Alliance Imaging continues to battle industry, legislative challenges

By Jennifer Lanning Drey

Portland, Ore., Aug. 3 - Alliance Imaging Inc.'s second-quarter revenues showed a 3.1% year-over-year drop due to industry and legislative challenges expected to continue to affect the imaging industry for the foreseeable future, Paul Viviano, Alliance's chief executive officer, said Friday during the company's second-quarter earnings conference call.

The company is weathering adverse effects caused by Medicare reimbursement reductions related to the Deficit Reduction Act of 2005 and the Medicare Part B Hospital Outpatient Prospective Payment System, and Alliance believes further legislation being considered by Congress could generate additional reimbursement reductions in the future, he said.

"Alliance is part of an industry that is in a very challenging business cycle and we have somewhat limited visibility into the regulatory and legislative changes that could impact us both positively and negatively," Viviano said.

However, the chief executive officer also reiterated his previously stated belief that in time, Alliance might be able to take advantage of market opportunities that will be presented as a result of the Deficit Reduction Act and Hospital Outpatient Prospective Payment System.

"The DRA and HOPPS reductions have generated potential acquisition opportunities with businesses that are unable to sustain their service levels due to the cash flow pressures from reduced reimbursement combined with the quality standards required in the industry today," Viviano said.

"We will continue to take a disciplined approach when analyzing the financial impact of the opportunities as well as the synergies available from our current operations."

Alliance had cash and cash equivalents of $36.5 million at June 30, up from $16.4 million at Dec. 31, 2006.

The company's long-term debt stood at $530.9 million at June 30, demonstrating a $1.5 million increase from $529.4 million at the end of 2006.

In addition to searching for potential acquisition targets, Alliance also continues to execute other initiatives designed to promote growth in the difficult environment. Those initiatives include developing growth opportunities by pursuing markets where the company does not have a strong presence, building a pipeline and infrastructure to support opportunities in oncology and implementing cost savings endeavors, Viviano said.

Alliance is an Anaheim, Calif.-based provider of shared-service and fixed-site diagnostic imaging services.

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