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What changed in RadNet, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RadNet, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+374 added−376 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in RadNet, Inc.'s 2023 10-K

374 paragraphs added · 376 removed · 282 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

112 edited+14 added−17 removed91 unchanged
Biggest changeWe have a track record of successful acquisitions and integration of acquired businesses into RadNet, and have managed the business through a variety of economic and reimbursement cycles. Our Technologically Advanced Operations In 2019, we created an AI division that now hosts the combined efforts of our acquisitions of DeepHealth, Aidence Holding B.V. and Quantib B.V..
Biggest changeOur senior and executive management teams have created our differentiated approach based on their comprehensive understanding of the diagnostic imaging industry and the dynamics of our regional markets. We have a track record of successful acquisitions and integration of acquired businesses into RadNet, and have managed the business through a variety of economic and reimbursement cycles. Our Technologically Advanced Operations.
Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.
Our imaging centers provide physicians with capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.
CT CT provides higher resolution images than conventional X-rays, but generally not as well defined as those produced by MRI. CT uses a computer to direct the movement of an X-ray tube to produce multiple cross-sectional images of a particular organ or area of the body. CT is used to detect tumors and other conditions affecting bones and internal organs.
CT provides higher resolution images than conventional X-rays, but generally not as well defined as those produced by MRI. CT uses a computer to direct the movement of an X-ray tube to produce multiple cross-sectional images of a particular organ or area of the body. CT is used to detect tumors and other conditions affecting bones and internal organs.
Mammography Mammography is a specialized form of radiology using low dosage X-rays to visualize breast tissue and is the primary screening tool for breast cancer. Mammography procedures and related services assist in the diagnosis of and treatment planning for breast cancer. Fluoroscopy Fluoroscopy uses ionizing radiation combined with a video viewing system for real time monitoring of organs.
Mammography is a specialized form of radiology using low dosage X-rays to visualize breast tissue and is the primary screening tool for breast cancer. Mammography procedures and related services assist in the diagnosis of and treatment planning for breast cancer. Fluoroscopy. Fluoroscopy uses ionizing radiation combined with a video viewing system for real time monitoring of organs.
Medicare/Medicaid Medicare is the federal health insurance program for people age 65 or older and people under age 65 with certain disabilities. Medicaid, funded by both the federal government and states, is a state-administered health insurance program for qualifying low-income and medically needy persons.
Medicare is the federal health insurance program for people age 65 or older and people under age 65 with certain disabilities. Medicaid, funded by both the federal government and states, is a state-administered health insurance program for qualifying low-income and medically needy persons.
California places a $250,000 limit on non-economic damages for medical malpractice cases. Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary injury. The cap applies whether the case is for injury or death, and it allows only one $250,000 recovery in a wrongful death case. No cap applies to economic damages.
California places a $250,000 limit on non-economic damages for medical malpractice cases. The cap applies whether the case is for injury or death, and it allows only one $250,000 recovery in a wrongful death case. Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary injury. No cap applies to economic damages.
Federal False Claims Act The federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any person who it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.
The federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any person who it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.
We believe that we are in compliance with the rules and regulations that apply to the federal False Claims Act as well as its state counterparts. Healthcare Reform Legislation Healthcare reform legislation enacted in the first quarter of 2010 by the Patient Protection and Affordable Care Act or PPACA, specifically requires the U.S.
We believe that we are in compliance with the rules and regulations that apply to the federal False Claims Act as well as its state counterparts. Patient Protection and Affordable Care Act. Healthcare reform legislation enacted in the first quarter of 2010 by the Patient Protection and Affordable Care Act or PPACA, specifically requires the U.S.
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, 15 including new federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per year.
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), signed into law on February 17, 2009, dramatically expanded, among other things, (1) the scope of HIPAA to now apply directly to “business associates,” or independent contractors who receive or obtain PHI in connection with providing a service to a covered entity, (2) substantive security and privacy obligations, including new federal security breach notification requirements to affected individuals, DHHS and prominent media outlets, of certain breaches of unsecured PHI, (3) restrictions on marketing communications and a prohibition on covered entities or business associates from receiving remuneration in exchange for PHI, and (4) the civil and criminal penalties that may be imposed for HIPAA violations, increasing the annual cap in penalties from $25,000 to $1.5 million per year.
Recent technological advancements include: 3 • MRI spectroscopy, which can differentiate malignant from benign lesions; • MRI angiography, which can produce three-dimensional images of body parts and assess the status of blood vessels; • enhancements in teleradiology systems, which permit the digital transmission of radiological images from one location to another for interpretation by radiologists at remote locations, • the development of combined PET/CT and PET/MRI scanners, which combine technologies to create a powerful diagnostic imaging system; and • use of augmented reality technologies make it possible to create three dimensional images that physicians can examine through virtual reality headsets or print using a three dimensional printer.
Recent technological advancements include: • MRI spectroscopy, which can differentiate malignant from benign lesions; • MRI angiography, which can produce three-dimensional images of body parts and assess the status of blood vessels; • enhancements in teleradiology systems, which permit the digital transmission of radiological images from one location to another for interpretation by radiologists at remote locations; • the development of combined PET/CT and PET/MRI scanners, which combine technologies to create a powerful diagnostic imaging system; and • use of augmented reality technologies make it possible to create three dimensional images that physicians can examine through virtual reality headsets or print using a three dimensional printer.
The key features of our services include: • patient-friendly, non-clinical environments; • a 24-hour turnaround on routine examinations; • interpretations within one to two hours, if needed; • flexible patient scheduling, including same-day appointments; • extended operating hours, including weekends; 6 • reports delivered by courier, facsimile or email; • availability of second opinions and consultations; • availability of sub-specialty interpretations at no additional charge; and • standardized fee schedules by region.
The key features of our services include: • patient-friendly, non-clinical environments; • a 24-hour turnaround on routine examinations; • interpretations within one to two hours, if needed; • flexible patient scheduling, including same-day appointments; • extended operating hours, including weekends; • reports delivered by courier, facsimile or email; • availability of second opinions and consultations; • availability of sub-specialty interpretations at no additional charge; and • standardized fee schedules by region.
The Stark Law, however, excludes from designated health services: (i) X-ray, fluoroscopy or ultrasound procedures that require the insertion of a needle, catheter, tube or probe through the skin or into a body orifice; (ii) radiology procedures that are integral to the performance of, and performed 13 during, non-radiological medical procedures; and (iii) invasive or interventional radiology, because the radiology services in these procedures are merely incidental or secondary to another procedure that the physician has ordered.
The Stark Law, however, excludes from designated health services: (i) X-ray, fluoroscopy or ultrasound procedures that require the insertion of a needle, catheter, tube or probe through the skin or into a body orifice; (ii) radiology procedures that are integral to the performance of, and performed during, non-radiological medical procedures; and (iii) invasive or interventional radiology, because the radiology services in these procedures are merely incidental or secondary to another procedure that the physician has ordered.
MRI uses a strong magnetic field in conjunction with low energy electromagnetic waves that are processed by a computer to produce high-resolution, three-dimensional, cross-sectional images of body tissue. A typical MRI examination takes from 20 to 45 minutes. MRI systems are designed as either open or closed and have magnetic field strength of 0.2 Tesla to 3.0 Tesla.
MRI uses a strong magnetic field in conjunction with low energy electromagnetic waves that are processed by a computer to produce high-resolution, three-dimensional, cross-sectional images of body tissue. A typical MRI examination takes from 20 to 45 minutes. MRI systems are designed as either open or closed and have magnetic field strength of 0.2 Tesla to 3.0 Tesla. CT.
This technology has created cost reductions for our centers in areas such as image storage, support personnel and financial management and has further allowed us to optimize the productivity of all aspects of our business by enabling us to: • capture patient demographic, history and billing information at point-of-service; • automatically generate bills and electronically file claims with third-party payors; • record and store diagnostic report images in digital format; 9 • digitally transmit in real-time diagnostic images from one location to another, thus enabling networked radiologists to cover larger geographic markets by using the specialized training of other networked radiologists; • perform claims, rejection and collection analysis; and • perform sophisticated financial analysis, such as analyzing cost and profitability, volume, charges, current activity and patient case mix, with respect to each of our managed care contracts.
This technology has created cost reductions for our centers in areas such as image storage, support personnel and financial management and has further allowed us to optimize the productivity of all aspects of our business by enabling us to: • capture patient demographic, history and billing information at point-of-service; • automatically generate bills and electronically file claims with third-party payors; • record and store diagnostic report images in digital format; • digitally transmit in real-time diagnostic images from one location to another, thus enabling networked radiologists to cover larger geographic markets by using the specialized training of other networked radiologists; • perform claims, rejection and collection analysis; and 8 • perform sophisticated financial analysis, such as analyzing cost and profitability, volume, charges, current activity and patient case mix, with respect to each of our managed care contracts.
Information Technology Our corporate headquarters and many of our centers are interconnected through a state-of-the-art information technology system. This system, which is compliant with the Health Insurance Portability and Accountability Act of 1996, is comprised of a number of integrated applications and provides a single operating platform for billing and collections, electronic medical records, practice management and image management.
Information Technology Our corporate headquarters and many of our centers are interconnected through a state-of-the-art information technology system. This system, which is compliant with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), is comprised of a number of integrated applications and provides a single operating platform for billing and collections, electronic medical records, practice management and image management.
Payor Marketing Our marketing team regularly meets with managed care organizations and insurance companies to solicit contracts and meet with existing contracting payors to solidify those relationships. The comprehensiveness of our services, the geographic location of our centers and the reputation of the physicians with whom we contract all serve as tools for obtaining new or repeat business from payors.
Our marketing team regularly meets with managed care organizations and insurance companies to solicit contracts and meet with existing contracting payors to solidify those relationships. The comprehensiveness of our services, the geographic location of our centers and the reputation of the physicians with whom we contract all serve as tools for obtaining new or repeat business from payors.
Expand Our Joint Ventures As part of our growth strategy we have entered into joint ventures with hospitals, health systems or radiology practices that were formed for the purpose of owning and operating diagnostic imaging centers. We have created a number of joint ventures in key markets with well-established hospital systems to manage additional centers.
As part of our growth strategy we have entered into joint ventures with hospitals, health systems or radiology practices that were formed for the purpose of owning and operating diagnostic imaging centers. We have created a number of joint ventures in key markets with well-established hospital systems to manage additional centers.
HIPAA, among other things, amends existing crimes and criminal penalties for Medicare fraud and enacts new federal healthcare fraud crimes, including actions affecting non-government healthcare benefit programs. Under HIPAA, a healthcare benefit program includes any private plan or contract affecting interstate commerce under which any medical benefit, item or service is provided.
HIPAA, among other things, amends existing crimes and criminal penalties for Medicare fraud and enacts new federal healthcare fraud crimes, including actions affecting non-government healthcare benefit programs. Under HIPAA, a healthcare benefit program includes any private plan or contract affecting interstate 13 commerce under which any medical benefit, item or service is provided.
Ultrasound Ultrasound imaging uses sound waves and their echoes to visualize and locate internal organs. It is particularly useful in viewing soft tissues that do not X-ray well. Ultrasound is used in pregnancy to avoid X-ray exposure as well as in gynecological, urologic, vascular, cardiac and breast applications.
Ultrasound imaging uses sound waves and their echoes to visualize and locate internal organs. It is particularly useful in viewing soft tissues that do not X-ray well. Ultrasound is used in pregnancy to avoid X-ray exposure as well as in gynecological, urologic, vascular, cardiac and breast applications. Mammography.
Radiologist Licensing The radiologists providing professional medical services at our centers are subject to licensing and related regulations by the states in which they provide services. As a result, we require the radiology groups with which we contract to require those radiologists to have and maintain appropriate licensure.
The radiologists providing professional medical services at our centers are subject to licensing and related regulations by the states in which they provide services. As a result, we require the radiology groups with which we contract to require those radiologists to have and maintain appropriate licensure.
Government and private payors have taken and may continue to take steps to control the cost, eligibility for, use, and delivery of healthcare services as a result of budgetary constraints, cost containment pressures and other reasons. We believe that these trends in cost containment will continue.
Government payors have taken and may continue to take steps to control the cost, eligibility for, use, and delivery of healthcare services as a result of budgetary constraints, cost containment pressures and other reasons. We believe that these trends in cost containment will continue.
Insurance Laws and Regulation States in which we operate have adopted certain laws and regulations affecting risk assumption in the healthcare industry, including those that subject any physician or physician network engaged in risk-based managed care to comply with applicable insurance laws and regulations.
States in which we operate have adopted certain laws and regulations affecting risk assumption in the healthcare industry, including those that subject any physician or physician network engaged in risk-based managed care to comply with applicable insurance laws and regulations.
Expand Our Networks We intend to continue to expand the number of our centers both organically and through targeted acquisitions, using a disciplined approach for evaluating and entering new areas, including consideration of whether we have adequate financial resources to expand.
We intend to continue to expand the number of our centers both organically and through targeted acquisitions, using a disciplined approach for evaluating and entering new areas, including consideration of whether we have adequate financial resources to expand.
The 12 laws of such states also prohibit a lay person or a non-professional entity from exercising control over the medical judgments or decisions of physicians and from engaging in certain financial arrangements, such as splitting professional fees with physicians.
The laws of such states also prohibit a lay person or a non-professional entity from exercising control over the medical judgments or decisions of physicians and from engaging in certain financial arrangements, such as splitting professional fees with physicians.
PET scans provide the capability to determine how metabolic activity impacts other aspects of physiology in the disease process by correlating the reading for the 2 PET with other tools such as CT or MRI.
PET scans provide the capability to determine how metabolic activity impacts other aspects of physiology in the disease process by correlating the reading for the PET with other tools such as CT or MRI.
Federal regulatory and law enforcement authorities have increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other reimbursement laws and rules, including laws and regulations that govern our activities and the activities of the radiology practices.
Federal regulatory and law enforcement authorities have increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other reimbursement laws and rules, including laws and regulations that govern our 12 activities and the activities of the radiology practices.
We focus on providing standardized high quality imaging services, regardless of location, to ensure patients, physicians and payors consistency in service and quality. To ensure the high quality of our services, we monitor patient satisfaction, timeliness of services to patients and reports to physicians.
We focus on providing standardized high quality imaging services, regardless of location, to ensure patients, physicians and payors consistency in service and quality. To ensure the high quality of our services, we monitor patient satisfaction, timeliness of services to patients, and delivery of reports to physicians.
Our UM program is managed by our UM department, which consists of staff who are actively involved with the referring physicians and payor management in both prospective and retrospective review programs. Our UM program includes features such as physician education combined with peer review procedures which are designed to manage our costs while ensuring that patients receive appropriate care.
Our UM program is managed by our UM department, which consists of staff who are actively involved with the referring physicians and payor management in both prospective and retrospective review programs. Our UM program includes features such as physician education combined with peer review procedures which are designed to manage our costs while ensuring that patients receive appropriate care. Medicare/Medicaid.
We may also continue to use, where appropriate, highly trained radiology physician assistants to perform, under appropriate supervision of radiologists, basic services traditionally performed by radiologists. We will continue to upgrade our advanced information technology system to create cost reductions for our centers in areas such as image storage, support personnel and financial management.
We may also continue to use, where appropriate, highly trained radiology physician assistants to perform, under appropriate supervision of radiologists, basic services traditionally performed by radiologists. We will continue to upgrade our advanced information technology system to create cost reductions for our centers in areas such as image storage, support personnel and financial management. Expand Our Networks.
These laws and regulations may require physicians and physician networks to meet minimum capital requirements and other safety and soundness requirements. Implementing additional regulations or compliance requirements could result in substantial costs to the contracted radiology practices, limiting their ability to enter into capitated or other risk-sharing managed care arrangements and indirectly affecting our revenue from the contracted practices. U.S.
These laws and regulations may require physicians and physician networks to meet minimum capital requirements and other safety and soundness requirements. Implementing additional regulations or compliance requirements could result in substantial costs to the contracted radiology practices, limiting their ability to enter into capitated or other risk-sharing managed care arrangements and indirectly affecting our revenue from the contracted practices.
Piloting initiatives such as the Connections Roadshow and new employee listening platforms enabled senior leaders to hear from team members at all levels of the organization to gain insights on various topics including quality, engagement, innovation, customer service, patient focus, diversity, equity, inclusion, and belonging. Total Well-being.
Piloting initiatives such as the Connections Roadshow and new employee listening platforms enable senior leaders to hear from team members at all levels of the organization to gain insights on various topics including quality, engagement, innovation, customer service, patient focus, diversity, equity, inclusion, and belonging. Total Well-being .
In our experience, consistent hands-on contact with a referring physician and his or her staff generates goodwill and increases referrals to our centers. The representatives also continually seek to establish referral relationships with new physicians and physician groups. In addition to a base salary, each representative receives a bonus based upon success.
In our experience, consistent hands-on contact with a referring physician and his or her staff generates goodwill and increases referrals to our centers. The representatives also continually seek to establish referral relationships with new physicians and physician groups. In addition to a base salary, each representative receives a bonus based upon success. Payor Marketing.
We have also established an Artificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images. The division is led by DeepHealth, and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in The Netherlands.
We have also established an Artificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images. The division is led by our DeepHealth, Inc. subsidiary and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in the Netherlands.
