S&P cuts InSight Health outlook to negative

Standard & Poor's said it revised the outlook on InSight Health Services Corp. to negative from stable. The B corporate credit rating, B senior secured debt rating and CCC+ subordinated debt rating were affirmed.

The outlook change reflects continued earnings and cash flow erosion as a result of competitive and pricing pressures, exacerbated by anticipated cuts in Medicare reimbursement, the agency said.

The ratings on InSight reflect the highly fragmented and competitive nature of the medical imaging industry, the limited barriers to competitor entry and reimbursement risk. Moreover, S&P said the company's debt-financed acquisitions over the past few years have weakened its balance sheet.

These risks overshadow the favorable effect on the industry as the population ages, the ability of imaging to limit overall health costs and the expanded approval of imaging for additional disease states.

S&P estimated that debt to EBITDA for the first half of 2006 will be around 7x.

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