Radiation Care, an Atlanta-based provider of outpatient radiation therapy and diagnostic centers, said it is considering selling a portion of its assets to AMA Financial Corp.
Terms of the possible sale weren't released. The two companies are in negotiations, officials said.
AMA is a Palm Beach, Fla., investment company controlled by Abraham Gosman, who also is the chairman of Meditrust, a healthcare real estate investment trust based in Waltham, Mass. AMA owns 2 million of Radiation Care's 16.2 million shares of stock.
The news comes nearly one month after Radiation Care announced it had hired Kidder, Peabody & Co., a New York investment banking firm, to find a prospective buyer or merger partner for its embattled diagnostic imaging company.
Changes in physician referral laws combined with less-than-stellar earnings were two reasons behind Radiation Care's decision to shop the company. However, Kidder Peabody will explore other alternatives in an effort to maximize full shareholder value, officials said.
Beginning Jan. 1, 1995, physicians will be prohibited from referring Medicare and Medicaid patients to outpatient imaging facilities in which they have a financial interest.
The new law is expected to dramatically cut into Radiation Care's revenue-a substantial portion of which "is derived from patients referred to its centers by physicians who are stockholders of the company," Radiation Care said in a recent press release.
However, a Radiation Care spokesman said the company doesn't specifically track how much money it generates from physician referrals.
"Since the enactment of (the referral law), the company has explored various strategic alternatives to address the legislation and maximize shareholder value," the press release said.
"Included in the alternatives being considered by the company are the possible sale of the company or a business combination with another organization," it said.
However, the referral law contains an exemption for publicly traded companies that have at least $75 million in stockholder equity by Dec. 31, 1994. The company, which last February changed its fiscal year to Dec. 31 from March 31, now has stockholder equity of approximately $64 million.
Atlanta-based Radiation Care is headed by its chairman, Thomas Haire. Mr. Haire also was co-founder, chairman and chief executive officer of neighboring home infusion firm T2 Medical, which officially became part of Coram Healthcare Corp. last month.
Both Radiation Care and T2 Medical's dealings with physicians are the subject of a federal investigation by HHS' inspector general's office and the U.S. Justice Department. The companies deny any wrongdoing in the matter.