Healthcare
Last updated: April 2008

Industry Codes:
  • NAICS – 621512 Diagnostic Imaging Centers
  • SIC – 5047 Medical and Hospital Equipment

Overview

The medical imaging industry has enjoyed significant growth in recent years fueled by several factors. First, there has been a change in the healthcare approach to less invasive diagnostic and treatment options. Research and development has spurned significant innovation. Finally, a growing and aging population is ensuring a continued increased demand for healthcare services. The Fredonia Group reports that the U.S. market for medical imaging equipment will grow 6% annually through 2010. However, legislation and health insurance carrier oversight are curbing this growth.

In 2005, the U.S. Budget Deficit Reduction Act (BDRA) aimed at controlling Medicare costs, which weakened the medical imaging market segment by changing reimbursement rates. This, combined with industry consolidation, has directly impacted the demand for new equipment. Reduced reimbursement to freestanding imaging centers is expected to result in a large number of business failures; some analysts estimate up to 10%. Adding to the pressure, health insurance carriers are more aggressively overseeing high-cost services, including medical imaging, which is having a direct effect on the reimbursement of claims. However, Siemens, one of the three biggest manufacturers of this equipment, optimistically projects that U.S. healthcare spending in this sector will recover after 2008.

Because of the demand for this type of equipment in other countries, the falling dollar is also having an effect on the market. GE announced in January its plans to focus on selling equipment to clients overseas.

Industry Condition – Fair to Average


Mergers & Acquisitions

  • General Electric Co. agreed to buy Whatman Plc, the U.K. maker of DNA-based products for drug research and police laboratories, for $718 million to gain filters and equipment for its health-care business. (February 2008)
  • Avista Capital Partners agreed to acquire Bristol-Myers Squibb Medical Imaging for approximately $525 million. (December 2007)
  • General Electric Co., the world's biggest seller of medical imaging machines, bought closely held Dynamic Imaging LLC to offer Web-based archiving systems for images such as MRIs and CT scans. (October 2007)
  • American Imaging Management, who makes software that is designed to help manage the use and costs of medical imaging, was purgeantaresd by WellPoint last year for $300 million. (August 2007)
  • Hologic announced that it would merge with CYTYC, creating a $10 billion global leader in women's healthcare. (May 2007)
  • Siemens AG conducted a $5.3 billion acquisition of Bayer AG’s diagnostic unit. (July 2006)

Key Industry Indicators

New Equipment Demand

  • Computed Tomography (CT) – 256 slice scanners to replace 64 slice
  • Full-Field Digital Mammography (FFDM) – Upgrading digital mammography
  • Magnetic Resonance Imaging (MRI) – 3 Tesla or higher strength
  • Positron Emission Tomography (PET) – Dominant in molecular imaging
  • Radiographic Systems (X-Ray) – Going digital, ultimately replacing analog
  • Ultrasound – Increasing prominence; getting smaller and more portable

Secondary Market

Overview

The market for used equipment has been supported by growth in healthcare but impacted by industry consolidation. The BDRA is also affecting the market for used equipment as larger volumes are available in the marketplace. U.S. buyers are limited to smaller hospitals and imaging centers. A large percentage of used equipment is sold for export to regions such as the former Soviet Republics, India, Pakistan, Latin America, Asia Pacific, and the Middle East. However, China, once a large purgeantaresr of this equipment, is no longer an outlet for pre-owned equipment. There is a growing preference in the used market for refurbished equipment, and GE, Siemens, and Philips are all very active in this sector as are a number of reputable dealers.

Used Equipment Values – Fair

  • Supply of used equipment – Increasing
  • Demand for used equipment – Stable

Liquidation Monitor

  • Recent bankruptcy filings
    • OMI Medical Imaging Company and affiliates, the operators of 21 MRI and CAT scan facilities in Florida, filed Chapter 11 petitions on Jan. 15, 2008 in Fort Lauderdale. The company blamed its filing on lower government reimbursement rates.

Factors Influencing Value & Marketability

  • Age – 3 years or less is best
  • Obsolescence – Rapid depreciation due to technology changes
  • Remarketers – Limited to a few major OEMs and larger dealers
  • Contingencies – Sales often dependant on OEM rebuild/warranty/installation
  • Operational – Equipment is under power and under service contract
  • Condition and usage factors, like slice count

Used Equipment Currently in Demand

  • Bone densitometers
  • CT – 16 and 64 slice
  • Mammography systems
  • MRI – 1.5T and open
  • Ultrasound
  • X-ray – Analog, digital, and portable

Industry Experience

Valuation Monitor

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Representative Clients Our Associates Have Served

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Success Stories

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  • Established Property Records and Asset Tracking Systems for Major Healthcare Providers
  • Provided Risk Management Expertise Regarding Insurance Coverage and Business Interruption
  • Maximized Return of Investment Through Timely Dispositions of Surplus Medical Equipment
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