Corporate Practice of Medicine In the states in which we operate, other than Florida and Arizona, a lay person or any entity other than a professional corporation or other similar professional organization is not allowed to practice medicine, including by employing professional persons or by having any ownership interest or profit participation in or control over any medical professional practice.
In the states in which we operate, other than Florida and Arizona, a lay person or any entity other than a professional corporation or other similar professional organization is not allowed to practice medicine, including by employing professional persons or by having any ownership interest or profit participation in or control over any medical professional practice.
Additional improvements in imaging technologies, contrast agents and scan capabilities are leading to new non-invasive diagnostic imaging application, including methods of diagnosing blockages in the heart’s vital coronary arteries, liver metastases, pelvic diseases and vascular abnormalities without exploratory surgery.
Additional improvements in imaging technologies, contrast agents and scan capabilities are leading to new non-invasive diagnostic imaging applications, including methods of diagnosing blockages in the heart’s vital coronary arteries, liver metastases, pelvic diseases and vascular abnormalities without exploratory surgery.
Other states in which we now operate do not have similar limitations and in those states we believe our insurance coverage to be sufficient. Regulation General The healthcare industry is highly regulated, and changes in the regulatory environment could significantly affect our operations in the future.
Other states in which we now operate do not have similar limitations and in those states we believe our insurance coverage to be sufficient. 10 Regulation The healthcare industry is highly regulated, and changes in the regulatory environment could significantly affect our operations in the future.
Sales and Marketing Our sales and marketing team employs a multi-pronged approach to marketing, including physician, payor and sports marketing programs, each of which are described below: 10 Physician Marketing Each customer service representative on our physician marketing team is responsible for marketing activity on behalf of one or more centers.
Sales and Marketing Our sales and marketing team employs a multi-pronged approach to marketing, including physician, payor and sports marketing programs, each of which are described below: 9 Physician Marketing. Each customer service representative on our physician marketing team is responsible for marketing activity on behalf of one or more centers.
State Anti-kickback and Physician Self-referral Laws Many states have adopted laws similar to the federal Anti-kickback Statute and the Stark Law. Some of these state prohibitions apply to services and the referral of patients for healthcare services reimbursed by any source, not only the Medicare and Medicaid programs.
Many states have adopted laws similar to the federal Anti-kickback Statute and the Stark Law. Some of these state prohibitions apply to services and the referral of patients for healthcare services reimbursed by any source, not only the Medicare and Medicaid programs.
Congress has extended Medicare benefits to include coverage of screening mammography but coverage is subject to the facility performing the mammography meeting prescribed quality standards described above. The Medicare requirements to meet the standards apply to diagnostic mammography and image quality examination as well as screening mammography.
Congress has extended Medicare benefits to include coverage of screening mammography but coverage is subject to the facility performing the mammography meeting prescribed quality standards described above. The Medicare requirements to meet the standards apply to diagnostic mammography and image quality examination as well as screening mammography. Radiologist Licensing.
Although we believe that we comply with both federal and state anti-kickback laws and self-referral laws, any finding of a violation of these laws could subject us to criminal and civil penalties or possible exclusion from federal or state healthcare programs. Such penalties would adversely affect our financial performance and our ability to operate our business.
Although we believe that we comply with both federal and state anti-kickback laws and self-referral laws, any finding of a violation of these laws could subject us to criminal and civil penalties or possible exclusion from federal or state healthcare programs. Such penalties would adversely affect our financial performance and our ability to operate our business. Federal False Claims Act.
We believe the use of equipment upgrades rather than equipment replacements will continue, as we do not foresee new imaging technologies on the near-term horizon that will displace MRI, CT or PET as the principal advanced diagnostic imaging modalities. Utilization of Artificial Intelligence AI has the potential to significantly change the medical imaging industry.
We believe the use of equipment upgrades rather than 3 equipment replacements will continue, as we do not foresee new imaging technologies on the near-term horizon that will displace MRI, CT or PET as the principal advanced diagnostic imaging modalities. Impact of Artificial Intelligence. AI has the potential to significantly change the medical imaging industry.
We generally will only enter new markets where: • there is sufficient patient demand for outpatient diagnostic imaging services; • we believe we can gain significant market share; • we can build key referral relationships or we have already established such relationships; and • payors are receptive to our entry into the market.
We generally will only enter new markets where: • there is sufficient patient demand for outpatient diagnostic imaging services; • we believe we can gain significant market share; • we can build key referral relationships or we have already established such relationships; and • payors are receptive to our entry into the market. Expand Our Joint Ventures.
Contracts with Physician Groups and Other Non-Insurance Company Payors For some of our contracts with physician groups and other providers, we do not bill payors, but instead accept agreed upon rates for our radiology services. These rates are typically at or below the rates set forth in the current Medicare Fee Schedule for the particular service.
For some of our contracts with physician groups and other providers, we do not bill payors, but instead accept agreed upon rates for our radiology services. These rates are typically at or below the rates set forth in the current Medicare Fee Schedule for the particular service.
We structure our relationships with the radiology practices, including the purchase of diagnostic imaging centers, in a manner that we believe keeps us from engaging in the practice of medicine, exercising control over the medical judgments or decisions of the radiology practices or their physicians, or violating the prohibitions against fee-splitting.
We structure our relationships with the radiology practices, including the purchase of diagnostic imaging centers, in a manner that we believe keeps us from engaging in the practice of medicine, exercising control over the medical judgments or decisions of the radiology practices or their physicians, or violating the prohibitions against fee-splitting. Government Healthcare Programs.
In addition, free-standing diagnostic imaging centers that provide services not performed as part of a physician's office must meet Medicare requirements to be certified as an independent diagnostic testing facility before it can be authorized to bill the Medicare program.
In addition, free-standing diagnostic imaging centers that provide services not performed as part of a physician's office must meet Medicare requirements to be certified as an independent diagnostic testing facility before it can be authorized to bill the Medicare program. Corporate Practice of Medicine.
Federal Budget 16 We derive a substantial portion of our revenue from direct billings to governmental healthcare programs, such as Medicare and Medicaid, and private health insurance companies and/or health plans, including but not limited to those participating in the Medicare Advantage program.
We derive a substantial portion of our revenue from direct billings to governmental healthcare programs, such as Medicare and Medicaid, and private health insurance companies and/or health plans, including but not limited to those participating in the Medicare Advantage program.
We do not believe that such laws and regulations will either prohibit or require licensure approval of our business operations, although no assurances can be made that such laws and regulations will not be interpreted to extend such prohibitions or requirements to our operations.
We do not believe that such laws and regulations will either prohibit or require licensure approval of our business operations, although no assurances can be made that such laws and regulations will not be interpreted to extend such prohibitions or requirements to our operations. 14 Insurance Laws and Regulation.
Medicare and Medicaid Fraud and Abuse – Stark Law The Ethics in Patient Referral Act of 1989, commonly known as the Stark Law, prohibits a physician from referring Medicare patients to an entity providing designated health services in which the physician (or immediate family member) has an ownership or investment interest or with which the physician (or immediate family member) has entered into a compensation arrangement.
The Ethics in Patient Referral Act of 1989, commonly known as the Stark Law, prohibits a physician from referring Medicare patients to an entity providing designated health services in which the physician (or immediate family member) has an ownership or investment interest or with which the physician (or immediate family member) has entered into a compensation arrangement.
We believe our position as a leading provider of diagnostic imaging services and our long-term 5 relationships with physician groups in our markets enable us to obtain more favorable contract terms than would be available to smaller or less experienced imaging services providers.
We believe our position as a leading provider of diagnostic imaging services and our long-term relationships with physician groups in our markets enable us to obtain more favorable contract terms than would be available to smaller or less experienced imaging services providers. Optimize Operating Efficiencies.
Consumer awareness of diagnostic imaging as a less invasive and preventive screening method has added to the growth in diagnostic imaging procedures. We believe that further technological advancements allowing for early diagnosis of diseases and disorders using less invasive procedures will create additional demand for diagnostic imaging.
Consumer awareness of diagnostic imaging as a less invasive and preventive screening method has added to the growth in diagnostic imaging procedures. We believe that further technological advancements allowing for early diagnosis of diseases and disorders using less invasive procedures will create additional demand for diagnostic imaging. New Effective Applications for Diagnostic Imaging Technology.
The aim of increased utilization of diagnostic imaging services is to spread the cost of the equipment and services over a greater number of scans, resulting in a lower cost per scan. These changes have precipitated reductions in federal reimbursement for medical imaging and have resulted in decreased revenue for the scans we perform for Medicare beneficiaries.
The aim of increased utilization of diagnostic imaging services is to spread the cost of the equipment and services over a greater number of scans, resulting in a lower cost per scan. These changes precipitated reductions in federal reimbursement for medical imaging, resulting in decreased revenues per scan for the scans we perform for Medicare beneficiaries.
Because governmental healthcare programs generally reimburse on a fee schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing the amount of charges for services. Moreover, if our costs increase, we may not be able to recover our increased costs from these programs.
Because governmental healthcare programs generally reimburse on a fee schedule basis rather than on a charge-related basis, we generally cannot increase our revenues from these programs by increasing our fees for the specified services. Moreover, if our costs increase, we may not be able to recover our increased costs from these programs.
Optimize Operating Efficiencies We try to maximize our equipment utilization by adding, upgrading and re-deploying equipment where we experience excess demand. We will continue to trim excess operating and general and administrative costs where it is feasible to do so.
We seek to maximize our equipment utilization by adding, upgrading and re-deploying equipment where we experience excess demand. We will continue to trim excess operating and general and administrative costs where it is feasible to do so.
New Effective Applications for Diagnostic Imaging Technology New technological developments are expected to extend the clinical uses of diagnostic imaging technology and increase the number of scans performed.
New technological developments are expected to extend the clinical uses of diagnostic imaging technology and increase the number of scans performed.
Nuclear Medicine Nuclear medicine uses short-lived radioactive isotopes that release small amounts of radiation that can be recorded by a gamma camera and processed by a computer to produce an image of various anatomical structures or to assess the function of various organs such as the heart, kidneys, thyroid and bones.
Nuclear medicine uses short-lived radioactive isotopes that release small amounts of radiation that can be recorded by a gamma camera and processed by a computer to produce an image of various anatomical structures or to assess the function of various organs such as the heart, kidneys, thyroid and bones. Nuclear medicine is used primarily to study anatomic and metabolic functions.
Item 1. Business Business Overview We are a leading national provider of diagnostic imaging services in the United States based on number of locations and annual imaging revenue. We have been in business since 1985.
Item 1. Business Business Overview We are a leading national provider of diagnostic imaging services in the United States based on number of locations and annual imaging revenue. We have been in business since 1985. Our principal business segment is the provision of diagnostic imaging services.
In addition, we employ combined PET/CT systems that blend the PET and CT imaging modalities into one scanner.
In addition, we employ combined PET/CT systems that blend the PET and CT imaging modalities into one scanner. 2 Nuclear Medicine.
We believe our networks of centers and tailored service offerings for geographic areas drive local physician referrals, make us an attractive candidate for selection as a preferred provider by third-party payors and create economies of scale.
We believe our networks of centers and tailored service offerings for geographic areas drive local physician referrals, make us an attractive candidate for selection as a preferred provider by third-party payors and create economies of scale. Our Strong Relationships with Payors and Diversified Payor Mix.
Through our east coast operations, we have entered into sponsorship agreements with the Baltimore Ravens of the National Football League and the Baltimore Orioles of Major League Baseball which permit us to state we are the imaging partner to each organization. Both agreements last through 2023.
Through our east coast operations, we have entered into sponsorship agreements with the Baltimore Ravens of the National Football League and the Baltimore Orioles of Major League Baseball which permit us to state we are the imaging partner to each organization. Both of those agreements are being renewed through 2025.
At December 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 357 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.
At December 31, 2023, we operated, directly or indirectly through joint ventures with hospitals, 366 imaging centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.
These cost containment measures, and other market changes in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, any increased costs that we experience. Our integrated care business and financial operations may be materially affected by these developments.
These cost containment measures, and other market changes in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, any increased costs that we experience. Our integrated care business and financial operations may be materially affected by these developments. Medicare and Medicaid Fraud and Abuse – Federal Anti-kickback Statute.
The government may investigate our or the radiology practices’ activities, claims may be made against us or the radiology practices and these increased enforcement activities may directly or indirectly have an adverse effect on our business, financial condition and results of operations.
The government may investigate our or the radiology practices’ activities, claims may be made against us or the radiology practices and these increased enforcement activities may directly or indirectly have an adverse effect on our business, financial condition and results of operations. State Anti-kickback and Physician Self-referral Laws.
If we open or acquire additional imaging centers, we may incur material equipment lease obligations. See Note 9, Leases, to our consolidated financial statements included in this annual report on Form 10-K for further information. Timely and effective maintenance is essential for achieving high utilization rates of our imaging equipment.
If we open or acquire additional imaging centers, we may incur material equipment lease obligations. See Note 9, Leases, in the notes accompanying our consolidated financial statements included in this report for further information. Timely and effective maintenance of our imaging equipment is essential for achieving high utilization rates.
Diagnostic Imaging Modalities The principal diagnostic imaging modalities we use at our centers are: MRI MRI has become widely accepted as the standard diagnostic tool for a wide and fast-growing variety of clinical applications for soft tissue anatomy, such as those found in the brain, spinal cord, abdomen, heart and interior ligaments of body joints such as the knee.
MRI has become widely accepted as the standard diagnostic tool for a wide and fast-growing variety of clinical applications for soft tissue anatomy, such as those found in the brain, spinal cord, abdomen, heart and interior ligaments of body joints such as the knee.
We believe that third-party payors representing large groups of patients often prefer to enter into managed care contracts with providers that offer a broad array of diagnostic imaging services at convenient locations throughout a geographic area.
We believe that third-party payors representing large groups of patients often 4 prefer to enter into managed care contracts with providers that offer a broad array of diagnostic imaging services at convenient locations throughout a geographic area. Our Strong Relationships with Experienced and Highly Regarded Radiologists.
Medicare patients usually pay a 20% co-payment unless they have secondary insurance. Medicaid rates are set by the individual states for each state program and Medicaid patients may be responsible for a modest co-payment.
Medicare patients usually pay a 20% co-payment unless they have secondary insurance. Medicaid rates are set by the individual states for each state program and Medicaid patients may be responsible for a modest co-payment. Contracts with Physician Groups and Other Non-Insurance Company Payors.
Nuclear medicine is used primarily to study anatomic and metabolic functions. X-ray X-rays use roentgen rays to penetrate the body and record images of organs and structures on film. Digital X-ray systems add computer image processing capability to traditional X-ray images, which provides faster transmission of images with a higher resolution and the capability to store images more cost-effectively.
X-ray. X-rays use roentgen rays to penetrate the body and record images of organs and structures on film. Digital X-ray systems add computer image processing capability to traditional X-ray images, which provides faster transmission of images with a higher resolution and the capability to store images more cost-effectively. Ultrasound.
Medicare and Medicaid Fraud and Abuse – Federal Anti-kickback Statute During the year ended December 31, 2022, approximately 22% of our net service revenue generated at our diagnostic imaging centers was derived from federal government sponsored healthcare programs (Medicare) and 3% from state sponsored programs (Medicaid).
During the year ended December 31, 2023, approximately 23% of our net service revenue generated at our diagnostic imaging centers was derived from federal government sponsored healthcare programs (Medicare) and 3% from state sponsored programs (Medicaid).
Department of Health and Human Services, in computing physician practice expense relative value units, to increase the equipment utilization factor for advanced diagnostic imaging services (such as MRI, CT and PET) from a presumed utilization rate of 50% to 65% for 2010 through 2012, 70% in 2013, and 75% thereafter.
Department of Health and Human Services, in computing physician practice expense relative value units, to increase the equipment utilization factor for advanced diagnostic imaging services (such as MRI, CT and PET) from a presumed utilization rate of 50% to 75% over a three year period.
Our Competitive Strengths Our Scale and Position as the Largest Provider of Freestanding, Fixed-site Outpatient Diagnostic Imaging Services in the United States, Based on Number of Centers and Revenue As of December 31, 2022, we operated, directly or indirectly through joint ventures with hospitals, 357 centers in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.
Our Scale and Reputation. As of December 31, 2023, we operated, directly or indirectly through joint ventures with hospitals, 366 centers in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. We are the largest operator of freestanding, fixed-site outpatient diagnostic imaging service centers in the United States, based on number of centers and revenue.
Diagnostic imaging providers contract directly with the hospital or clinic and are typically reimbursed directly by them. We do not provide mobile imaging services.
Diagnostic imaging providers contract directly with the hospital or clinic and are typically reimbursed directly by them. We do not provide mobile imaging services. Diagnostic Imaging Modalities The principal diagnostic imaging modalities we use at our centers are: MRI.
