integrated solutions to manage all aspects of RadNet's information needs.
"Entering the radiology software business is a significant event for RadNet and a natural extension of our core competencies. We have always been on the leading edge with respect to using technology to manage our own business, both within our facilities and within our affiliated radiology groups”, said Howard G. Berger, MD, president and chief executive officer of RadNet, in a statement,.
“The systems we use are essential to our ability to accurately create, process and distribute data and run our business cost-effectively," said Berger.
He said that up to this point, the company’s revenue has been earned exclusively through owned and operated facilities.
“With today's announcement, we have positioned ourselves to sell products and services to the over 6,000 freestanding imaging centers and the 10,000 imaging operations within community hospitals across the U.S. that we do not own”, said Berger.
Berger said that entering this business creates a new revenue stream for the company, positions it to integrate with the ongoing adoption of digital medical records, and greatly enhances prospects for growth, margin improvement and profitability.
“We have estimated that the acquisition of eRAD and the development of our own workflow solutions could save us more than $20 million over the next 10 years by eliminating the licensing, annual support and maintenance fees we would otherwise pay to others”, said Berger.
He said that the company, as such, believes that these IT initiatives have the potential to expand operating margins by eliminating internal RadNet costs and by benefiting from a business that has the potential for high-margin revenue and relatively low capital investment requirements.
Dr. Roy Miller, president and chief executive officer of eRAD, highlighted the benefits to eRAD of the pending transaction.
"We are very excited about our new partnership with RadNet. Not only will eRAD software be at the foundation of RadNet's technology information infrastructure, but eRAD's tradition of technical innovation and our customer-centric business model will be maintained and nurtured by RadNet”, said Dr. Miller.
He said that the company’s customers, suppliers and employees will experience seamless continuity in product development and support, ongoing relationships and functional roles.
Dr. Miller said that culturally and strategically, this business combination is truly an excellent fit.
Anil Sharma is a contributing editor for HealthTechZone. To read more of Anil’s articles, please visit his columnist page.
