Andrew Mok: I was actually talking about the other category, the payer mix, not the procedure mix.
Dr. Howard Berger: Oh, I’m sorry, I thought you talked about the procedure mix.
Andrew Mok: The — yes, that would be from EBCD because it’s — that’s self-pay, so it’s in the other category.
Dr. Howard Berger: Yes, that’s likely the case, Andrew. I’ll double check the reports and follow up with you.
Andrew Mok: Yes, that makes sense. And then are there any metrics you can share to give us a sense of the backlog or unmet demand? I think it’s clear that there’s strong demand backdrop and you have this patient backlog, but just curious if there’s anything you can share with us to give us a sense of that unmet demand.
Dr. Howard Berger: I think that the backlogs are a function of, number one, more use of imaging and greater adoption of it, aging population, growing population, all of which require more and more imaging. And I think greater than previously determined shift away from hospitals. I think there is more effort on the part of payors to direct the business away from hospitals, again, by education and giving the patients an alternative that they might not have previously realized were available to them. And I think this is important and has become more important as deductibles have risen with some of the newer products. When you stop to think about how much if a patient goes to a hospital, they have to pay for their co-pay segment of the scan.
These numbers are rather substantial, and yes, e through their deductible very quickly and their effective use of that cash could go further for more health services if they elect to go to an outpatient facility where, as we’ve talked about in the past, scanning differential can be three to five or even more times in a hospital. So, I think all of these are coming together. And I think perhaps the other reason is that things that were more esoteric in the past are now becoming more familiar and patients more comfortable with things like PET/CT scanning maybe in the past people thought were only done at veterinary clinics, but particularly as things like prostate screening and now for Alzheimer’s screening as well as the general use of it in cancer for diagnostic staging are now just being recognized by everybody of the enormous value that these tools are.
So there’s greater adoption and greater demand for this coming from all sectors. I would say that also our experience for increased demand is not unique to RadNet. I think almost all of the people that we talk to in the industry, other large chain operators as well as acquisitions when we talk to our various opportunities here, are all experiencing increase in demand. So what makes RadNet a little bit different is that our ability to take advantage of this by deploying capital either by doing acquisitions or building de novo centers allows us to address these kind of opportunities, which benefit not only our patients and referring physicians, but our communities as a whole. So, I just think that right now, imaging is enjoying a very important role in delivery of health care.
And as I’ve said previously, I believe it is the gateway for population health. And I believe more and more people are coming to agree with that statement.
Mark Stolper: Yes. And specifically, to your question, Andrew, from the standpoint of what KPIs we look at in order to determine how big our backlogs are and whether we have to invest in those centers to expand them or build new centers, we particularly look at advanced imaging and how long it takes when a patient calls into our scheduling department, how long it takes them to actually come in and get their exam performed? And if — for advanced imaging, if someone’s calling up for an MRI or a PET/CT and is concerned that they have a serious injury or serious disease process, if we can’t get that patient in with a matter — in a matter of three or four days, we’re going to end up losing some of that business. And — because the patient is not going to wait around a week or two to figure out if he or she has cancer.
So, we manage those — that scheduling. We try to, as much as we can, load balance with our with our scheduling departments that are centralized in that region, and we’ll try to direct that patient to another center that might have a scanning spot that’s open with less waiting time. But unfortunately, what we’re facing right now are some real scheduling difficulties, which is why we’ve determined that we need to build new centers and increase capacity. The newer equipment, particularly in the areas of MRI, have faster throughput these days, better post processing software. So, we are able to do more scanning in the same amount of work hours. And we’ve been, as much as we can over the last couple of years, trying to upgrade our MRI scanners to the newer technologies.
But this is the highest-class problem we can have, but it’s still a problem nonetheless because we don’t want to lose this patient volume to our competitors. And referral patterns, physician relationships tend to be sticky, and so once you lose business to someone else, it’s hard to get that business back, which is why we’re trying to expand our capacity so quickly.
Operator: And our next question comes from Yuan Zhi from B. Riley Securities. Please go ahead with your question.
Yuan Zhi: Congrats on the great quarter. And thank you for the corrections. I have a couple of them. So first, if we take a step back, you have different market shares in different states. I’m curious what was the reason to have higher market share in some states and the lower market share in the others? In other way, was it because of lack of good acquisition targets? Or do you think you’ve reached certain critical mass in that stage, think here in Texas or even new state, if you are expanding further, what would be the criteria or goal there?