The following table sets forth the number of our centers operated directly or managed through joint ventures for each year during the five-year period ended December 31, 2022: 8 Years Ended December 31, 2022 2021 2020 2019 2018 Total centers owned or managed (at beginning of the year) 347 331 335 344 297 Centers added by: Acquisition 8 27 13 9 55 Internal development 14 1 4 4 5 Centers closed or sold (12) (12) (21) (22) (13) Total centers owned or managed (at year end) 357 347 331 335 344 Diagnostic Imaging Equipment The following table indicates, as of December 31, 2022, the quantity of principal diagnostic equipment available at our centers operated directly or through joint venture investments: Equipment Count Years Ended December 31, 2022 2021 2020 MRI 340 323 293 CT 208 192 175 PET/CT 67 68 67 Mammography 387 358 315 Ultrasound 818 760 689 X-ray 440 415 376 Nuclear Medicine 57 55 57 Fluoroscopy 116 105 117 Total equipment 2,433 2,276 2,089 The average age of our MRI and CT units is less than five years, and the average age of our PET units is less than four years.
The following table sets forth the number of our centers operated directly or managed through joint ventures for each year during the three-year period ended December 31, 2023: 7 Years Ended December 31, 2023 2022 2021 Total centers owned or managed (at beginning of the year) 357 347 331 Centers added by: Acquisition 10 8 27 Internal development 11 14 1 Centers closed or sold (12) (12) (12) Total centers owned or managed (at year end) 366 357 347 Diagnostic Imaging Equipment The following table indicates, as of December 31, 2023, the quantity of principal diagnostic equipment available at our imaging centers operated directly or through joint venture investments: Equipment Count Years Ended December 31, 2023 2022 2021 MRI 353 340 323 CT 208 208 192 PET/CT 63 67 68 Mammography 405 387 358 Ultrasound 861 818 760 X-ray 363 440 415 Nuclear Medicine 55 57 55 Fluoroscopy 121 116 105 Total equipment 2,429 2,433 2,276 The average age of our MRI and CT units is less than five years, and the average age of our PET units is less than four years.
The higher utilization rate was fully implemented in the beginning of 2011 and replaced the phase-in approach provided in the PPACA. This utilization rate was further increased to 90% by the American Taxpayer Relief Act of 2012, effective as of January 1, 2014.
The Health Care and Education Reconciliation Act of 2010 (H.R. 4872), or Reconciliation Act, fully implemented the higher utilization rate in the beginning of 2011, eliminating the phase-in approach provided in the PPACA. This utilization rate was further increased to 90% by the American Taxpayer Relief Act of 2012, effective as of January 1, 2014.
We compete principally on the basis of our reputation, our ability to provide multiple modalities at many of our centers, the location of our centers, the quality of our diagnostic imaging services and technologists and our ability to establish and maintain relationships with healthcare providers and referring physicians. See “Competitive Strengths” above.
We compete principally on the basis of our reputation, our ability to provide multiple modalities at many of our centers, the location of our centers, the quality of our diagnostic imaging services and technologists and our ability to establish and maintain relationships with healthcare providers and referring physicians. We believe that the following competitive strengths differentiate us from our competition.
Business Strategy Maximize Performance at Our Existing Centers We intend to enhance our operations and increase scan volume and revenue at our existing centers by expanding physician relationships and increasing the procedure offerings.
We seek to enhance our operations and increase scan volume and revenue at our existing centers by expanding physician relationships and increasing the procedure offerings. Focus on Profitable Contracting.
For performing these management services, which include billing, collecting, transcription and medical coding, we receive management fees, that depending on the agreement are calculated at a fixed or variable rate.
For performing these management services, which include billing, collecting, transcription and medical coding, we receive management fees, that depending on the agreement are calculated at a fixed or variable rate. 6 Payors The fees charged for diagnostic imaging services performed at our centers are paid by a diverse mix of payors: Commercial Insurance.
Although some of our arrangements may not fall within a safe harbor, we believe that such business arrangements do not violate the Anti-kickback Statute because we are careful to structure them to reflect fair value and ensure that the reasons underlying our decision to enter into a business arrangement comport with reasonable interpretations of the Anti-kickback Statute.
Although full compliance with these provisions ensures against prosecution under the federal Anti-kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-kickback Statute will be pursued. 11 Although some of our arrangements may not fall within a safe harbor, we believe that such business arrangements do not violate the Anti-kickback Statute because we are careful to structure them to reflect fair value and ensure that the reasons underlying our decision to enter into a business arrangement comport with reasonable interpretations of the Anti-kickback Statute.
Focus on Profitable Contracting We regularly evaluate our contracts with third-party payors, industry vendors and radiology groups, as well as our equipment and real property leases, to determine how we may improve the terms to increase our revenues and reduce our expenses.
We regularly evaluate our contracts with third-party payors, industry vendors and radiology groups, as well as our equipment and real property leases, to determine how we may improve the terms to increase our revenues and reduce our expenses. Because many of our contracts with third party payors are short-term in nature, we can regularly renegotiate these contracts, if necessary.
Diagnostic Imaging Settings Diagnostic imaging services are typically provided in one of the following settings: Fixed-site, freestanding outpatient diagnostic centers These centers range from single-modality to multi-modality centers and are generally not owned by hospitals or clinics. These centers depend upon physician referrals for their patients and generally do not maintain dedicated, contractual relationships with hospitals or clinics.
These centers range from single-modality to multi-modality centers and are generally not owned by hospitals or clinics. These centers depend upon physician referrals for their patients and generally do not maintain dedicated, contractual relationships with hospitals or clinics. In fact, these centers may compete with hospitals or clinics that have their own imaging systems to provide services to these patients.
We believe in ensuring every team member feels valued, seen, and heard; therefore, we have various avenues for all to share ideas and provide feedback.
As a foundational practice, all employees are required to complete cultural competence training annually. Employee Listening . We believe in ensuring every team member feels valued, seen, and heard; therefore, we have various avenues for all to share ideas and provide feedback.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a consequence, there can be no assurance that our present arrangements with the Group or the physicians providing medical services and medical supervision at our imaging centers will not be challenged, and, if challenged, that they will not be found to violate the corporate practice of medicine or fee splitting prohibitions, thus subjecting us to potential damages, injunction and/or civil and criminal penalties or require us to restructure our arrangements in a way that would affect the control or quality of our services and/or change the amounts we receive under our management agreements. 25 If we fail to comply with federal and state privacy and information security laws mandating protection of certain confidential data against disclosure, including cybersecurity attacks, we may be subject to government or private actions.
Biggest changeAs a consequence, there can be no assurance that our present arrangements with the Group or the physicians providing medical services and medical supervision at our imaging centers will not be challenged, and, if challenged, that they will not be found to violate the corporate practice of medicine or fee splitting prohibitions.
The success of our AI investments will depend upon a number of factors, some of which are out of our control, such as: • our ability to effectively integrate the operations of the acquired companies, including retaining key personnel; • the timeline and related expenses associated with applying for regulatory approvals necessary for commercialization; • whether any of our existing or future AI products will receive European CE or U.S.
However, the success of our AI investments will depend upon a number of factors, some of which are out of our control, such as: • our ability to effectively integrate the operations of the acquired companies, including retaining key personnel; • the timeline and related expenses associated with applying for regulatory approvals necessary for commercialization; • whether any of our existing or future AI products will receive European CE or U.S.
For example, the provisions: • permit the board of directors to increase its own size, within the maximum limitations set forth in the bylaws, and fill the resulting vacancies; • authorize the issuance of shares of preferred stock in one or more series without a stockholder vote; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors; and • prohibit transfers and/or acquisitions of stock (without consent of the Board of Directors ) that would result in any stockholder owning greater than 5% of the currently outstanding stock resulting in a limitation on net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the internal revenue code of 1986, as amended.
For example, provisions in our organizational documents: • permit the board of directors to increase its own size, within the maximum limitations set forth in the bylaws, and fill the resulting vacancies; • authorize the issuance of shares of preferred stock in one or more series without a stockholder vote; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors; and • prohibit transfers and/or acquisitions of stock (without consent of the Board of Directors ) that would result in any stockholder owning greater than 5% of the currently outstanding stock resulting in a limitation on net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the internal revenue code of 1986, as amended.
In addition, 20 successful claims against us may adversely affect our business or reputation. Although California places a $250,000 limit on non-economic damages for medical malpractice cases, no limit applies to economic damages and no such limits exist in the other states in which we provide services.
In addition, successful claims against us may adversely affect our business or reputation. Although California places a $250,000 limit on non-economic damages for medical malpractice cases, no limit applies to economic damages and no such limits exist in the other states in which we provide services.
For example, health maintenance organizations sometimes contract directly with providers and require their enrollees to obtain these services exclusively from those contracted providers. Some insurance companies and self-insured employers also limit these services to contracted providers. These “closed panel” systems are now common in the managed care environment.
For example, health maintenance organizations sometimes contract directly with providers 18 and require their enrollees to obtain these services exclusively from those contracted providers. Some insurance companies and self-insured employers also limit these services to contracted providers. These “closed panel” systems are now common in the managed care environment.
Our corporate headquarters and over 100 of our radiology centers are located in California, which is subject to wildfires, blackouts, and potentially damaging earthquakes. In addition, several of our centers located in parts of the east coast have suffered from weather events that caused us to temporarily close centers.
Our corporate headquarters and over 100 of our radiology centers are located in California, which is subject to wildfires, blackouts, and potentially damaging earthquakes. In addition, several of our imaging centers located in parts of the east coast have suffered from weather events that caused us to temporarily close centers.
Certain states have enacted statutes or adopted regulations affecting risk assumption in the healthcare industry, including statutes and regulations that subject any physician or physician network engaged in risk-based managed care 23 contracting to comply with applicable insurance laws.
Certain states have enacted statutes or adopted regulations affecting risk assumption in the healthcare industry, including statutes and regulations that subject any physician or physician network engaged in risk-based managed care contracting to comply with applicable insurance laws.
We may be impacted by eligibility changes to government and private insurance programs. Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase.
We may be impacted by eligibility changes to government and private insurance programs. 21 Due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase.
We incur capital expenditures to, among other things, upgrade and replace equipment for existing centers and expand within our existing markets and enter new markets. If we open or acquire additional imaging centers, we may have to incur material capital lease obligations.
We incur capital expenditures to, among other things, upgrade and replace equipment for existing centers and expand within our existing markets and enter new markets. If we open or acquire 24 additional imaging centers, we may have to incur material capital lease obligations.
These or other similar events could cause disruption or interruption to our operations and significantly impact our employees. Any disruption to our services may result in decreases in revenues or increased operating and capital expenses.
These or other similar events could cause disruption or interruption to our operations and significantly impact our employees. 16 Any disruption to our services may result in decreases in revenues or increased operating and capital expenses.
We seek to manage this risk through the purchase of professional liability insurance. Any claim made against us that is not fully covered by insurance could be costly to defend, result in a substantial damage award against us and divert the attention of our management from our operations, all of which could have an adverse effect on our financial performance.
We seek to mitigate this risk through the purchase of professional liability insurance. Any claim made against us that is not fully covered by insurance could be costly to defend, result in a substantial damage award against us and divert the attention of our management from our operations, all of which could have an adverse effect on our financial performance.
Historically, when we have experienced a reduction in business due to inclement weather or external events for a period of 18 time, our operations have returned to a normalized level, but we have not experience a significant increase of procedures that would fully compensate for the revenues lost during the slower periods.
Historically, when we have experienced a reduction in business due to inclement weather or external events for a period of time, our operations have returned to a normalized level, but we have not experienced a significant increase of procedures that would fully compensate for the revenues lost during the slower periods.
In addition, federal legislation requires all suppliers that provide the technical component of diagnostic MRI, PET/CT, CT, and nuclear medicine to be accredited by an accreditation organization designated by CMS (which currently include the American College of Radiology (ACR), the Intersocietal Accreditation Commission (IAC) and the Joint Commission).
In addition, federal legislation requires all suppliers that provide the technical component of diagnostic MRI, PET/CT, CT, and nuclear medicine to be accredited by an accreditation organization designated by CMS (which currently include the American College of Radiology, the Intersocietal Accreditation Commission and the Joint Commission).
A decline in the Company's operating results, future estimated cash flows and other assumptions could impact our estimated fair values, potentially leading to a material impairment of goodwill, other intangible assets, or other long-lived assets, which could adversely affect our financial position and results of operations.
A future decline in our operating results, future estimated cash flows and other assumptions could impact our estimated fair values, potentially leading to a material impairment of goodwill, other intangible assets, or other long-lived assets, which could adversely affect our financial position and results of operations.
The trading price of our common stock on the NASDAQ Global Market has fluctuated significantly in the past. During the period from January 1, 2021 through December 31, 2022, the trading price of our common stock fluctuated from a high of $38.84 per share to a low of $12.03 per share.
The trading price of our common stock on the NASDAQ Global Market has fluctuated significantly in the past. During the period from January 1, 2021 through December 31, 2023, the trading price of our common stock fluctuated from a high of $38.84 per share to a low of $12.03 per share.
Our substantial indebtedness could also: • make it difficult for us to satisfy our payment obligations with respect to our outstanding indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • expose us to the risk of interest rate increases on our variable rate borrowings, including borrowings under our new senior secured credit facilities; • increase our vulnerability to adverse general economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit our ability to borrow additional funds on terms that are satisfactory to us or at all.
Our substantial indebtedness could also: • make it difficult for us to satisfy our payment obligations with respect to our outstanding indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; • expose us to the risk of interest rate increases on our variable rate borrowings, including borrowings under our Barclays and Truist credit facilities; • increase our vulnerability to adverse general economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit our ability to borrow additional funds on terms that are satisfactory to us, or at all.
Moreover, continued disruption in credit markets could render it more difficult for us to timely replacing maturing liabilities or to expand credit facilities, which would adversely affect our liquidity and financial condition.
Moreover, continued disruption in credit markets could render it more difficult for us to timely replace maturing liabilities or to expand credit facilities, which would adversely affect our liquidity and financial condition.
We face various risks related to health epidemics and other outbreaks, including the global outbreak of COVID-19 (including the virus' variants that have emerged and could emerge in the future): • Restrictions intended to slow the spread of COVID-19, including quarantines, government-mandated actions, stay-at-home orders and other restrictions, have led and may in the future lead to periods where procedure volumes drop significantly; • Disruptions in supply chains can affect the cost and availability of reagents and other materials needed for certain procedures; • Significant portions of our workforce may be unable to work illness, quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations; • General economic downturns as a result of COVID-19 may affect demand or pricing for our services; and • Volatility in the global capital markets may result in a decrease in the price of our common stock, or an increase in our cost of capital.
We face various risks related to health epidemics and other outbreaks, that have emerged and could emerge in the future, including: • restrictions intended to slow the spread of outbreaks, including quarantines, government-mandated actions, stay-at-home orders and other restrictions, have led and may in the future lead to periods where our imaging procedure volumes drop significantly; • disruptions in supply chains can affect the cost and availability of reagents and other materials needed for certain procedures; • significant portions of our workforce may be unable to work due to illness, quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations; • general economic downturns as a result of outbreaks may affect demand or pricing for our services; and • volatility in the global capital markets may result in a decrease in the price of our common stock, or an increase in our cost of capital.
Our operations can be subject to external events beyond our control, such as the effects of earthquakes, fires, floods, severe weather, public health issues, power failures, telecommunication loss, and other natural and man-made events, some of which may be intensified by the effects of climate change and changing weather patterns.
Our operations can be impacted by external events beyond our control, such as the effects of earthquakes, fires, floods, severe weather, public health issues, power failures, telecommunication loss, and other natural and man-made events, some of which may be intensified by the effects of climate change and changing weather patterns.
For the year ended December 31, 2022, approximately 22% and 3% of our net service fee revenue came from Medicare and various state Medicaid programs, respectively. A change in the applicable certification status of one of our centers could adversely affect our other centers and in turn us as a whole.
For the year ended December 31, 2023, approximately 23% and 3% of our net service fee revenue came from Medicare and various state Medicaid programs, respectively. A change in the applicable certification status of one of our centers could adversely affect our other centers and, in turn, us as a whole.
On November 22, 2022, Centers for Medicare and Medicaid Services (“CMS”) released the 2022 Medicare Physician Fee Schedule final rule, which contained significant payment reductions effective January 1, 2023 for radiology services as a result of changes to relative value units, redistributive effects of the CMS proposed clinical labor pricing update and statutorily mandated budget neutrality rules.
On November 16, 2023, Centers for Medicare and Medicaid Services (“CMS”) released the 2023 Medicare Physician Fee Schedule final rule, which contained significant payment reductions for radiology services, effective January 1, 2024, largely as a result of changes to relative value units, redistributive effects of the CMS proposed clinical labor pricing update and statutorily mandated budget neutrality rules.
We structure our relationships with the radiology groups under our management agreements in a manner that we believe does not constitute the practice of medicine by us, or subject us to professional malpractice claims for acts or omissions of physicians employed by the contracted radiology practices.
Under the terms of our management agreements with those radiology groups, we structure the relationship in a manner that we believe does not constitute our practice of medicine, or subject us to professional malpractice claims for acts or omissions of physicians employed by the contracted radiology practices.
Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. Furthermore, additional changes to, or rollback of, the Patient Protection and Affordable Care Act, whether through legislation or judicial action, may also affect reimbursement and coverage in ways that are currently unpredictable.
Even for those patients who remain in private insurance plans, changes to those plans could increase patient financial responsibility, resulting in a greater risk of uncollectible receivables. Furthermore, additional changes to, or rollback of, the PPACA, whether through legislation or judicial action, may also affect reimbursement and coverage in ways that are currently unpredictable.
