Alliance HealthCare Services Inc. is working on a concerted recovery plan to counter turbulence that started with the recession and has continued amid the spotty economic recovery, according to executives of the Newport Beach-based company.
Alliance provides doctors and hospitals with scanning services, including magnetic resource imaging and diagnostic services such as positron emission tomography.
It also runs radiation-treatment facilities for cancer patients.
Alliance has about $500 million in annual revenue but is slogging through a tough year. Its shares are down 72% this year for a recent market value of $60.5 million.
“Healthcare services demand and volumes have been (affected) by the terrible cycle of the recession and near recession-like trends,” Alliance Chief Executive Paul Viviano said at a recent investor conference in New York.
Factors
Viviano cited high unemployment, reduced office visits, closer scrutiny from insurers, and higher patient deductibles and co-payments among the factors working against Alli-ance.
“A weak economy has impaired demand for imaging services and pricing pressures,” said Robert Mains, a healthcare services analyst with Morgan Keegan & Co. in Memphis, Tenn. “We expect this trend to continue until employment recovers.”
Alliance shares plummeted in August, when the company reported disappointing second-quarter earnings.
The third quarter saw a 5% increase in revenue to $127 million, but Alliance posted a $137.3 million loss that included $133 million in non-cash charges.
Third-quarter earnings before interest, taxes, depreciation and amortization slid 5% from a year earlier to $39 million. Executives cite EBITDA as a key indicator of quarterly performance.
Viviano said the company plans to stabilize and grow Alliance’s core imaging business, which has seen fewer referrals for services and pricing pressures.
Its MRI revenue fell 5.5% in the third quarter, and PET/CT scanning was off 8%.
Alliance now aims to focus on “new, high-quality sales opportunities more quickly,” Viviano said.
A push to improve the rate of contract renewals is expected to play out over a longer haul.
“(Alliance) is focusing its effort on building a more flexible service model to secure higher contract renewal rates among hospital customers,” said Darren Lehrich, a New York-based analyst with Deutsche Bank. “We don’t expect near-term improvements to be enough to materially offset competitive pressures.”
• Headquarters: Newport Beach
• Founded: 1983
• Business: scanning services, radiation treatment
• Ticker symbol: AIQ (NYSE)
• Market value: about $60.5 million
• Notable: shares plummet on disappointing earnings, ailing economy
Hire
Alliance also has hired a consulting firm to help boost imaging sales.
Compensation programs for its sales force will be tweaked.
The company projects continued growth in its radiation oncology business, where revenue leaped 82% in the most recent quarter to $21.3 million.
Plans include a drive to open cancer treatment centers and acquire radiation therapy providers.
Alliance Oncology aims to have 37 centers in operation by year’s end, including 16 static radiosurgery centers. It operates more than 570 mobile and fixed-site diagnostic imaging and cancer radiation therapy systems in 48 states.
The company also will continue to trim expenses with an eye on $25 million in annual savings. The cuts have already led to high-level departures.
Imaging division president Michael Frisch left the company in August, along with Eli Glovinky, executive vice president, corporate secretary and general counsel.
