RadNet, Inc. (RDNT) Q4 2012 Earnings Report, Transcript and Summary

Good day, everyone and welcome to today's RadNet Incorporated Fourth Quarter 2012 Financial Results Conference. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to your host for today, Mr. Mark Stolper, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you for joining Dr. Howard Berger and me today to discuss RadNet's fourth quarter and full year 2012 financial results. Before we begin, we'd like to remind everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning anticipated future financial and operating performance, RadNet’s ability to continue to grow the business by generating patient referrals and contracts with radiology practices, recruiting and retaining radiologists and technologists, receiving third-party reimbursement for diagnostic imaging services, successfully integrating acquired operations, generating revenue and adjusted EBITDA for the acquired operations as estimated, among others, are forward-looking statements within the meaning of the Safe Harbor. Forward-looking statements are based upon management's current preliminary expectations and are subject to risks and uncertainties, which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties include those risks set forth in RadNet's reports filed with the SEC from time to time, including RadNet's annual report on Form 10-K for the year ended December 31, 2012, to be filed shortly. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date it is made. RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the day they were made or to reflect the occurrence of unanticipated events. And with that, I'd like to turn the call over to Dr. Berger, President and Chief Executive Officer of RadNet.

Thank you, Mark. Good morning, everyone, and thank you for joining us today. On today's call, Mark Stolper and I plan to provide you with highlights from our fourth quarter and full year 2012 results, give you more insight into factors, which affected this performance and discuss our future strategy. After our prepared remarks, we will open the call to your questions. I'd like to thank all of you for your interest in our company and for dedicating a portion of your day to participate in our conference call this morning. Despite our performance in the fourth quarter, which we will discuss in significant detail of this call, I am very pleased with what we accomplished in 2012 and how it positions us for the future. In my discussion, I'll divide these accomplishments into 3 main areas, all of which will have impacts in shaping 2013 and beyond. These 3 categories of accomplishments I'll touch upon include, one, important strategic acquisitions and partnerships; two, ongoing information technology initiatives; and three, private payer reimbursement initiatives. Let's begin with acquisitions. As some of you may have seen, on December 31, we acquired Lenox Hill Radiology, which is the largest non-hospital-based outpatient imaging center company in Manhattan. Lenox Hill has been an operator in the New York City market for 25 years. The cluster of centers includes its flagship Lenox Hill Radiology multi-modality facility at 61 East 77 Street, between Park and Madison Avenues. Lenox Hill also owns and operates multi-modality facilities at 2002 (sis) [ 202 ] East 70th Street, Regency Medical Imaging, and 240 Madison Avenue, Madison Avenue Medical Imaging, as well as several satellite routine imaging facilities throughout Manhattan. In addition to its wholly owned facilities, Lenox Hill has an interest in Park West Radiology at 315 West 57th Street…

Thank you, Howard. I'm now going to briefly review our fourth quarter and full year 2012 performance and attempt to highlight what I believe to be some material items. I will also give some further explanation of certain items in our financial statements, as well as provide some insights into some of the metrics that drove our fourth quarter and full year performance. Lastly, I will provide 2013 financial guidance levels. In my discussion, I will use the term adjusted EBITDA, which is a non-GAAP financial measure. The company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and excludes losses or gains on the sale of equipment, other income or loss, loss on debt extinguishments, bargain purchase gains and noncash equity compensation. Adjusted EBITDA includes equity and earnings in unconsolidated operations and subtracts allocations of earnings due to noncontrolling interest in subsidiaries and is adjusted for noncash or extraordinary and onetime events taking place during the period. A full quantitative reconciliation of adjusted EBITDA to net income or loss attributable to RadNet income and shareholders is included in our earnings release. With that said, I'd now like to review our fourth quarter and full year 2012 results. I'll begin with the 2012 fourth quarter results. For the 3 months ended December 31, 2012, RadNet reported revenue and adjusted EBITDA of $165.8 million and $24.5 million, respectively. Revenue increased $4.4 million or 2.7% over the prior year same quarter, and adjusted EBITDA decreased $7.8 million or 24.2% over the prior year same quarter. Our fourth quarter performance was significantly hampered by nonrecurring events. First, we estimate that we incurred approximately a $3.5 million negative impact from downtime of our northeastern facilities and loss of business from Hurricane Sandy. We had numerous site closures. Most…