Personnel may leave or be terminated because of an acquisition. If these factors limit our ability to integrate the operations of an acquisition successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies as a result of the acquisition, may not be met.
If these factors limit our ability to integrate the operations of an acquisition successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies as a result of the acquisition, may not be met.
Forthuber, our Chief Operating Officers, West Coast and East Coast, respectively, could hinder our ability to execute our business strategy and have a significant negative impact on our operations. We believe that they could not easily be replaced with executives of equal experience and capabilities, which would adversely affect our business.
Hames or Stephen M. Forthuber, our Presidents and Chief Operating Officers, West Coast and East Coast, respectively, could hinder our ability to execute our business strategy and have a significant negative impact on our operations. We believe that they could not easily be replaced with executives of equal experience and capabilities, which would adversely affect our business.
Under the terms of our management agreements, these radiology groups must use their best efforts to provide medical services at our centers as well as any new centers that we open or acquire in their areas of operation.
Under the terms of our management agreements, the radiology groups are required use their best efforts to provide medical services at our centers as well as any new centers that we open or acquire in their areas of operation.
We are directly or indirectly, through the radiology practices with which we contract, subject to extensive regulation by both the federal government and the state governments in which we provide services, including: • the federal False Claims Act; • the federal Medicare and Medicaid Anti-Kickback Statute, and state anti-kickback prohibitions; • federal and state billing and claims submission laws and regulations; • HIPAA, as amended by HITECH, and comparable state laws; • the federal physician self-referral prohibition commonly known as the Stark Law and state equivalents; • state laws that prohibit the corporate practice of medicine and prohibit similar fee-splitting arrangements; • federal and state laws governing the diagnostic imaging and therapeutic equipment we use in our business concerning patient safety, equipment operating specifications and radiation exposure levels; • state laws governing reimbursement for diagnostic services related to services compensable under workers' compensation rules; and • federal and state environmental and health and safety laws.
We are directly or indirectly, through the radiology practices with which we contract, subject to extensive regulation by both the federal government and the state governments in which we provide services, including: • the federal False Claims Act; • the federal Medicare and Medicaid Anti-Kickback Statute, and state anti-kickback prohibitions; • federal and state billing and claims submission laws and regulations; • HIPAA, as amended by HITECH, and comparable state laws; • the federal physician self-referral prohibition commonly known as the Stark Law and state equivalents; • state laws that prohibit the corporate practice of medicine and prohibit similar fee-splitting arrangements; • state laws governing the approval of healthcare transactions and complying with cost targets, including the California Health Care Quality and Affordability Act and its implementing regulations. • federal and state laws governing the diagnostic imaging and therapeutic equipment we use in our business concerning patient safety, equipment operating specifications and radiation exposure levels; • state laws governing reimbursement for diagnostic services related to services compensable under workers' compensation rules; and • federal and state environmental and health and safety laws.
For the year ended December 31, 2022, we derived approximately 11% of our total net revenue from capitation arrangements, and we expect to continue to derive a significant portion of our revenue from capitation arrangements in the future.
For the year ended December 31, 2023, we derived approximately 9% of our total net revenue from capitation arrangements, and we expect to continue to derive a significant portion of our revenue from capitation arrangements in the future.
Financial Risks Because we have high fixed costs, lower scan volumes and revenues could adversely affect our business. The principal components of our expenses are debt service, capital lease payments, depreciation, compensation paid to technologists, salaries, real estate lease expenses and equipment maintenance costs.
Financial Risks Because we have high fixed costs, lower scan volumes or other decreases revenues could adversely affect the profitability of our business. The principal components of our expenses are debt service, depreciation, compensation paid to technologists, salaries, real estate lease expenses and equipment maintenance costs.
The price of our common stock could also be subject to wide fluctuations in the future as a result of a number of other factors, including the following: • changes in expectations as to future financial performance or buy/sell recommendations of securities analysts; • our, or a competitor’s, announcement of new services, or significant acquisitions, strategic partnerships, joint ventures or capital commitments; and • the operating and stock price performance of other comparable companies.
The price of our common stock could also be subject to wide fluctuations in the future as a result of a number of other factors, including the following: • changes in expectations as to future financial performance or buy/sell recommendations of securities analysts; • our, or a competitor’s, announcement of new services, or significant acquisitions, strategic partnerships, joint ventures or capital commitments; and • the operating and stock price performance of other comparable companies. 25 In addition, the U.S. securities markets periodically experience significant price and volume fluctuations.
The process of integrating the acquired business, technology, service and research and development component into our business and operations and entry into a new line of business in which we are inexperienced may result in unforeseen operating difficulties and expenditures.
In the future we may acquire companies that create a new line of business. The process of integrating the acquired business, technology, service and research and development component into our business and operations and entry into a new line of business in which we are inexperienced may result in unforeseen operating difficulties and expenditures.
Healthcare and Regulatory Risks The regulatory framework in which we operate is uncertain and evolving. Although we believe that we are operating in compliance with applicable federal and state laws, neither our current or anticipated business operations nor the operations of our contracted radiology practices have been the subject of judicial or regulatory interpretation.
Although we believe that we are operating in compliance with applicable federal and state laws, neither our current or anticipated business operations nor the operations of our contracted radiology practices have been the subject of judicial or regulatory interpretation.
We are subject to Section 203 of the Delaware General Corporation Law, which could have the effect of delaying or preventing a change in control.
We are subject to Section 203 of the Delaware General Corporation Law, which could have the effect of delaying or preventing a change in control. Item 1B. Unresolved Staff Comments None.
Our information technology system is vulnerable to damage or interruption from: • earthquakes, fires, floods and other natural disasters; • power losses, computer systems failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees, physical and electronic losses of data and similar events; and • computer viruses, security attacks and breaches, coordinated attacks by hackers or activist entities seeking to disrupt operations or misappropriate information and other breaches of security; and • acts of vandalism or theft, misplaced or lost data, programming or human errors and similar events.
Our information technology system is vulnerable to damage or interruption from: 19 • Cybersecurity attacks and breaches, ransomware and computer viruses, coordinated attacks by hackers, activist entities, organized criminal threat actors, and nation-state sponsored actors, seeking to disrupt operations or misappropriate information; • technology service provider outages and technology supply chain cyber-security weaknesses; • power losses, computer systems failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees, physical and electronic losses of data and similar events; • earthquakes, fires, floods and other natural disasters; and • acts of vandalism or theft, misplaced or lost data, programming or human errors and similar events.
Concerns about the systemic impact of potential long-term and wide-spread recession, inflation, energy costs, geopolitical issues, the availability and cost of credit have contributed to increased market volatility and diminished expectations for near-term growth in the United States and many global economies.
Concerns about the systemic impact of potential long-term and wide-spread recession, inflation, energy costs, geopolitical issues, the availability and cost of credit have contributed to increased market volatility and diminished expectations for near-term growth in the United States and many global economies. Continued turbulence in domestic and international markets and economies may adversely affect our liquidity and financial condition.
Our success depends in part on our ability to attract and retain qualified senior and executive management, and managerial and technical personnel. The loss of the services of Dr. Howard G. Berger, our President and Chief Executive Officer, and Norman R. Hames or Stephen M.
Our success depends in part on our key personnel and loss of key executives could adversely affect our operations. Our success depends in part on our ability to attract and retain qualified senior and executive management, and managerial and technical personnel. The loss of the services of Dr. Howard G. Berger, our President and Chief Executive Officer, and Norman R.
We believe we are operating in compliance with applicable law and believe that our arrangements with providers would not be found to violate the anti-kickback laws.
We believe we are operating in compliance with applicable law and believe that our arrangements with providers would not be found to violate the anti-kickback laws. However, these laws could be interpreted in a manner inconsistent with our operations.
Credentialing of physicians is required by our payors prior to commencing payment. We have experienced a slowdown in the credentialing of our physicians over the last several years which has lengthened our billing and collection cycle, and could negatively impact our ability to collect revenue from patients covered by Medicare.
Our payors required that the physicians providing imaging services are credentialed, before the payor will commence payment. We have experienced a slowdown in the credentialing of our physicians over the last several years which has lengthened our billing and collection cycle, and could negatively impact our ability to collect revenue from patients covered by Medicare.
Responding to such incidents could require us to incur significant costs related to rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages, complying with consumer protection laws or taking other remedial steps with respect to third parties.
We may be required to comply with state breach notification laws or become subject to mandatory corrective action. Responding to such incidents could require us to incur significant costs related to rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages, complying with consumer protection laws or taking other remedial steps with respect to third parties.
A downturn in the economic environment can also lead to increased risk of collection on our accounts receivable and impairment of goodwill, possible reductions in liquidity, as well as the risk of failure of derivative counterparties and other 17 financial institutions. These and other economic factors can materially adversely affect our business, results of operations, financial condition and stock price.
A downturn in the economic environment can also lead to increased risk of collection on our accounts receivable, impairment of goodwill, and increased risk of failure of financial institutions including insurance companies and derivatives counterparties. These and other economic events could materially adversely affect our business, results of operations, financial condition and stock price.
We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of new diagnostic imaging centers and the acquisition of 26 additional centers and new diagnostic imaging equipment.
A restriction in our ability to make capital expenditures would restrict our growth and could adversely affect our business. We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of new diagnostic imaging centers and the acquisition of additional centers and new diagnostic imaging equipment.
The termination of a management agreement with a radiology group could result in both short and long-term loss of revenue and adversely affect our performance and competitive position in the markets served by the departing radiology group. We are dependent on the ability of our contracted radiology practices, including the Group, to hire and retain qualified radiologists.
The termination of a management agreement with a radiology group could result in both short and long-term loss of revenue and adversely affect our performance and competitive position in the markets served by the departing radiology group.
However, these laws could be interpreted in a manner inconsistent with our operations. 24 Federal law prohibiting certain physician self-referrals, known as the Stark Law, prohibits a physician from referring Medicare or Medicaid patients to an entity for certain “designated health services” if the physician has a prohibited financial relationship with that entity, unless an exception applies.
Federal law prohibiting certain physician self-referrals, known as the Stark Law, prohibits a physician from referring Medicare or Medicaid patients to an entity for certain “designated health services” if the physician has a prohibited financial relationship with that entity, unless an exception applies. Certain radiology services are considered “designated health services” under the Stark Law.
Business Risks If our contracted radiology practices terminate their agreements with us, our business could substantially diminish. 19 Our business is substantially dependent on the radiology groups that we contract with to provide medical services. The radiology groups are party to substantially all of the managed care contracts from which we derive revenue.
Our business is substantially dependent on the radiology groups that we contract with to provide medical services at our imaging centers. The radiology groups are party to substantially all of the managed care contracts from which we derive revenue.
Most of our indebtedness is borrowed under terms with variable interest rates. We have purchased, and may in the future purchase, forward swaps or other derivative instruments designed to hedge the risk of changes in interest rates.
To meet these capital requirements, we have incurred various indebtedness including senior secured credit facilities and equipment leases. 15 Most of our indebtedness is borrowed under terms with variable interest rates. We have purchased, and may in the future purchase, forward swaps or other derivative instruments designed to mitigate the risk of changes in interest rates.
Emerging and advanced security threats, including coordinated attacks, require additional layers of security which may disrupt or impact efficiency of operations. We have in the past experienced unauthorized access to our network and could again face attempts by others to gain unauthorized access to information or to introduce malicious software to disrupt the operation of our information technology systems.
We have in the past experienced unauthorized access to our network and could again face attempts by others to gain unauthorized access to information or to introduce malicious software to disrupt the operation of our information technology systems.
Our ability to generate revenue depends in large part on referrals from physicians. We depend on unaffiliated physicians and other third parties who have no contractual obligations to refer patients to us for a substantial portion of the services we perform.
Our ability to generate revenue depends in large part on referrals from physicians. A significant portion of the services that we perform are derived from patient referrals from unaffiliated physicians and other third parties. Those physicians and other third parties do not have any contractual obligation to refer patients to us.
A decline in global economic conditions could also have a significant impact on the financial condition and operations of our third party payors, contracting radiology groups, equipment manufacturers and other suppliers.
Patients may transition work, leaving insurance programs, or defer non-emergency procedures, which could reduce overall demand for our services. A decline in global economic conditions could also have a significant impact on the financial condition and operations of our third party payors, contracting radiology groups, equipment manufacturers and other suppliers.
The failure to successfully manage these risks in the development and implementation of new lines of business could have a material, adverse effect on our business, financial condition, and results of operations. We may not generate the expected benefits from our recent investment in AI technologies.
The failure to successfully manage these risks in the development and implementation of new lines of business could have a material, adverse effect on our business, financial condition, and results of operations. Healthcare and Regulatory Risks The regulatory framework in which we operate is continually evolving.
Technological change in our industry could reduce the demand for our services and require us to incur significant costs to upgrade our equipment. The development of new technologies or refinements of existing modalities may require us to upgrade and enhance our existing equipment before we may otherwise intend. Many companies currently manufacture diagnostic imaging equipment.
The development of new technologies or refinements of existing modalities may require us to upgrade and enhance our existing equipment before we may otherwise intend. Many companies currently manufacture diagnostic imaging equipment. Competition among manufacturers for a greater share of the diagnostic imaging equipment market may result in technological advances in the speed and imaging capacity of new equipment.
Because a majority of these expenses are fixed, a relatively small change in our revenue could have a disproportionate effect on our operating and financial results depending on the source of our revenue. Thus, decreased revenue as a result of lower scan volumes per system could result in lower margins, which would materially adversely affect the profitability our business.
Because a majority of these expenses are fixed, a relatively small change in our revenue could have a disproportionate effect on our operating and financial results depending on the source of our revenue.
The future success and growth of our business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.
We also use information technology systems and networks in our operations and supporting departments such as research and development, marketing, accounting, finance, and human resources. The future success and growth of our business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.
We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act (collectively, “HIPAA”).
If we fail to comply with federal and state privacy and information security laws mandating protection of certain confidential data against disclosure, including cybersecurity attacks, we may be subject to government or private actions. 23 We must comply with numerous federal and state laws and regulations governing the collection, dissemination, access, use, security and privacy of PHI, including HIPAA and its implementing privacy and security regulations, as amended by the federal HITECH Act.
These threats are constantly changing, increasing the difficulty of successfully defending against them or implementing adequate preventive measures. We maintain multiple layers of security measures and are continuously enhancing 21 our security technologies to address new threats. Our defenses are monitored and routinely tested internally and by external parties.
Cybersecurity threats are constantly changing, increasing the difficulty of successfully defending against them or implementing adequate preventive measures. While we maintain multiple layers of security measures and are continuously enhancing our security technologies to address new threats, emerging and advanced cybersecurity threats, including coordinated attacks, require additional layers of security which may disrupt or impact efficiency of operations.
In the future, we could become the subject of an unsolicited attempted takeover of our company.
Provisions of the Delaware General Corporation Law and our organizational documents may discourage an acquisition of us. In the future, we could become the subject of an unsolicited attempted takeover of our company.
We operate in an industry that requires significant amounts of capital to fund operations, particularly the initial start-up and development expenses of new diagnostic imaging centers and the acquisition of additional centers and new diagnostic imaging equipment. To meet these capital requirements we have incurred various indebtedness including senior secured credit facilities and equipment leases.
We operate in an industry that requires significant amounts of capital to fund operations, particularly in the development or acquisition of diagnostic imaging centers and the acquisition of diagnostic imaging equipment.
We are also required to perform an impairment test of definite lived intangible or other long-lived assets when indicators of impairment are present.
We are required to perform impairment tests for goodwill and other indefinite-lived intangible assets annually and whenever events or circumstances indicate that it is more likely than not that impairment exists. We are also required to perform an impairment test of definite lived intangible or other long-lived assets when indicators of impairment are present.
The institution of similar litigation against us could result in substantial costs and a diversion of management’s attention and resources, which could negatively affect our business, results of operations or financial condition. Provisions of the Delaware General Corporation Law and our organizational documents may discourage an acquisition of us.
In the past, following periods of volatility in the market price of an individual company’s securities, securities class action litigation often has been instituted against that company. The institution of similar litigation against us could result in substantial costs and a diversion of management’s attention and resources, which could negatively affect our business, results of operations or financial condition.
We may also be required to accelerate the depreciation on existing equipment and incur significant capital expenditures to acquire the new technologies. We may not have the financial ability to acquire the new or improved equipment and may not be able to maintain a competitive equipment base.
If the development of new technologies accelerates the obsolescence of our current equipment, we may lose some of our competitive advantage. We may also be required to accelerate the depreciation on existing equipment and incur significant capital expenditures to acquire the new technologies.
We may never realize expected synergies or capitalize on expected business opportunities in connection with an acquisition. Moreover, assumptions underlying estimates of expected cost savings may be inaccurate, or general industry and business conditions may deteriorate. Integrating operations requires significant efforts and expense on our part. Our management may have its attention diverted while trying to integrate an acquisition.
During the past three fiscal years, we have completed acquisitions that have added 45 centers to our fixed-site outpatient diagnostic imaging services. We may never realize expected synergies or capitalize on expected business opportunities in connection with an acquisition. Moreover, assumptions underlying estimates of expected cost savings may be inaccurate, or general industry and business conditions may deteriorate.
In addition, legislation may be enacted in the future that further addresses Medicare and Medicaid fraud and abuse or imposes additional regulatory burdens on us.
