While Apollo has invested in healthcare since its inception in 1990, this is the firm's first foray into imaging services. The business may provide a platform for Apollo to expand both within imaging and outside, providing other types of services to hospitals, Harris told SCAN.
"Allowing hospitals to outsource services that are not fundamentally core to them can be a growing and good business, as long as you do it on a cost-efficient basis," he said. "We see (annual growth in) demand of between 5% and 10%, which is greater than in other areas. There are also opportunities within the industry to consolidate and take cost out of the business."
The Apollo investment is significantly less leveraged than Alliance's management-led buyout in 1988, Zehner said (SCAN 11/9/88). The new owners will sink $80 million of equity into Alliance.
Alliance expects that Apollo's assistance and funding will fortify its effort to build market share in MRI shared services, he said.
"We will be able to grow more," Zehner said. "These people (Apollo) have about $9 billion under management. If we need to do other acquisitions or grow the core business or even enter new lines of business, they will be able to either raise the funds or provide the funds for us to grow at a more rapid rate."
Brighter prospects. Rising procedural volume in MRI has helped compensate for radically lower reimbursement rates per procedure, Zehner said. Both Alliance and SMT displayed a sharp rise in revenue and net income in their 1997 second quarters (both end-June).
Alliance's second-quarter revenues this year rose 25% to $20.8 million, and net earnings jumped 39% to $2.4 million. SMT's quarterly revenue jumped 50% to $7 million, and net income increased 56% to $879,000. Reflecting greater scan volume in the industry, SMT experienced a 21% increase in quarterly revenues from hospitals the company serviced in both 1996 and 1997.