With the U.S. outpatient diagnostic imaging market in financial disarray, outpatient imaging providers are going international in the hopes of discovering undeveloped markets and fresh revenue.
Three mid-sized outpatient imaging providers in particular-Medcross, Diagnostic Health Services and Health Images-have made headway in the international imaging market through start-up ventures in China, Mexico and Great Britain.
Last month, Medcross announced it had formed a company called MedPacific to sell and service new and used high-technology imaging equipment and linear accelerators in the Far East.
Earlier this year, Medcross signed a joint venture agreement with China National Equipment and Supplies Import & Export Shenyand Corp., a subsidiary owned by the People's Republic of China, to supply and service 19 computed tomography scanners to Shen Yang, China.
Terms of the agreement weren't released. Executives of St. Petersburg, Fla.-based Medcross say they hope the move will become the foundation for future joint ventures with the Chinese.
DHS, by comparison, expanded into the international market in February through the purchase of HomeCare International de Mexico, a privately owned Mexico City healthcare company, for an undisclosed amount.
To help finance the effort, Dallas-based DHS raised $4.7 million from a public offering of stock in 1993. Part of the proceeds from that offering will be used to broaden the scope of the company's services and to expand its geographic coverage of the Mexican market, said DHS Chairman Max Batzer.
And Atlanta-based Health Images operates four magnetic resonance imaging centers in England, along with its 39 centers in the United States. It opened its latest center in England in August 1993.
Although financial details weren't available, the company has said in the past that all its British MRI facilities are profitable.
Ironically, Health Images is one of the few imaging providers to log a profit during the first half of 1994 (See related story, p. 54), recording a net income of $2.2 million, or 20 cents per share, compared with $1.7 million, or 14 cents per share, in 1993. Revenues rose 5% to 38 million.
Medcross and DHS are expected to report their second-quarter earnings later this month.
Although manufacturers of diagnostic imaging equipment have opened international markets for some time, service-oriented imaging companies have only recently explored the international market-and for good reason.
Opportunities for imaging providers in the United States have dried up for now, industry observers said, as healthcare moves away from expensive, high-technology procedures to focus more on primary-care and preventive medicine. That, combined with stricter physician self-referral laws, has carved into the profits of several publicly owned outpatient imaging providers.
Overall, the United States spends $56 billion to $70 billion on diagnostic imaging services annually, according to industry observers (Nov. 29, 1993, p. 34).
Still, imaging executives said expanding services internationally may signify a growing trend among outpatient imaging service companies. Several countries in Europe, Asia and Latin America are demanding better medical care and are more than willing to pay-in cash-to obtain it.
However, there are obstacles to overcome, typically in the form of language, business customs, distances and government intervention, said Robert Goodman, managing director of Copelco Capital, Pennsauken-N.J.
"A select few of the service industry providers will (expand internationally)," Mr. Goodman said. "However, those who do it as a last ditch effort for survival will probably put the last nail in their coffin."
Providers seem to agree. "We've got a great advantage in China because of (Medcross President and CEO) Henry Toh-a native of China-and he's very comfortable operating over there," `said Medcross spokesman Denis Calabrese. "Still, we struggle sometimes."
For example, the only way a foreign company can conduct business in China is by forming a joint venture agreement with the Chinese government. In addition, the pace of negotiations in China is quite slow. It can literally take years before a deal is completed, he added.
Medcross was lucky. It only took 11/2 years to complete the joint venture agreement with the Chinese. The experience was satisfying enough for the company to continue working in the East, not only with China, but with Taiwan and Hong Kong as well, Mr. Calabrese said.
DHS, in an effort to shore up its new Mexican business line, recently named Fernando Pena general manager of its Mexican operations. Mr. Pena had been assistant director of planning for the Ministry of Communication and Transportation of the Federal Government of Mexico.