Although we believe our operations do not violate the Stark Law, our activities may be challenged. If a 22 challenge is successful, it could have an adverse effect on our operations. In addition, legislation may be enacted in the future that further addresses Medicare and Medicaid fraud and abuse or imposes additional regulatory burdens on us.
Broad market and industry factors may lead to volatility in the price of our common stock, regardless of our operating performance. 27 In the past, following periods of volatility in the market price of an individual company’s securities, securities class action litigation often has been instituted against that company.
These fluctuations often have been unrelated to the operating performance of companies in these markets. Broad market and industry factors may lead to volatility in the price of our common stock, regardless of our operating performance.
We believe that technology advancements including AI will significantly impact diagnostic imaging services in the future. As part of our growth strategy we have acquired or invested in a number of AI companies and technologies, including DeepHealth, Inc., NeuroLogix, Inc., WhiteRabbit.ai, Aidence Holding B.V. and Quantib B.V.
As part of our growth strategy we have acquired or invested in a number of AI companies and technologies, including DeepHealth, Inc., NuLogix Health, Inc., WhiteRabbit.ai, Aidence Holding B.V. and Quantib B.V. with the expectation that these AI technologies can be developed into solutions that enhance the quality of outcomes for patients via improved diagnostic imaging, reduce operating costs, and correspondingly improve our competitive position.
Our inability to enforce radiologists’ non-compete provisions could result in increased competition from individuals who are knowledgeable about our business strategies and operations. The future growth of our imaging business is partially dependent on our ability to continue to identify, complete and successfully integrate acquired businesses.
The inability of the contracted radiology practices or us to enforce a radiologist’s non-compete covenants could result in increased competition from individuals who are knowledgeable about our business strategies and operations. We are dependent on the ability of our contracted radiology practices, including the Group, to hire and retain qualified radiologists.
Our competitors include independent imaging operators, such as Akumin, Inc., which recently acquired Alliance Healthcare Services, and smaller regional operators, as well as hospitals, clinics and radiology groups that operate their own imaging equipment.
Our competitors include independent imaging operators, such as Akumin, Inc., and smaller regional operators, as well as hospitals, clinics and radiology groups that operate their own imaging equipment. Some of our competitors may have, now or in the future, access to greater financial resources than we do and may have access to newer, more advanced equipment.
Our scale in both the number of our locations and the number and types of imaging equipment we offer is one of our competitive advantages. If the development of new technologies accelerates the obsolescence of our current equipment, we may lose some of our competitive advantage.
In addition, advances in technology may enable physicians and others to perform diagnostic imaging procedures without us. Our scale in both the number of our locations and the number and types of imaging equipment we offer is one of our competitive advantages.
As of December 31, 2022 term loan indebtedness, excluding related discount, was $864.1 million, of which the Barclays credit facility term loans were $714.1 million and the Truist credit facility term loan was $150.0 million.
Our current substantial indebtedness and any future indebtedness we incur could adversely affect our financial condition. We are highly leveraged. As of December 31, 2023 term loan indebtedness, excluding related discount, was $823.1 million, of which the Barclays credit facility term loans were $678.7 million and the Truist credit facility term loan was $144.4 million.
We rely on our information systems to perform functions critical to our ability to operate, including patient scheduling, billing, collections, image storage and image transmission. We also use information technology systems and networks in our operations and supporting departments such as marketing, accounting, finance, and human resources.
A significant portion of the communication between our personnel, patients, business partners, and suppliers depends on information technology. We rely on our information systems to perform functions critical to our ability to operate, including patient scheduling, billing, collections, image storage and image transmission.
While we maintain cyber liability insurance, our insurance may not be sufficient to protect against all losses we may incur if we suffer significant or multiple attacks. Our success depends in part on our key personnel and loss of key executives could adversely affect our operations.
If our data storage system was compromised, it could also give rise to unwanted media attention, materially damage our payor and physician relationships, and harm our business reputation. While we maintain cyber liability insurance, our insurance may not be sufficient to protect against all losses we may incur if we suffer significant or multiple attacks.
The Consolidated Appropriations Act of 2023, enacted on December 29, 2022, mitigated to a certain extent the reimbursement cuts, but did not completely eliminate them. Furthermore, absent further and more permanent intervention from Congress, CMS could propose and impose similar or more significant reimbursement cuts in the months and years ahead .
The January 18, 2024 continuing resolution passed by Congress and signed into law by President Biden did not contain provisions to stop or mitigate these reimbursement cuts. Furthermore, absent further and more permanent intervention from Congress, CMS could propose and impose similar or more significant reimbursement cuts in the months and years ahead .
The agreements with most of our radiology practices contain non-compete provisions; however the enforceability of these provisions is generally subject to a “reasonableness” standard determined by a court based on the facts and circumstances of the specific case at the time enforcement is sought.
Enforceability of a non-compete covenant is determined by a court based on all of the facts and circumstances of the specific case at the time enforcement is sought. For this reason, it is not possible to predict whether or to what extent a court will enforce the contracted radiology practices’ covenants.
Disruption or malfunction in our information systems could adversely affect our business. We rely on information technology systems to process, transmit and store electronic information. A significant portion of the communication between personnel, customers, business partners, and suppliers depends on information technology.
Cybersecurity threats and other disruption or malfunction in our information technology systems could adversely affect our business. We rely on information technology systems to process, transmit and store electronic information including legally-protected personal information, such as diagnostic image results and other patient health information, credit card and other financial information, insurance information, and personally identifiable information.
Some of our competitors may have, now or in the future, access to greater financial resources than we do and may have access to newer, more advanced equipment. If we are unable to successfully compete, our business and financial condition would be adversely affected.
If we are unable to successfully compete, our business and financial condition would be adversely affected. Technological change in our industry could reduce the demand for our services and require us to incur significant costs to upgrade our equipment.
Historically, we have experienced substantial growth through acquisitions that have increased our size, scope and geographic distribution. During the past two fiscal years, we have completed 24 acquisitions. These acquisitions have added 35 centers to our fixed-site outpatient diagnostic imaging services.
The future growth of our imaging business is partially dependent on our ability to continue to successfully integrate acquired businesses. Historically, we have experienced substantial growth through acquisitions that have increased our size, scope and geographic distribution of our imaging center business.
Removed
Continued turbulence in domestic and international markets and economies may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our patients. Patients may transition work, leaving insurance programs, or defer non-emergency procedures which could reduce overall demand for our services.
Added
Our labor costs have been, and we expect will continue to be, adversely affected by competition for staffing, the shortage of experienced healthcare professionals, and regulatory activity including changes in minimum wage laws. Our operations are dependent on the availability, efforts, abilities and experience of management and medical support personnel.
Removed
Our results of operations have recovered from the initial outbreak of COVID-19, but a further outbreak or similar pandemic event would negatively impact our results of operations.
Added
We compete with other healthcare providers in recruiting and retaining qualified employees; however, over the past several years, the healthcare industry has faced considerable workforce challenges, including shortages of skilled personnel and increased wage competition.
Removed
In addition, changes to statutes, regulations or regulatory policies or practices as a result of, in response to or otherwise relating to COVID-19, including the wind-down of the COVID-19 Public Health Emergency (PHE) and similar federal and state regulatory measures, could affect us in substantial and unpredictable ways.
Added
In some of the regions in which we operate, state or municipalities increased the applicable minimum wage, which has created more competition and, in some cases, higher labor costs. If prevailing wages continue to be driven higher, we could suffer increased employee turnover and increased costs, adversely affecting our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 357 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. We lease the premises at which these facilities are located and do not have options to purchase the facilities we rent.
Biggest changeIn addition, we lease approximately 36,700 square feet of warehouse space nationwide, which expire at various dates, including options, through December 31, 2028. 27 At December 31, 2023, we operated directly or indirectly through joint ventures with hospitals, 366 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.
We also have a regional office of approximately 39,000 square feet in Baltimore, Maryland under a lease, which including options, expires September 30, 2028. In addition, we lease approximately 36,700 square feet of warehouse space nationwide, which expire at various dates, including options, through December 31, 2028.
We also have a regional office of approximately 39,000 square feet in Baltimore, Maryland under a lease, which including options, expires September 30, 2028.
Our most common initial term varies in length from 5 to 15 years. Including renewal options negotiated with the landlord, we can have a total span of 10 to 35 years at the facilities we lease. We also lease smaller satellite X-Ray locations on mutually renewable terms, usually lasting one year.
We lease the premises at which these facilities are located and do not have options to purchase the facilities we rent. Our most common initial lease term varies in length from 5 to 15 years. Factoring in renewal options, we can have a total span of 10 to 35 years at the facilities we lease.
Rental increases can range from 1% to 10% on an annual basis, depending on the location and market conditions where we do business. As of December 31, 2022, total square footage operated directly or indirectly under lease, including medical office, administrative and warehouse locations, was approximately 2.8 million square feet.
As of December 31, 2023, total square footage operated directly or indirectly under lease, including medical office, administrative and warehouse locations, was approximately 2.7 million square feet. All leasing activity described relates solely to our Imaging Center segment, as our AI segment leasing activity is currently immaterial.
Removed
All leasing activity described relates solely to our Imaging Center segment, as our AI segment leasing activity is immaterial.
Added
We also lease smaller satellite X-Ray locations, usually for one year terms, that are renewable on mutual consent with the landlord. Rental increases can range from 1% to 10% on an annual basis, depending on the location and market conditions where we do business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are engaged from time to time in the defense of lawsuits arising out of the ordinary course and conduct of our business. We believe that the outcome of our current litigation will not have a material adverse impact on our business, financial condition and results of operations.
Biggest changeItem 3. Legal Proceedings From time to time we are engaged in the defense of lawsuits arising out of the ordinary course of our business. We do not believe that the outcome of our current litigation will have a material adverse impact on our business, financial condition and results of operations. However, the outcome of litigation is inherently uncertain.
Removed
However, we could be subsequently named as a defendant in other lawsuits that could adversely affect us. 28
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If one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results could be materially adversely affected. Item 4. Mine Safety Disclosures Not applicable. 28 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent that RadNet specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act. 30 ANNUAL RETURN PERCENTAGE Years Ending Company / Index 12/31/18 12/31/19 12/31/20 12/31/21 12/30/22 RadNet, Inc. 0.69 99.61 (3.6) 53.86 (37.46) S&P 500 Index (4.38) 31.49 18.4 28.71 (18.11) S&P Health Care Sector 6.47 20.82 13.45 26.13 (1.95) Base INDEXED RETURNS Years Ending Period Company / Index 12/29/17 12/31/18 12/31/19 12/31/20 12/31/21 12/30/22 RadNet, Inc. 100 100.69 200.99 193.76 298.12 186.44 S&P 500 Index 100 95.62 125.72 148.85 191.58 156.88 S&P Health Care Sector 100 106.47 128.64 145.93 184.07 180.47 Recent Sales of Unregistered Securities On November 1, 2022, we acquired a 75% controlling interest in Heart and Lung Imaging Limited in part by issuing 359,002 shares at $19.06 per share with a fair value of $6.8 million.
Biggest changeThis graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent that RadNet specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act. 29 ANNUAL RETURN PERCENTAGE Years Ending Company / Index 12/31/19 12/31/20 12/31/21 12/30/22 12/29/23 RadNet, Inc. 99.61 (3.60) 53.86 (37.46) 84.65 S&P 500 Index 31.49 18.40 28.71 (18.11) 26.29 S&P Health Care Sector 20.82 13.45 26.13 (1.96) 2.06 Base INDEXED RETURNS Years Ending Period Company / Index 12/31/18 12/31/19 12/31/20 12/31/21 12/30/22 12/29/23 RadNet, Inc. 100 199.61 192.43 296.07 185.15 341.89 S&P 500 Index 100 131.49 155.68 200.37 164.08 207.21 S&P Health Care Sector 100 120.82 137.07 172.89 169.51 173.00 Recent Sales of Unregistered Securities On December 12, 2023, we issued 64,569 shares of common stock to settle a milestone contingent liability as part of our purchase of Heart & Lung Imaging Limited.
Stock Performance Graph The following graph compares the yearly percentage change in cumulative total stockholder return of our common stock during the period from 2017 to 2022 with (i) the cumulative total return of the S&P 500 index and (ii) the cumulative total return of the S&P 500 – Healthcare Sector index.
Stock Performance Graph The following graph compares the yearly percentage change in cumulative total stockholder return of our common stock during the period from 2018 to 2023 with (i) the cumulative total return of the S&P 500 index and (ii) the cumulative total return of the S&P 500 – Healthcare Sector index.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Trading Market Our common stock is quoted on the NASDAQ Global Market under the symbol “RDNT”. Holders As of February 23, 2023, the number of holders of record of our common stock was 1,136.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Principal Trading Market Our common stock is quoted on the NASDAQ Global Market under the symbol “RDNT”. Holders As of February 27, 2024, the number of holders of record of our common stock was 1,001.
The comparison assumes $100 was invested on December 29, 2017 in our common stock and in each of the foregoing indices and the reinvestment of dividends through December 30, 2022. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
The comparison assumes $100 was invested on December 31, 2018 in our common stock and in each of the foregoing indices and the reinvestment of dividends through December 29, 2023. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
The shares of common stock were issued to the four holders of the outstanding equity of Heart and Lung Imaging Limited. The shares were issued without registration on the basis of the exemption for private placement transactions provided by Section 4(a)(2) of the Securities Act.
In each of the foregoing transactions, the shares of common stock issued without registration on the basis of the exemption for private placement transactions provided by Section 4(a)(2) of the Securities Act.
Added
The shares were ascribed a value of $2.3 million. On September 20, 2023, we issued 56,600 shares of common stock to settle a milestone contingent liability as part of our purchase of Heart & Lung Imaging Limited. The shares were ascribed a value of $1.6 million.
Added
On July 7, 2023, we issued 113,303 shares of common stock to settle the stock portion of a holdback contingent liability as part of our purchase of Quantib B.V.
Added
The shares were ascribed a value of $3.5 million. 30 On April 30, 2023, we issued 114,227 shares of common stock to settle a holdback contingent liability as part of our purchase of Aidence Holding B.V. The shares were ascribed a value of $4.0 million.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeThe following is a reconciliation of the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the years ended December 31, 2022, 2021, and 2020, respectively (in thousands): Years Ended December 31, 2022 2021 2020 Net income (loss) attributable to RadNet, Inc. common stockholders $ 10,650 $ 24,727 $ (14,840) Income Taxes 9,361 14,560 895 Interest Expense 50,841 48,830 45,882 Severance costs 946 744 4,353 Depreciation and amortization 115,877 96,694 86,795 Non-cash employee stock-based compensation 23,770 25,203 12,405 Loss on sale and disposal of equipment 2,529 1,246 1,200 Loss on impairment — — 4,170 Loss (gain) on extinguishment of debt and related expenses 731 6,044 (4,047) Other expenses 1,833 1,438 120 Non-cash change in fair value of interest rate hedge (39,621) (21,670) 2,528 Other adjustment to joint venture investment — (565) — Legal settlement and related expenses 2,197 831 — Lease abandonment charges — 19,675 — Non operational rent expenses 4,297 — — Transaction costs HLH, Aidence Holding B.V. & Quantib B.V 927 1,171 — Valuation adjustment for contingent consideration 47 — — Change in estimate related to refund liability 8,089 — — Adjusted EBITDA Including Losses from AI Segment and Provider Relief Funding $192,474 $218,928 $139,461 Provider relief funding — (9,110) (26,264) Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding $192,474 $209,818 $113,197 Adjusted EBITDA Losses from AI segment 16,575 2,121 1,757 Adjusted EBITDA excluding Losses from AI Segment and Provider Relief Funding $209,049 $211,939 $114,954 The following table is a reconciliation of GAAP net income for our AI Segment to Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020 respectively. 44 Twelve Months Ended December 31, 2022 2021 2020 Segment net loss $ (22,107) $ (5,060) $ (3,463) Stock Compensation 2,782 1,796 1,065 Depreciation & Amortization 6,353 520 400 Other operating loss 23 — — Other expense (income) (903) 622 241 Severance 20 — — Income taxes (2,743) — — Adjusted EBITDA AI Segment $ (16,575) $ (2,121) $ (1,757) : Liquidity and Capital Resources The following table is a summary of key balance sheet data as of December 31, 2022 and December 31, 2021 and income statement data for the twelve months ended December 31, 2022, 2021 and 2020 (in thousands): Balance Sheet Data for the period ended December 31, 2022 2021 2020 Cash and cash equivalents $ 127,834 $ 134,606 Accounts receivable 166,357 135,062 Working capital (exclusive of current operating lease liability) (41,932) 14,932 Stockholders' equity 491,452 346,157 Income Statement data for the twelve months ended December 31, Total revenue $ 1,430,061 $ 1,315,077 $ 1,071,840 Net income (loss) attributable to RadNet common stockholders 10,650 24,727 (14,840) We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations.
