Outpatient-care chains posted another year of expansion in 1994, presenting a growing challenge to the inpatient market.
The number of ambulatory-care facilities operated by healthcare systems increased 24% to 3,763 in 1994, compared with 3,029 in 1993, according to MODERN HEALTHCARE's 1995 Multi-unit Providers Survey.
Services provided at those facilities included adult day care, cancer treatment, chest pain services, diagnostic imaging, kidney dialysis, pain management, physical therapy, rehabilitation, outpatient surgery, women's health and wound care.
The number of on-campus facilities operated by healthcare systems rose 5% in 1994 to 1,117, while the off-campus total increased 34% to 2,646.
Some 24 independent outpatient-care providers responded to the survey. Those providers said the number of branches they operated increased about 15% to 1,446 in 1994 from 1,262 in the previous year.
Independent outpatient-care companies include operators of outpatient surgery centers, freestanding dialysis providers, cancer centers, urgent-care clinics and other nonhospital-based services.
Of the 24 independent respondents, 15 provided financial information for fiscal 1994 and 1993. Those outpatient-care chains posted a 17% increase in net income to $281 million in 1994, compared with $240 million in the previous year. Total revenues rose 32% to $3.4 billion.
Operators of outpatient surgery centers reported mixed results in 1994, according to survey data. Among those companies, AmSurg Corp., National Surgery Centers, Surgical Care Affiliates and Sutter Surgery Centers reported increases in the number of facilities operated in 1994.
However, Detroit-based Michigan Health Centers reported 23 centers last year, down three from the previous year, and Premier Ambulatory Systems of Pasadena, Calif., with 18 surgery centers, reported no change.
Interestingly, the largest freestanding outpatient provider-Dallas-based Medical Care America-fought off a $950 million uninvited takeover attempt by Nashville, Tenn.-based Surgical Care Affiliates, but the company ended up accepting a $858 million buyout offer from Columbia/HCA Healthcare Corp.
Surgical Care said it will continue to look for additional acquisitions in the outpatient surgery center market. The company operated 65 centers nationwide in 1994, a 16% increase from 56 in 1993.
In 1993, the outlook was dismal for many of the nation's for-profit diagnostic imaging companies, with nearly every major independent provider reporting substantial declines in income and revenues.
Last year's results were mixed. At MedAlliance, a Brentwood, Tenn.-based outpatient imaging services company then known as Image America, exited the business entirely in December 1994 after agreeing to sell its 16 freestanding imaging centers to Health Images, an Atlanta-based company. The divestiture will allow MedAlliance to concentrate on its radiological group practice management business.
MedAlliance took a large fourth-quarter "asset impairment" charge of $29 million related to the sale. As a result, the company recorded a net loss of $25 million, or $2.18 per share, for the quarter, compared with net income of $513,000, or 5 cents per share, in 1993. Revenues dropped 11% to $18.6 million.
For the year, MedAlliance reported a net loss of $23 million, or $2.01 per share, compared with net income of $4.6 million, or 45 cents per share, in 1993. Revenues dropped 4% to $79 million.
Health Images operates diagnostic imaging centers in the United States and United Kingdom and one radiation oncology center.
The company posted a net loss of $1.1 million in 1994 on revenues of $73 million. The loss included a nonrecurring asset impairment charge related to the acquisition of National Diagnostic Systems, a Burlingame, Calif.-based imaging benefits manager.
Meanwhile, Newport Beach, Calif.-based American Health Services Corp. reported a 24% increase in net income to $6.1 million in 1994 from $4.9 million in the previous year. Net patient revenues declined 4% to $36 million. The company operated 24 centers in 1994, down one from the previous year.
With the U.S. outpatient diagnostic imaging market slumping, some providers decided to market their services internationally last year in the hopes of discovering undeveloped markets and untapped revenues.
Three companies in particular- Medcross, Diagnostic Health Services and Health Images-have made headway in the international imaging market through start-up ventures in China, Great Britain and Mexico, respectively.
The nation's three largest for-profit dialysis chains-National Medical Care, Vivra and REN Corp.-remained solidly in front of their competition in 1994, according to the survey.
The number of dialysis centers operated by Waltham, Mass.-based NMC increased about 12% to 526. NMC, a subsidiary of Boca Raton, Fla.-based W.R. Grace & Co., doesn't break out specific net income and revenue figures.
But NMC received a black eye for the second time in two years after the Food and Drug Administration cited the company for violating regulations related to the importation of dialysis equipment manufactured by an NMC-owned plant in Dublin, Ireland.
In June 1993, the FDA temporarily banned NMC from importing hemodialysis bloodlines and dialysis machines manufactured by its plants in Reynosa, Mexico, and Dublin. The FDA cited NMC with violating the Federal Medical Device Good Manufacturing Practice Regulations and subsequently blocked the import of NMC products to the United States.
Meanwhile, Vivra, the nation's second-largest dialysis chain, reported a 21% increase in the number of branches it operated to 172. The Burlingame, Calif.-based company said net operating income increased 28% to $30 million, and net patient revenues rose 31% to $285 million.
Nashville-based REN Corp. said its net income for fiscal 1994 more than doubled to $8.5 million from $3.7 million in 1993. Revenues rose 25% to $131 million.