Mark Stolper: Sure, Yuan. So, when we look at a market, we don’t necessarily have a market share in mind. We have found in our operating history that there are tremendous benefits to operating at scale in local markets, most of which are around centralizing a lot of the business processes that we perform on behalf of our centers. For instance, we have the centralization of scheduling, pre-authorization, insurance verification, revenue cycle among other — marketing among other things. And so when we think about building scale in a regional market, it’s not necessarily driving towards a particular market share, it is really the result of how we can grow the business profitably using the benefits of scale. And so, when we look at all of our markets, we want to have that benefit where we want to be able to achieve those benefits of scale.
And there isn’t necessarily a magic market share that — where we can do that. When you look at where our sites are today, we certainly don’t have a lot of scale in the state of Florida. All four of our centers are in one particular market there in the Treasure Coast, port St. Lucie, Stuart area of Florida. But that’s a state where we would love to expand given the right opportunities. Arizona, we feel like we’re not yet getting the benefits of the scale that we could possibly have in the Phoenix area. And we did make an acquisition there with our partner, Dignity Health, where we acquired seven additional centers this quarter as Dr. Berger mentioned in his prepared remarks. So, I think the short answer to your question is we’d like scale in all of the markets that we have because it — because of the ability to manage these business processes more efficiently and get better profitability from our assets.
Yuan Zhi: Got it. That’s very helpful. And maybe one additional housekeeping questions here. Great to see the increase of PET/CT volumes related to PSMA. I’m curious did you guys see any update on Alzheimer-related procedures, both the PET/CT part as well as the MRI part in 1Q or recently in April?
Mark Stolper: Yes. We are starting to see more volume come in, in the Alzheimer’s area, both on the initial PET/CT screen for the presence of these amyloid plaques as well as some ongoing MRI monitoring once these patients are on these therapies, although we’re not seeing a lot of that because these patients are just starting to go on to these therapies. There’s been a delay in qualifying a lot of these patients on to some of the newer drug therapies and getting the initial diagnostic imaging approved to qualify these patients. The decision for this was passed down to the individual regional Medicare administrators or what we call the MACs and that has caused a delay. But we are starting to see some uptick. But we’re talking about patients in the hundreds of patients, not the thousands or tens of thousands of patients that you would expect — we would have expected to see by now.
We still remain optimistic that this is going to happen. I think these therapies prove to be efficacious in their clinical trials. It’s going to lean heavily on advanced imaging, both on the initial PET/CT screen to determine whether these patients are available — are eligible for these therapies as well as the ongoing MRIs that are indicated every three to four months for at least 18 months when these patients go on these therapies. So, I think this is just another example that gives us encouragement and optimism about the continued use of advanced imaging. I mean, Dr. Berger mentioned cardiac imaging, which is growing in popularity, the PSMA test on the PET/CT side, Alzheimer’s, and there’s others that are coming down the road, particularly in the area of PET/CT where there is a lot of development of some of these new radioactive tracers that are targeting very specific solid tumors — cancer tumors in the body.
So, I think it’s going to be an ongoing process that unfolds here.
Operator: And our next question comes from Jim Sidoti from Sidoti & Company. Please go ahead with your question.
Jim Sidoti: I know it’s been a long call. Just two quick ones for me. Can you update us on how things are going in Texas? It’s been a while since you entered a new market. How do you find this market? Is it easy to get paid? And is it easy to do business there?
Mark Stolper: Yes. Well, I mean it’s a little hard to say now. So, we completed the first acquisition of seven centers. We completed that on April 1. So, we don’t have a whole lot of operating experience there as of yet. I think the integration of that business and what we call the RadNetization is just at the very beginning stages. The other acquisition that we’ve announced of the American Health Imaging centers in Houston, that’s scheduled to close kind of in the June, July time frame. And we anticipate some further integration of those two operations to create a platform from which we can grow at that point. So, I think we’ll have a lot better feeling of — and a better way of answering your questions in the coming quarters.
But early indication is that this is a very attractive market. good demographics, good payor relationships. We think that we’ve identified and partnered with an excellent group of radiologists. And they’re motivated as our lead to really grow that platform through further acquisitions, de novo centers. There’s a number of hospital relationships in that market that could be interesting to us as we continue to grow there. So, I think we’re highly encouraged from what we see so far.