Biggest changeAdjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation and this metric, as presented, may not be comparable to other similarly titled measures of other companies. 43 The following is a reconciliation of the nearest comparable GAAP financial measure, net income, to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021, respectively (in thousands): Years Ended December 31, 2023 2022 2021 Net income attributable to RadNet, Inc. common stockholders $ 3,044 $ 10,650 $ 24,727 Income Taxes 8,473 9,361 14,560 Interest Expense 64,483 50,841 48,830 Severance costs 3,778 946 744 Depreciation and amortization 128,391 115,877 96,694 Non-cash employee stock-based compensation 26,785 23,770 25,203 Loss on sale and disposal of equipment 2,187 2,529 1,246 Loss on impairment 3,950 — — Loss on extinguishment of debt and related expenses — 731 6,044 Other (income) expenses (6,354) 1,833 1,438 Non-cash change in fair value of interest rate hedge 8,185 (39,621) (21,670) (Gain) loss on contribution of imaging centers into joint venture (16,808) — (565) Legal settlement and related expenses — 2,197 831 Lease abandonment charges 5,146 — 19,675 Non operational rent expenses 3,628 4,297 — Non-Capitalized R&D - DeepHealth Cloud OS & Generative AI 1,308 Transaction costs HLH, Aidence Holding B.V., Quantib B.V, and WhiteRabbit 222 927 1,171 Valuation adjustment for contingent consideration (4,075) 47 — Change in estimate related to refund liability — 8,089 — Adjusted EBITDA Including Losses from AI Segment and Provider Relief Funding $232,343 $192,474 $218,928 Provider relief funding — — (9,110) Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding $232,343 $192,474 $ 209,818 Adjusted EBITDA Losses from AI segment 12,765 16,575 2,122 Adjusted EBITDA excluding Losses from AI Segment and Provider Relief Funding $245,108 $209,049 $211,940 The following table is a reconciliation of GAAP net income for our AI Segment to Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021 respectively. 44 Twelve Months Ended December 31, 2023 2022 2021 Segment net loss $ (20,597) $ (21,456) $ (5,060) Stock Compensation 2,211 2,782 1,796 Depreciation & Amortization 7,615 6,354 520 Other operating loss (4) 23 — Other expense (income) 1,402 (903) 622 Severance 1,805 20 — Income taxes (1,955) (3,395) — Non-cash change to contingent consideration (7,191) — — Impairment of IPR&D intangible asset 3,950 — — Adjusted EBITDA AI Segment $ (12,765) $ (16,575) $ (2,122) Liquidity and Capital Resources The cash we generate from our core operations enables us to fund ongoing operations, our research and development for new products and technologies including our investment in AI, and acquisition or expansion of imaging centers.
As it relates to other centers, this service fee revenue is earned through providing the use of our diagnostic imaging equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and 47 office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.
As it relates to other centers, this service fee revenue is earned through providing the use of our diagnostic imaging 47 equipment and the provision of technical services as well as providing administration services such as clerical and administrative personnel, bookkeeping and accounting services, billing and collection, provision of medical and office supplies, secretarial, reception and transcription services, maintenance of medical records, and advertising, marketing and promotional activities.
Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition. These benefits include expanding the Company's AI capabilities to drive revenue growth. Quantib B.V. On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.
Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition. These benefits include expanding our AI capabilities to drive revenue growth. Quantib B.V. On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.
BUSINESS COMBINATION – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.
BUSINESS COMBINATIONS – When the qualifications for business combination accounting treatment are met, it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.
We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. We tested goodwill, trade name and IPR&D for impairment on October 1, 2022.
We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation. If multiple valuation methodologies are used, the results are weighted appropriately. We tested goodwill, trade name and IPR&D for impairment on October 1, 2023.
In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of January 1, 2021 through December 31, 2022. Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2021 through December 31, 2022.
In the discussion below same center metrics are based on imaging centers that were in operation throughout the period of January 1, 2022 through December 31, 2023. Excluded amounts relate to imaging centers that were acquired or divested between January 1, 2022 through December 31, 2023.
Advanced Radiology at Capital Region, LLC On June 15, 2022 we entered into Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation. ("Dimension"), an affiliate of the University of Maryland. The operation will provide multi-modality services out of two yet to be determined locations in the Largo, Maryland area.
On June 15, 2022 we formed Advanced Radiology at Capital Region, LLC, a partnership with Dimension Health Corporation, an affiliate of the University of Maryland. The operation will provide multi-modality services out of two yet to be determined locations in the Largo, Maryland area.
On a same center basis, the increase in revenue was largely attributable to product mix as advanced radiology procedures of MRI, PET, and CT expanded at combined 5.5% to provide the major portion of the revenue growth.
On a same center basis, the increase in revenue was largely attributable to product mix as advanced radiology procedures of MRI, PET, and CT expanded at combined 7.2% to provide the major portion of the revenue growth.
The division is led by DeepHealth, and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in The Netherlands.
The division is led by our DeepHealth, Inc. subsidiary and includes our acquisitions of Aidence Holding B.V. and Quantib B.V., both based in the Netherlands.
On November 1, 2022 we contributed eight of our imaging centers to ADRG with a carrying value of $12.7 million and recorded a loss of $0.5 million which was calculated as the difference between the fair value and carrying value of such imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers.
On November 1, 2022 we contributed eight of our imaging centers to ADRG of $12.7 million and recorded a loss of $0.5 million which was calculated as the difference between the transaction price and carrying value of such imaging centers which included equipment and other assets and an allocation of goodwill to such imaging centers.
The IPR&D asset relates primarily to an in-process project for a customer relationship management offering to manage patients that are found with Incidental Pulmonary Nodules and has not reached technological feasibility as of the acquisition date. The asset recorded relates to one project, and the Company expects to complete the project in the next twelve months.
The IPR&D asset relates primarily to an in-process project for a customer relationship management offering to manage patients that are found with Incidental Pulmonary Nodules and has not reached technological feasibility as of the acquisition date. The asset recorded relates to one project, and the Company originally expected to complete the project following twelve months of acquisition.
REVENUES – Our revenues generally relate to net patient fees received from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied.
REVENUES – Our revenues generally relate to net patient fees that we receive from various payors and patients themselves under contracts in which our performance obligations are to provide diagnostic services to the patients. Revenues are recorded during the period when our obligations to provide diagnostic services are satisfied.
The venture was initially capitalized with nominal amounts of $5.1 thousand for a 51% economic interest from us and $4.9 thousand from Dimension for a 49% economic interest. Simi Valley Imaging Group, LLC On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist").
The venture was initially capitalized with nominal amounts of $5.1 thousand for a 51% economic interest from us and $4.9 thousand from Dimension Health Corporation for a 49% economic interest. Simi Valley Imaging Group, LLC. On January 1, 2021 we formed the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services.
We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to exclude losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains, loss on de-consolidation of joint ventures and non-cash equity compensation.
We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to exclude losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains, loss on de-consolidation of joint ventures, gain on contribution of imaging centers into joint ventures, and non-cash equity compensation.
The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value of $25.9 million ii) cash of $11.8 million and iii) contingent consideration consisting of 113,303 shares with a fair value at the date of close of $3.0 million and cash of $1.6 million both to be released 18 months after acquisition subject to adjustment for any indemnification claims.
The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including (a) 965,058 shares of our common stock issued at $26.80 per share with a fair value of $25.9 million (b) cash of $11.8 million and (c) contingent consideration consisting of 113,303 shares with a fair value at the date of close of $3.0 million and cash of $1.6 million both to be released 18 months after acquisition subject to adjustment for any indemnification claims.
Amounts remaining to be collected on these agreements were $15.4 million and $17.7 million at December 31, 2022 and December 31, 2021, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital. Senior Credit Facilities: We maintain secured credit facilities with Barclays Bank PLC and with Truist.
Amounts remaining to be collected on these agreements were $14.3 million and $15.4 million at December 31, 2023 and December 31, 2022, respectively. We do not utilize factoring arrangements as an integral part of our financing for working capital. Senior Credit Facilities: We maintain secured credit facilities with Barclays Bank PLC and with Truist Bank.
Additional Information Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2022, 2021 and 2020 is included in the consolidated financial statements and notes thereto in this annual report.
Additional Information 48 Additional information concerning RadNet, Inc., including our consolidated subsidiaries, for each of the years ended December 31, 2023, 2022 and 2021 is included in the consolidated financial statements and notes thereto in this report.
Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $677.7 million and $513.8 million at December 31, 2022 and December 31, 2021, respectively.
Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. GOODWILL AND INDEFINITE LIVED INTANGIBLES – Goodwill totaled $679.5 million and $677.7 million at December 31, 2023 and December 31, 2022, respectively.
We have service agreements with various vendors under which they have agreed to be responsible for the maintenance and repair of a majority of our equipment for a fee that is based on the type and age of the equipment. Under these agreements, we are committed to minimum payments of approximately $43.3 million in 2023.
We have service agreements with various vendors under which they have agreed to be responsible for the maintenance and repair of a majority of our equipment for a fee that is based on the type and age of the equipment. Under these agreements, we are committed to minimum payments of approximately $30.5 million in 2024.
The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) contingent consideration of $11.9 million ($7.4 million in milestones to be settled in shares or cash at our election and a share holdback of $4.5 million) and iv) a settlement of a loan from RadNet of $1.5 million.
The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including (a) 1,117,872 shares of our common stock issued at $26.80 per share with a fair value of $30.0 million (b) cash of $1.8 million, (c) contingent consideration of $11.9 million ($7.4 million in milestones to be settled in shares or cash at our election and a share holdback of $4.5 million) and (d) a settlement of a loan from RadNet of $1.5 million.
Results of Operations The following table sets forth, for the periods indicated, the percentage that certain items in the statements of operations bears to net revenue for the years 2022, 2021 and 2020. 38 Years Ended December 31, 2022 2021 2020 REVENUE Service fee revenue 89.4 % 88.7 % 86.9 % Revenue under capitation arrangements 10.6 % 11.3 % 13.1 % Total Revenue 100.0 % 100.0 % 100.0 % Provider relief funding — % 0.7 % 2.5 % OPERATING EXPENSES Cost of operations, excluding depreciation and amortization 88.4 % 85.4 % 90.1 % Lease abandonment charges — % 1.5 % — % Depreciation and amortization 8.1 % 7.4 % 8.1 % Loss on sale and disposal of equipment 0.2 % 0.1 % 0.1 % Loss on impairment — % — % 0.4 % Severance costs 0.1 % 0.1 % 0.4 % Total operating expenses 96.8 % 94.4 % 99.1 % INCOME FROM OPERATIONS 3.2 % 6.3 % 3.3 % OTHER INCOME AND EXPENSES Interest expense 3.6 % 3.7 % 4.3 % Equity in earnings of joint ventures (0.7) % (0.8) % (0.7) % Non-cash change in fair value of interest rate hedge (2.8) % (1.6) % 0.2 % Loss (gain) on extinguishment of debt 0.1 % 0.5 % (0.4) % Other expenses 0.1 % 0.1 % — % Total other expenses 0.2 % 1.9 % 3.4 % INCOME (LOSS) BEFORE INCOME TAXES 3.0 % 4.5 % (0.1) % Provision for income taxes (0.7) % (1.1) % (0.1) % NET INCOME (LOSS) 2.3 % 3.3 % (0.2) % Net income attributable to noncontrolling interests 1.6 % 1.5 % 1.2 % NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.
Results of Operations The following table sets forth, for the periods indicated, the percentage that certain items in the statements of operations bears to net revenue for the years 2023, 2022 and 2021. 37 Years Ended December 31, 2023 2022 2021 REVENUE Service fee revenue 90.5 % 89.4 % 88.7 % Revenue under capitation arrangements 9.5 % 10.6 % 11.3 % Total Revenue 100.0 % 100.0 % 100.0 % Provider relief funding — % — % 0.7 % OPERATING EXPENSES Cost of operations, excluding depreciation and amortization 86.3 % 88.4 % 85.4 % Gain on contribution of imaging centers into joint venture (1.0) % — % — % Lease abandonment charges 0.3 % — % 1.5 % Depreciation and amortization 7.9 % 8.1 % 7.4 % Loss on sale and disposal of equipment and other 0.1 % 0.2 % 0.1 % Severance costs 0.2 % 0.1 % 0.1 % Total operating expenses 93.9 % 96.8 % 94.4 % INCOME FROM OPERATIONS 6.1 % 3.2 % 6.3 % OTHER INCOME AND EXPENSES Interest expense 4.0 % 3.6 % 3.7 % Equity in earnings of joint ventures (0.4) % (0.7) % (0.8) % Non-cash change in fair value of interest rate swaps 0.5 % (2.8) % (1.6) % Loss on extinguishment of debt and related expenses — % 0.1 % 0.5 % Other (income) expenses (0.4) % 0.1 % 0.1 % Total other expenses 3.7 % 0.2 % 1.9 % INCOME BEFORE INCOME TAXES 2.4 % 3.0 % 4.5 % Provision for income taxes (0.5) % (0.7) % (1.1) % NET INCOME 1.9 % 2.3 % 3.3 % Net income attributable to noncontrolling interests 1.7 % 1.6 % 1.5 % NET INCOME ATTRIBUTABLE TO RADNET, INC.
The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. RadNet contributed $0.3 million in assets for a 60.0% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40.0% economic interest.
The operation will offer multi-modality imaging services out of two locations in Ventura County, California. Total investment in the venture is $0.4 million. We contributed $0.3 million in assets for a 60.0% economic interest and Simi Valley Hospital and Health Services contributed assets totaling $0.1 million for a 40.0% economic interest.
COMMON STOCKHOLDERS 0.7 % 1.8 % (1.4) % Imaging Center Segment Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 We grow through a combination of organic growth as well as acquisitions and joint ventures.
COMMON STOCKHOLDERS 0.2 % 0.7 % 1.8 % Imaging Center Segment Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 We grow our imaging center business through a combination of organic growth as well as acquisitions and joint ventures.
The transaction was accounted for as the acquisition of a business with a total purchase consideration of approximately $31.9 million, including: i) shares with a fair value of $6.8 million (359,002 shares issued at $19.06 per share), ii) cash of $6.3 million and iii) contingent consideration of $10.8 million ($10.2 million in contingent milestone consideration and cash holdback of $0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims) and iv) noncontrolling interest of $8.0 million.
The transaction was accounted for as the acquisition of a business with a total purchase consideration of approximately $31.9 million, including: (a) shares of our common stock with a fair value of $6.8 million 34 (359,002 shares issued at $19.06 per share), (b) cash of $6.3 million, (c) contingent consideration of $10.8 million ($10.2 million in contingent milestone consideration and cash holdback of $0.6 million to be issued 24 months after acquisition subject to adjustment for any indemnification claims) and (d) noncontrolling interest of $8.0 million.
The cash flows were based on estimated earnings from existing customers, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. 35 Artificial Intelligence Segment Aidence Holding B.V.
The cash flows were based on estimated earnings from existing customers, and the discount rate applied was benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. Artificial Intelligence Segment Aidence Holding B.V. On January 20, 2022, we acquired all the equity interests of Aidence Holding B.V.
As a result of the transaction, we recognized a gain of $6.6 million to additional paid in capital and retained a 65% controlling economic interest in FCR and Hospital retains an $11.1 million or 35% noncontrolling economic interest in FCR.
As a result of the transaction, we recognized a gain of $6.6 million to additional paid in capital and retained a 65% controlling economic interest in FCR and Frederick Health Hospital, Inc. retains an $11.1 million or 35% noncontrolling economic interest in FCR. Advanced Radiology at Capital Region, LLC.
Equity in earnings from unconsolidated joint ventures For the twelve months ended December 31, 2022 we recognized equity in earnings from unconsolidated joint ventures of $10.4 million versus $11.0 million for the twelve months ended December 31, 2021, a decrease of $0.6 million or 5.3%.
Equity in earnings from unconsolidated joint ventures For the twelve months ended December 31, 2023 we recognized equity in earnings from unconsolidated joint ventures of $6.4 million versus $10.4 million for the twelve months ended December 31, 2022, a decrease of $4.0 million or 38.1%.
Based on our assessment recognition of the revenue previously recognized remained appropriate. ACCOUNTS RECEIVABLE – Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers.
ACCOUNTS RECEIVABLE – Substantially all of our accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Services are generally provided pursuant to one-year contracts with healthcare providers.
Acquisitions Imaging Center Segment Radiology Practice Acquisitions: 33 During 2022 and 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in the Delaware, Maryland, New Jersey and New York markets.
Acquisitions Imaging Center Segment Radiology Imaging Center Asset Acquisitions: During the years ended 2023, 2022 and 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses. The primary reason for these acquisitions was to strengthen our presence in many of our markets.
Indefinite lived intangible assets were $24.1 million at December 31, 2022 and $20.6 million at December 31, 2021 and are associated with the value of certain trade name intangibles and in process research and development (IPR&D). Goodwill, trade name intangibles and IPR&D are recorded as a result of business combinations.
Indefinite lived intangible assets were $9.0 million at December 31, 2023 and $24.1 million at December 31, 2022 and are associated with the value of certain trade name intangibles and IPR&D. Goodwill, trade name intangibles and IPR&D are recorded as a result of business combinations.
Non-GAAP Financial Measures We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA and Free Cash Flow assist us in measuring our core operations from period to period as well as our cash generated from operations and ability to service our debt obligations.
Non-GAAP Financial Measures We use both GAAP and non-GAAP metrics to measure our financial results. We believe that, in addition to GAAP metrics, non-GAAP metrics such as Adjusted EBITDA assist us in measuring our core operations from period to period.
Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or 43 as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.
Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and Adjusted EBITDA should not be considered in isolation or as alternatives to net income, or other financial statement data presented in the consolidated financial statements as an indicator of financial performance.
The following table shows our centers in operation at year end and revenues for the years ended December 31, 2022, 2021 and 2020: Years Ended December 31, 2022 2021 2020 Centers in operation 357 347 331 Total revenue (millions) $ 1,430 $ 1,315 $ 1,072 Our revenue is derived from a diverse mix of payors, including private payors, managed care capitated payors and government payors.
The following table shows our imaging centers in operation at year end and revenues for the years ended December 31, 2023, 2022 and 2021: Years Ended December 31, 2023 2022 2021 Centers in operation 366 357 347 Total revenue (millions) $ 1,617 $ 1,430 $ 1,315 Our revenue is derived from a diverse mix of payors, including private payors and commercial insurance companies, managed care capitated payors, and government payors such as Medicare and Medicaid.
During 2002 we refinanced our Truist term loan which added an additional $108.0 million in obligations to our balance sheet in the fourth quarter. Based on recent increases in global interests rates, we expect the effective interest rates on our senior credit facilities, and our related interest expense, to continue to rise in the near term.
During 2022 we refinanced our Truist term loan which added an additional $108.0 million in obligations to our balance sheet in the fourth quarter. Based on recent Federal Reserve interest rate decisions, we expect the effective interest rates on our senior credit facilities, and the related interest expense, to stabilize in the near term.
As it relates to the Group, this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees.
As it relates to the Group (as defined in Note 1 Nature of Business included in the notes to our consolidated financial statements), this service fee revenue includes payments for both the professional medical interpretation revenue recognized by them as well as the payment for all other aspects related to our providing the imaging services, for which we earn management fees.
We also had no balance under our $50.0 million Truist 46 Revolving Credit Facility related to our consolidated subsidiary NJIN at December 31, 2022, and with no letters of credit reserved against the facility, the full amount was available to draw upon.
The remaining $187.4 million of our Barclays revolving credit facility 46 was available to draw upon as of December 31, 2023. We also had no balance under our $50.0 million Truist revolving credit facility at December 31, 2023, and with no letters of credit reserved against the facility, the full amount was available to draw upon.
Operating Expenses Total operating expenses for the twelve months ended December 31, 2022 increased approximately $117.8 million, or 9.5%, from $1.24 billion for the twelve months ended December 31, 2021 to $1.35 billion for the twelve months ended December 31, 2022.
Operating Expenses Total operating expenses for the twelve months ended December 31, 2023 increased approximately $130.8 million, or 9.7%, from $1.35 billion for the twelve months ended December 31, 2022 to $1.48 billion for the twelve months ended December 31, 2023.
See Note 8 Credit Facilities and Notes Payable included in the notes to our consolidated financial statements. 41 Lease abandonment charges We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers in an effort to maximize utilization rates.
See Note 8, Credit Facilities and Notes Payable, in the notes accompanying our consolidated financial statements included in this report. Lease abandonment charges We closely monitor patient levels at our imaging centers and occasionally divest or shut down centers to maximize utilization rates. During the end of 2023, we experienced lower utilization at two imaging centers.
For more information on our secured credit facilities see Note 8 to our consolidated financial statements in this annual report.
For more information on our secured credit facilities see Note 8, Credit Facilities and Notes Payable, in the notes accompanying our consolidated financial statements in this report.
We accounted for the transaction as an adjustment to our equity investment for the value of the assets contributed. To maintain our 49% economic interest in ADRG, we received a distribution from the partnership of $4.5 million to reduce our overall investment to $8.3 million.
To maintain our 49% economic interest in ADRG, we received a distribution from the partnership of $4.5 million to reduce our overall investment to $8.3 million.
Our service fee revenue, net of contractual allowances and discounts, implicit price concessions, and revenue under capitation arrangements for the years ended December 31, 2022, 2021 and 2020 are summarized in the following table (in thousands): 32 In Thousands 2022 2021 2020 Commercial insurance $ 785,128 $ 743,462 $ 584,035 Medicare 311,124 280,911 217,928 Medicaid 38,279 34,731 25,619 Workers' compensation/personal injury 51,339 44,235 33,478 Other patient revenue 31,849 19,398 25,314 Management fee revenue 22,235 19,630 11,253 Software and teleradiology 14,238 10,525 10,798 Other 19,428 12,436 23,297 Revenue under capitation arrangements 152,045 148,334 140,118 Imaging center segment revenue 1,425,665 1,313,662 1,071,840 AI segment revenue 4,396 1,415 — Total revenue $ 1,430,061 $ 1,315,077 $ 1,071,840 We typically experience some seasonality to our business.
Our service fee revenue, net of contractual allowances and discounts, implicit price concessions, and revenue under capitation arrangements for the years ended December 31, 2023, 2022 and 2021 are summarized in the following table (in thousands): 32 In Thousands 2023 2022 2021 Commercial insurance $ 897,948 $ 785,128 $ 743,462 Medicare 363,863 311,124 280,911 Medicaid 43,175 38,279 34,731 Workers' compensation/personal injury 47,364 51,339 44,235 Other patient revenue 42,249 31,849 19,398 Management fee revenue 17,936 22,235 19,630 Software and teleradiology 18,082 14,238 10,525 Other 20,111 19,428 12,436 Revenue under capitation arrangements 153,433 152,045 148,334 Imaging center segment revenue 1,604,161 1,425,665 1,313,662 AI segment revenue 12,469 4,396 1,415 Total revenue $ 1,616,630 $ 1,430,061 $ 1,315,077 We typically experience some seasonality to our business.
Kelly MD acquisitions consisted of various subsidiaries purchased separately. Heart and Lung Imaging Limited On November 1, 2022, we acquired a 75% controlling interest in Heart and Lung Imaging Limited (“HLI”). HLI is a teleradiology concern which operates in the United Kingdom with the National Healthcare Service to screen high risk populations for cardiac and lung conditions.
Heart & Lung Imaging Limited. On November 1, 2022, we acquired a 75% controlling interest in Heart & Lung Imaging Limited (“HLI”). HLI is a teleradiology concern which operates in the United Kingdom with the National Healthcare Service to screen high risk populations for cardiac and lung conditions. HLI’s operations are included in our imaging center segment for reporting purposes.
The cash flows were based on 36 estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The developed technology consists of artificial intelligence powered applications for neurological and prostate imaging scans and reporting.
The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.
See “Liquidity and Capital Resources” below for more details on our credit facilities. See the Derivative Instruments section of Note 2 to the consolidated financial statements included in this annual report on Form 10-K and Item 7A, Quantitative and Qualitative Disclosure About Market Risk below for more details on our derivative transactions.
See the Derivative Instruments section of Note 2, Summary of Significant Accounting Policies, in the notes accompanying the consolidated financial statements included in this report and Item 7A — "Quantitative and Qualitative Disclosure About Market Risk" below for more details on our derivative transactions.
Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or one-time events that take place during the period.
Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries, and is adjusted for non-cash or one-time events that take place during the period. Adjusted EBITDA is a non-GAAP financial measure used as an analytical indicator by us and the healthcare industry to assess business performance.
As a result of this transaction, we recorded $2.4 million in current assets, $0.1 million in property and equipment, $21.3 million in intangible assets (including developed technology of $19.6 million and IPR&D of $0.7 million), $0.7 million in current liabilities, $6.7 million in long-term debt and deferred tax liabilities, and $26.4 million in goodwill.
As a result of this transaction, we recorded $2.4 million in current assets, $0.1 million in property and equipment, $21.3 million in intangible assets (including developed technology of $19.6 million and IPR&D of $0.7 million), $0.7 million in current liabilities, $6.7 million in long-term debt and deferred tax liabilities, and $26.4 million in goodwill. 35 In performing the purchase price allocation, we considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of the Quantib business.
No observable price changes or impairment in our investment was noted for the year ended December 31, 2022. Joint venture investment contributions to Arizona Diagnostic Radiology Group During the years ended December 31, 2022 and 2021, we made an additional equity contributions of $1.4 million each year to Arizona Diagnostic Radiology Group ("ADRG", our joint venture with Dignity Health).
Joint venture investment contributions to Arizona Diagnostic Radiology Group During the years ended December 31, 2023 and 2022, we made additional equity contributions of $2.4 million and $1.4 million, respectively, to Arizona Diagnostic Radiology Group ("ADRG", our joint venture with Dignity Health).
The following table sets forth our cost of operations and total operating expenses for the twelve months ended December 31, 2022 and 2021 (in thousands): Years Ended December 31, 2022 2021 Salaries and professional reading fees, excluding stock-based compensation $ 778,586 $ 683,772 Stock-based compensation 20,988 23,407 Building and equipment rental 123,058 121,924 Medical supplies 68,712 56,423 Other operating expenses * 249,249 232,416 Cost of operations 1,240,593 1,117,942 Depreciation and amortization 109,524 96,173 Lease abandonment charges — 19,675 Loss on sale and disposal of equipment 2,506 1,246 Severance costs 926 744 Total operating expenses $ 1,353,549 $ 1,235,780 * Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecommunications, utilities, marketing, travel and other expenses.
The following table sets forth our cost of operations and total operating expenses for the twelve months ended December 31, 2023 and 2022 (in thousands): Years Ended December 31, 2023 2022 Salaries and professional reading fees, excluding stock-based compensation $ 860,464 $ 778,586 Stock-based compensation 24,575 20,988 Building and equipment rental 117,660 123,150 Medical supplies 86,213 68,712 Other operating expenses * 282,124 249,157 Cost of operations 1,371,036 1,240,593 Depreciation and amortization 120,776 109,524 Gain on contribution of imaging centers into joint venture (16,808) — Lease abandonment charges 5,147 — Loss on sale and disposal of equipment 2,191 2,506 Severance costs 1,972 926 Total operating expenses $ 1,484,314 $ 1,353,549 * Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecommunications, utilities, marketing, travel and other expenses.
Deferred financing costs on our revolving credit lines at December 31, 2022, net of accumulated amortization, totaled $2.3 million, with $1.7 million related to Barclays and $0.6 million related to Truist.
As of December 31, 2023, we were in compliance with all covenants under our credit facilities. Deferred financing costs on our revolving credit lines at December 31, 2023, net of accumulated amortization, totaled $1.6 million, with $1.1 million related to the Barclays revolving credit facility and $0.5 million related to the Truist revolving credit facility.
Medical supplies In Thousands Year Ended December 31, Medical Supplies Expense 2022 2021 $ Increase/(Decrease) % Change Total $68,712 $56,423 $12,289 21.8% Same Center $62,274 $52,872 $9,402 17.8% Excluded $6,438 $3,551 — — Increased medical supplies expense corresponds to the 5.5% growth in advanced radiology volumes as noted above combined with price increases for contrast agents and higher utilization of isotopes employed in PET and CT procedures.
Medical supplies In Thousands Year Ended December 31, Medical Supplies Expense 2023 2022 $ Increase/(Decrease) % Change Total $86,213 $68,712 $17,501 25.5% Same Center $79,550 $64,872 $14,678 22.6% Excluded $6,663 $3,840 — — Increased medical supplies expense was related to the 7.2% growth in advanced radiology volumes noted above, combined with price increases for contrast agents and higher utilization of isotopes employed in PET and CT procedures.
These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers.
We have entered into factoring agreements with various institutions and sold certain accounts receivable under non-recourse agreements in exchange for notes receivables from the buyers. These transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers.
We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our senior secured credit facilities or through new equity or debt issuances. 45 We and our subsidiaries or affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.
We and our subsidiaries or affiliates may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise.
Other operating expenses In Thousands Year Ended December 31, Other Operating Expenses 2022 2021 $ Increase/(Decrease) % Change Total $249,249 $232,416 $16,833 7.2% Same Center $224,174 $214,488 $9,684 4.5% Excluded $25,075 $17,928 — — The rise in other operating expenses is attributable to additional professional fees associated with our acquisition activity, contractor services, equipment and maintenance and software upgrades all in support of our expansion accompanied with increased procedure volumes.
Other operating expenses In Thousands Year Ended December 31, Other Operating Expenses 2023 2022 $ Increase/(Decrease) % Change Total $282,124 $249,157 $32,967 13.2% Same Center $259,164 $240,084 $19,078 7.9% Excluded $22,960 $9,073 — — The rise in other operating expenses is attributable to additional professional fees associated with our acquisition activity, contractor services, equipment and maintenance and software upgrades all in support of our expansion and increase in procedure volumes.
The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 50% to 55%.
As part of the purchase price allocation, we determined the identifiable intangible assets are developed technology, IPR&D, trade names, and customer relationships. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 50% to 55%.
Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients. Integral to the imaging center business is our software arm headed by eRAD, Inc., which sells computerized systems that distribute, display, store and retrieve digital images.
Our imaging centers centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.
Sale of ownership interest in a majority owned subsidiary Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC.
We recorded a gain of $16.8 million, within (gain) on contribution of imaging centers into joint venture in our consolidated statement of operations representing the difference between the fair value and carrying value of the business contributed. 36 Sale of ownership interest in a majority owned subsidiary Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC.
Sources and Uses of Cash The following table summarizes key components of our sources and uses of cash for the twelve months ended December 31, in thousands: Cash Flow Data December 31, 2022 December 31, 2021 December 31, 2020 Cash provided by operating activities $ 146,417 $ 149,491 $ 233,759 Cash used in investing activities (246,949) (221,511) (126,244) Cash provided by (used in) financing activities 93,647 104,673 (45,561) Cash provided by operating activities for the period ended December 31, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.
Sources and Uses of Cash The following table summarizes key components of our sources and uses of cash for the twelve months ended December 31, in thousands: 45 Cash Flow Data 2023 2022 2021 Cash provided by operating activities $ 220,863 $ 146,417 $ 149,491 Cash used in investing activities (201,470) (246,949) (221,511) Cash provided by financing activities 195,635 93,647 104,673 Cash provided by operating activities for the period ended December 31, 2023 included $261.1 million in net income reconciling adjustments and $40.3 million change in assets and liabilities.
Subsidiary activity Formation of majority owned subsidiaries Frederick County Radiology, LLC On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc. ("Hospital"). The operation offers multi-modality services out of six locations in Frederick, Maryland.
On April 1, 2022 we formed Frederick County Radiology, LLC ("FCR"), a partnership with Frederick Health Hospital, Inc. The operation offers multi-modality services out of six locations in Frederick, Maryland. We contributed the operations of four centers to the enterprise and Frederick Health Hospital, Inc. contributed $5.4 million in fixed assets, $3.0 million in equipment, and $11.0 million in goodwill.
We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands): 2022: Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Right of Use Liabilities IFRC LLC*^ 1/1/2022 8,200 2,910 1,703 5,271 — 19 (1,703) IFRC LLC*^ 1/1/2022 4,800 2,103 857 2,697 — — (857) Heart and Lung Imaging Limited+ 11/1/2022 32,000 — — 16,200 15,800 — — Montclair Radiological Associates, P.A.*# 10/1/2022 94,877 16,414 4,665 79,690 400 (2,168) (4,124) Chelsea Dignostic Radiology, P.C.* 12/1/2022 2,800 568 — 2,132 100 — — North Jersey Imaging Center, LLC* 12/9/2022 104 20 — 55 25 4 — $142,781 $22,015 $7,225 $106,045 $16,325 $(2,145) $(6,684) *Fair Value Determination is Final ^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC. # Montclair Radiological Associates includes a liability for $1.2 million in contingent consideration. +See detailed description of the Heart and Lung Imaging Limited acquisition below. 2021: 34 Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities Personal Health Imaging PLLC* 2/1/2021 2,995 576 608 2,355 50 14 (608) ZP Elmont LLC* 2/1/2021 2,194 1,112 — 1,005 50 27 — ZP Freeport LLC* 2/1/2021 6,065 4,668 — 1,328 40 29 — Broadway Medical Imaging LLC* 2/1/2021 1,155 1,076 446 6 50 23 (446) 3235 Hempstead LLC* 2/1/2021 9,386 5,667 — 3,649 70 — — SLZM Realty LLC* 2/1/2021 13,671 4,617 — 8,974 80 — — 2012 Sunrise Merrick LLC* 2/1/2021 11,428 2,741 335 8,617 70 — (335) ZP Bayside LLC* 3/1/2021 3,545 3,385 2,191 40 50 70 (2,191) ZP Laurelton LLC* 3/1/2021 2,658 2,530 1,418 32 50 46 (1,418) ZP Smith LLC* 3/1/2021 3,978 3,581 2,214 347 50 — (2,214) ZP 907 Northern LLC* 4/1/2021 562 507 1,817 5 50 — (1,817) William M.
