MICA's 1994 net loss drops afterimaging services firm restructures

Company to pursue center management contracts

Medical Imaging Centers of America made considerable progressin stanching its red ink in 1994. The company last month posteda net loss for 1994 of $494,000, down sharply from the $29.6 millionnet loss recorded in 1993. The improved numbers are a sign thatthe company's restructuring effort is paying off, according toCEO and chairman Robert S. Muehlberg.

While MICA's loss declined, the company's revenues were offfor the year. MICA's 1994 revenues were $57.3 million, comparedto $68.8 million in 1993, Muehlberg said. Muehlberg assumed theCEO and chairman posts last month, replacing Samuel Mayhugh, whoserved as interim CEO and chairman following the resignation ofMICA founder Antone Lazos last November. Muehlberg retains thetitles president and COO.

MICA endured a tough 1993 due to the high costs of an expensivelease portfolio and lower reimbursement rates and patient referrals.The company took a $21.5 million noncash charge in the fourthquarter of 1993 to write off good will and assets such as olderMRI scanners. In 1994, the company was delisted from the NASDAQstock exchange after its stock price dropped to 50¢ a share(SCAN 7/13/94).

To cut expenses, MICA concentrated on restructuring its debt,consolidating its operations and positioning itself to take advantageof the managed-care market. It sold an imaging center in St. Louisand another in Richmond, VA, that were outside MICA's core Californiamarket. It replaced them by acquiring two California centers,in Bakersfield and Downey. The new centers complement MICA's existingholdings in the area and make the company more attractive to managed-careplans looking for an imaging services provider with a large networkof sites in Southern California.

MICA is also expanding its center management business to takeadvantage of the changes wrought by federal anti-self-referrallaws, known as Stark II (SCAN 12/28/94). Many self-referring centerowners are looking to exit their businesses due to the legislation.There is a paucity of center buyers, however, and in many casesphysician owners are preparing to turn their centers over to debtholders such as banks and equipment leasing companies. MICA willoffer its management services to the debt holders, allowing themto keep a center open and generate revenue rather than shuttingit down.

"MICA is set up to manage these facilities," Muehlbergsaid. "We can do staffing, billing, collections, contractwith managed-care providers and allow those debt holders to getthe return they were expecting without an asset coming back tothem that has little or no value."

MICA itself has few problems with Stark II due to the company'sstrategy of selling stock to qualified investors rather than referringphysicians, Muehlberg said.