We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands): 33 2023: Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Right of Use Liabilities C.C.D.G.L.R. & S Services Inc.* 1/1/2023 3,500 435 1,689 3,015 50 — (1,689) Southern California Diagnostic Imaging, Inc.* 1/1/2023 1,815 466 1,184 1,272 50 27 (1,184) Inglewood Imaging Center, LLC* 2/1/2023 2,600 877 1,188 1,658 50 15 (1,188) Ramapo Radiology Associates, P.C.* 2/1/2023 2,000 1,663 3,775 229 100 8 (3,775) Madison Radiology Medical Group, Inc.* 4/1/2023 250 100 — 150 — — — Delaware Diagnostic Imaging, P.A.* 8/1/2023 600 401 337 149 50 — (337) Total $10,765 $3,942 $8,173 $6,473 $300 $50 $(8,173) *Fair Value Determination is Final 2022: Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Right of Use Liabilities IFRC LLC*^ 1/1/2022 8,200 2,910 1,703 5,271 — 19 (1,703) IFRC LLC*^ 1/1/2022 4,800 2,103 857 2,697 — — (857) Heart & Lung Imaging Limited+ 11/1/2022 32,000 — — 16,200 15,800 — — Montclair Radiological Associates, P.A.*# 10/1/2022 94,877 16,414 4,665 79,690 400 (2,168) (4,124) Chelsea Dignostic Radiology, P.C.* 12/1/2022 2,800 568 — 2,132 100 — — North Jersey Imaging Center, LLC* 12/9/2022 104 20 — 55 25 4 — Total $142,781 $22,015 $7,225 $106,045 $16,325 $(2,145) $(6,684) *Fair Value Determination is Final ^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC. # Montclair Radiological Associates includes a liability for $1.2 million in contingent consideration. +See detailed description of the Heart & Lung Imaging Limited acquisition below.
The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The developed technology consists of artificial intelligence powered applications for lung nodule management and early lung cancer diagnosis and reporting.
The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The useful lives for the developed technology asset was set at seven years, customer relationships three years, and trade names seven years.
For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our consolidated financial statement included in this annual report on Form 10-K..
Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence. For further financial information about these segments, see Note 5, Segment Reporting, in the notes accompanying our consolidated financial statements included in this report.
Included in our consolidated balance sheets at December 31, 2022 are $851.7 million of total term loan debt (net of unamortized discounts of $12.4 million) displayed below in thousands: Face Value Discount Total Carrying Value Barclays First Lien Term Loans $ 714,125 $ (11,127) $ 702,998 Truist Term Loan Agreement 150,000 (1,254) 148,746 Total Term Loans $ 864,125 $ (12,381) $ 851,744 We had no outstanding balance under our $195.0 million Barclays Revolving Credit Facility at December 31, 2022 and had reserved $7.6 million for certain letters of credit.
Included in our consolidated balance sheets at December 31, 2023 are $813.0 million of total term loan debt (net of unamortized discounts of $10.0 million) displayed below in thousands: Face Value Discount Total Carrying Value Barclays Term Loans $ 678,687 $ (9,041) $ 669,646 Truist Term Loan 144,375 (990) 143,385 Total Term Loans $ 823,062 $ (10,031) $ 813,031 We had no outstanding balance under our $195.0 million Barclays revolving credit facility at December 31, 2023 and had reserved $7.6 million for certain letters of credit.
Salaries and professional reading fees, excluding stock-based compensation and severance In Thousands Year Ended December 31, Salaries and Professional Fees 2022 2021 $ Increase/(Decrease) % Change Total $778,586 $683,772 $94,814 13.9% Same Center $709,525 $639,124 $70,401 11.0% Excluded $69,061 $44,648 — — Similar to the prior year, growth in procedure volumes precipitated increases in salary expenses both to meet additional professional staffing needs and retain our skilled work force in the current tight labor market.
Salaries and professional reading fees, excluding stock-based compensation and severance In Thousands Year Ended December 31, Salaries and Professional Fees 2023 2022 $ Increase/(Decrease) % Change Total $860,464 $778,586 $81,878 10.5% Same Center $805,096 $757,989 $47,107 6.2% Excluded $55,368 $20,597 — — Similar to the prior year, growth in procedure volumes precipitated increases in salary expenses to meet additional professional staffing needs and we increased salaries as we seek to retain our skilled work force in the current tight labor market.
Post the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain tangible and intangible business assets for purchase consideration of approximately $5.2 million. 37 Equity Investments Medic Vision, based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans.
Following the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain tangible and intangible business assets for purchase consideration of approximately $5.2 million.
Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition. These benefits include expanding the Company's AI capabilities to drive revenue growth.
The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. Factors contributing to the recognition of the amount of goodwill were primarily based on anticipated strategic and synergistic benefits that are expected to be realized from the acquisition.
See Note 4, Acquisitions, Dispositions and Business Venture Activity and Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this annual report on Form 10-K for further information.
Acquisitions, Equity Investments and Joint Venture Activity The following discussion summarizes certain details concerning our acquisition or disposition of centers, our equity investments and our joint venture transactions. See Note 4, Business Combinations and Related Activity and Note 2, Summary of Significant Accounting Policies, in the notes accompanying our consolidated financial statements included in this report for further information.
The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million. The Truist credit facilities are comprised of a term loan and a revolving credit facility of $50.0 million. As of December 31, 2022, we were in compliance with all covenants under our credit facilities.
The Barclays credit facilities are comprised of term loans and a revolving credit facility of $195.0 million. The Truist credit facilities relate to our subsidiary New Jersey Imaging Network LLC, and are comprised of a term loan and a revolving credit facility of $50.0 million.
The lease abandonment charges include the impairment of associated right of use assets of $12.6 million and write off of related leasehold improvements of approximately $7.1 million. Impairment Charges During 2020, we ceased employing certain indefinite lived trade names with a total value of $4.2 million and they were written off in full.
The lease abandonment charges include the impairment of associated right-of-use assets of $2.7 million and write off of related leasehold improvements of approximately $2.5 million.
Total Revenue inclusive of Provider Relief Funding for 2021 In Thousands Year Ended December 31, Revenue 2022 2021 $ Increase/(Decrease) % Change Total Revenue $1,425,665 $1,322,772 $102,893 7.8% Same Center Revenue $1,275,333 $1,239,587 $35,746 2.9% Excluded $150,333 $83,185 — — 39 Overall revenue change was driven by procedure volume growth of 2.7% compared to the same period in the prior year.
Total Revenue In Thousands Year Ended December 31, Revenue 2023 2022 $ Increase/(Decrease) % Change Total Revenue $1,604,161 $1,425,665 $178,496 12.5% Same Center Revenue $1,465,076 $1,372,134 $92,942 6.8% Excluded $139,085 $53,531 — — 38 Overall revenue change was driven by procedure volume growth of 5.7% compared to the same period in the prior year.
Recent Accounting Standards 48 See Note 3, Recent Accounting and Reporting Standards to the consolidated financial statements included in this annual report for further information.
Our annual impairment test as of October 1, 2023 noted no other impairment, and we have not identified any indicators of impairment through December 31, 2023. Recent Accounting Standards See Note 3, Recent Accounting Standards, in the notes accompanying the consolidated financial statements included in this report for further information.
At December 31, 2022, we operated directly or indirectly through joint ventures with hospitals, 357 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence.
At December 31, 2023, we operated directly or indirectly through joint ventures with hospitals, 366 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York. Internationally, our subsidiary Heart & Lung Imaging Limited, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service.
See Note 8 Credit Facilities and Notes Payable included in this annual report on Form 10-K. 42 AI Segment Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with a current emphasis on brain, breast, prostate, and pulmonary diagnostics. We are developing our AI segment initially through acquisition activity.
AI Segment Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with a current emphasis on breast, prostate, and lung cancer diagnostics.
Cash provided by financing activities for the twelve months ended December 31, 2022 was related mainly to the refinancing of our Truist term loan obligations with the Second Amended and Restated Revolving Credit and Term Loan Agreement on October 10, 2023.
Cash provided by financing activities for the twelve months ended December 31, 2023 related primarily to a secondary public offering of our common stock, offset by payments including prepayments on our term loan, and payments of contingent consideration on recent acquisition transactions.
Additional segment operating and non operating expenses: In Thousands Year Ended December 31, 2022 2021 $ Increase/(Decrease) % Change Depreciation and Amortization $109,524 $96,173 $13,351 13.9% Loss on disposal of equipment and other $2,506 $1,246 $1,260 nm Non-cash change in fair value of interest rate swaps ($39,621) ($21,670) $(17,951) nm Other expenses* $3,467 $6,859 $(3,393) nm Severance $926 $744 $183 24.5% nm=not meaningful * Other expenses in 2022 and 2021 included approximately $0.7 million and $6.0 million of debt extinguishment and restructuring charges, respectively, which related to refinancing of our credit facilities with Truist in 2022 and Barclays in 2021.
Additional segment operating and non operating expenses: In Thousands Year Ended December 31, 2023 2022 $ Increase/(Decrease) % Change Depreciation and Amortization $120,776 $109,524 $11,252 10.3% Loss on disposal of equipment and other $2,191 $2,506 ($315) (12.6)% (Gain) Loss on contribution of imaging centers into joint venture ($16,808) — ($16,808) nm Non-cash change in fair value of interest rate swaps $8,185 ($39,621) $47,806 (120.7)% Other (income) expenses ($7,756) $3,467 ($11,223) (323.7)% Severance $1,972 $926 $1,046 113.0% nm=not meaningful The increase in depreciation expense was the result of our higher depreciable asset base.
Internationally, our subsidiary Heart and Lung Imaging LLC, provides teleradiology services for remote interpretation of images on behalf of providers within the framework of the United Kingdom's National Health Service. We have also established an Artificial Intelligence (AI) division, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images.
Integral to the imaging center business is our software arm headed by eRad, Inc., which sells computerized systems that distribute, display, store and retrieve digital images. We have also established an Artificial Intelligence (AI) business, that develops and deploys AI suites to enhance radiologist interpretations of breast, lung and prostate images.
We believe our payor diversity mitigates our exposure to possible unfavorable reimbursement trends within any one payor class. In addition, our experience with capitation arrangements over the last several years has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable stream of revenue.
We believe our payor diversity mitigates our exposure to possible unfavorable reimbursement trends within any one payor class.
Interest expense In Thousands Year Ended December 31, Interest Expense 2022 2021 $ Increase/(Decrease) % Change Total Interest Expense $50,841 $48,830 $2,011 4.1% Cash Paid for Interest $39,151 $29,042 $10,109 34.8% The rise in adjusted interest expense is attributable to a higher overall loan balances in combination with increased variable interest rates paid on those balances compared to the same period in the prior year.
Interest expense In Thousands Year Ended December 31, Interest Expense 2023 2022 $ Increase/(Decrease) % Change Total Interest Expense $64,483 $50,841 $13,642 26.8% Interest related to derivatives* $(9,752) $7,806 Interest related to amortization** $2,987 $2,693 Adjusted Interest Expense*** $71,248 $40,342 $30,906 76.6% *Includes payments from 2019 swaps **Includes noncash amortization of deferred loan costs and discount on issuance of debt ***Includes interest related to our term loans, revolving credit line, notes, and other The rise in adjusted interest expense is attributable to higher overall loan balances in combination with increased variable interest rates paid on those balances in comparison to the same period in the prior year.
Stock-based compensation Stock-based compensation decreased $2.4 million, or 10.3%, to approximately $21.0 million for the twelve months ended December 31, 2022 compared to $23.4 million for the twelve months ended December 31, 2021.
For the twelve months ended December 31, 2023, we recognized net income attributable to noncontrolling interests of $27.3 million versus $23.0 million for the twelve months ended December 31, 2022, an increase of $4.3 million.
The breakdown of revenue and expenses of the segment for the twelve months ended December 31, 2022 and 2021 are as follows: In Thousands Twelve Months Ended December 31, 2022 2021 $ Increase/(Decrease) Statement of Operations Revenue $4,396 $1,415 $2,981 Salaries and Wages $15,799 $2,938 $12,861 Stock compensation 2,782 1,796 986 Other operating 5,171 599 4,572 Depreciation & Amort. 6,353 520 5,833 Other operating loss 23 — 23 Severance 20 — 20 Total operating expenses 30,149 5,853 24,296 Loss from Operations (25,753) (4,438) (21,315) Other (income) expense (903) 622 (1,525) Income before taxes (24,850) (5,060) (19,790) Income taxes (2,743) — (2,743) Segment net loss ($22,107) ($5,060) ($17,047) Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 For the comparison of results of operations for the year ended December 31, 2021 to the year ended December 31, 2020, please see Item 7, Management's Discussion and Analysis of Financial Condition and Operations in our Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.
The breakdown of revenue and expenses of the segment for the twelve months ended December 31, 2023 and 2022 are as follows: 42 In Thousands Twelve Months Ended December 31, 2023 2022 $ Increase/(Decrease) Statement of Operations Revenue $12,469 $4,396 $8,073 Salaries and Wages $18,168 $15,799 $2,369 Stock compensation 2,211 2,782 (571) Other operating 3,824 5,171 (1,347) Depreciation & Amort. 7,615 6,354 1,261 Other operating loss (4) 23 (27) Severance 1,805 20 1,785 Total operating expenses 33,619 30,148 3,470 Loss from Operations (21,150) (25,752) 4,602 Other (income) expense 1,402 (903) 2,305 Loss before taxes (22,552) (24,851) 2,299 Income taxes (1,955) (3,395) 1,440 Segment net loss ($20,597) ($21,456) $859 The increase in revenues for the AI segment was driven by the launch of new imaging products, including our Enhanced Breast Cancer Detection product which was initially released in 2022 and is being rolled out in certain of our imaging centers.
Removed
Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−5 removed2 unchanged
Biggest changeA hypothetical 1% increase in the alternative base rate under the First Lien Credit Agreement over the current alternative base rate would result in an increase of $18.0 thousand in annual interest expense and a corresponding decrease in income before taxes.
Biggest changeA hypothetical 1% increase in the SOFR rates under the Barclay's credit facility would result in an increase of $2.8 million in annual interest expense and a corresponding decrease in income before taxes. We can elect SOFR or Base Rate interest rate options on amounts outstanding under the Truist credit facility.
We are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Euro, Canadian Dollar, Hungarian Forint and Pound Sterling. We have Artificial Intelligence operations in the Netherlands, radiology services in the United Kingdom, and maintain research and development centers in Canada and Hungary.
We are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Euro, Canadian Dollar, Hungarian Forint and Pound Sterling. We have AI operations in the Netherlands, radiology services in the United Kingdom, and maintain research and development centers in Canada and Hungary.
At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At December 31, 2022, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against these currencies, would have resulted in an annual increase of approximately $0.2 million in operating expenses. Interest Rate Sensitivity.
At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At December 31, 2023, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against these currencies, would have resulted in an annual increase of approximately $0.3 million in operating expenses. Interest Rate Sensitivity.
A hypothetical 1% increase in the adjusted Eurodollar rates under the Restated Credit Agreement over the current Eurodollar rate would result in an increase of $2.1 million in annual interest expense and a corresponding decrease in income before taxes.
A hypothetical 1% increase in the adjusted SOFR rates under the Truist credit facility would result in an increase of approximately $1.4 million in annual interest expense and a corresponding decrease in income before taxes. 49
Accordingly, our interest expense and consequently, our earnings, are affected by changes in short term interest rates. However due to our purchase of swaps, described below, the effects of interest rate changes are limited. We can elect Eurodollar or Base Rate (Prime) interest rate options on amounts outstanding under the First Lien Term Loans.
Accordingly, our interest expense and consequently, our earnings, are affected by changes in short term interest rates. We purchased the 2019 swaps to mitigate interest rate risk on a portion of our outstanding term loan debt, as described below. We can elect SOFR or Alternative Base Rate interest rate options on amounts outstanding under the Barclay's term loan.
At December 31, 2022, we had $150.0 million outstanding subject to an adjusted SOFR election on the Truist Restated Credit and Term Loan Agreement. We can elect SOFR or Base Rate interest options on amounts outstanding under the Truist Restated Credit and Term Loan Agreement. At December 31, 2022, our effective SOFR rate plus applicable margin was 6.28%.
At December 31, 2023, we had $144.4 million outstanding subject to an adjusted SOFR election on our Trust term loan. At December 31, 2023, our effective SOFR rate plus applicable margin was 7.24%.
At December 31, 2022, we had $214.1 million outstanding subject to a Eurodollar election on First Lien Term Loans and our effective 3 month LIBOR rate plus applicable margin was 4.73%.
At December 31, 2023, after giving effect to the $400 million notional amount of our 2019 swaps, we had $279.0 million outstanding subject to a SOFR election on our Barclay's term loan, at an effective rate plus applicable margin of 5.38%.
Removed
At December 31, 2022, we had $1.8 million loan amount principal outstanding subject to an alternate base rate election on First Lien Term Loans with an effective rate of 9.50%.
Removed
A hypothetical 1% increase in the adjusted Eurodollar rates under the Truist Restated Credit and Term Loan Agreement would result in an increase of approximately $1.5 million in annual interest expense and a corresponding decrease in income before taxes. In the second quarter of 2019, we entered into four forward interest rate agreements ("2019 Swaps").
Removed
The 2019 Swaps have total notional amounts of $500,000,000, consisting of two agreements of $50,000,000 each and two agreements of $200,000,000 each. The 2019 Swaps will secure a constant interest rate associated with portions of our variable rate bank debt and have an effective date of October 13, 2020.
Removed
They will mature in October 2023 for the smaller notional and October 2025 for the larger notional. Under these arrangements, we arranged the 2019 Swaps with locked in 1 month LIBOR rates at 1.96% for the $100,000,000 notional and at 2.05% for the $400,000,000 notional.
Removed
As of the effective date, we will be liable for premium payments if interest rates decline below arranged rates, but will receive payments under the 2019 Swaps if interest rates rise above the arranged rates. 49

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