Thank you, Mark. In summary, we remain optimistic and energized about the path ahead. While our industry will remain under volume and pricing pressure, opportunities will continue to present themselves for us to expand our business, make our operations more efficient and consolidate our regional markets. Imaging will continue to be an indispensable part of the health care delivery system. Nonhospital outpatient imaging will always be delivered more cost effectively and conveniently than the offerings of hospitals who have the domain expertise, management breadth and operating culture necessary for outpatient success. Like with the Barnabas Health and our numerous other hospital partnerships on the East Coast, we believe that more and more health systems will look to us as a partner not a competitor. Finally, having refinanced the senior portion of our capital structure in October last year, we have the financial flexibility and access to capital to execute our plan. We've enjoyed excellent relationships with our lenders, who have continued to support the capital needs and growth plans of our business. RadNet's access to capital has been a major advantage relative to the rest of the industry, which remains fragmented and comprised of individual and small group operators. At the same time, the capital has been available to us, industry pressures have driven acquisition multiples to historic lows. We continue to execute transactions at the 3 to 4x EBITDA multiples, which we have previously announced. In the face of all the industry pressures we've discussed this morning, the power of RadNet's model has shown through. As more industry players fall in difficult times, we will continue to distance and distinguish ourselves within the diagnostic imaging marketplace. Operator, we are now ready for the acquisitions -- excuse me, for the question-and-answer portion of the call or acquisitions if they come up at the same time. Thank you.

[Operator Instructions] We'll go first to Brian Tanquilut of Jefferies. Brian Tanquilut - Jefferies & Company, Inc., Research Division: Dr. Berger, since you started with acquisitions, I'll go right there, so...

Somehow I knew you might, Brian. Brian Tanquilut - Jefferies & Company, Inc., Research Division: So good acquisition with Lenox Hill. How should we think about your strategy today on acquisitions? Because I know 2 years ago, you -- the goal was to basically cover the Eastern seaboard, and it seems like you're there now. So as we think about acquisitions, would you start considering going to new markets? Or would it be a densification in the -- still within the East and the West Coast. How should I think about that?

Thanks, Brian. There's plenty of opportunities within the existing markets that we currently operate in and won't be a shortage of opportunities for us to continue to avail ourselves of our primary strategy, and that is to bulk up or continue to bulk up in the existing marketplace because it would really take an unusually attractive or opportunistic acquisition for us to look outside of the core 6 markets or states that we're in right now. And so I think you can expect us to continue to focus primarily on those markets with both new opportunities with some of the payors that we're speaking with that might have needs for us to provide more access or acquisitions that are continuing to be calling in for us to evaluate.

The one exception I will add is that we would go into a new market if there were a unique opportunity with a hospital or a health system in that, we found that when you partner with hospitals or health systems who have a significant presence or leverage with payers in a particular market, our strategy of geographic concentration, multi-modality approach on the outpatient center business is not quite as important because you can get some of that leverage with a strong, powerful local hospital or health system. So we have, at times, entertained and had discussions with a big health systems and hospitals outside of our geographic markets, and we consider doing that in the future. Brian Tanquilut - Jefferies & Company, Inc., Research Division: And Mark, to follow up on that, I mean, a lot of the hospitals have been buying physician practices so -- in the last couple of years. Are you seeing that as an opportunity that's opening up? Or is it already accruing to you guys? Or is that a potential threat for those hospital systems that have their own imaging facilities in your markets?

Well, we are seeing that in a number of our markets, Brian, and I think it's a double-edged sword if you will. On the one hand, when these hospitals buy up medical practices, they do attempt to drive as much of that imaging into their hospital systems as possible, of course, raising an interesting concern about self referral, which I won't get into too deeply here, but nonetheless, I find it a little bit perverse in some respects. But the number of referring physicians and the amount of imaging that's done out there cannot be managed by hospital system imaging departments. So while it may, in any individual situation, impact RadNet or the other competitors in our marketplace, we don't look at it as enough of a threat to be concerned about. Actually, the double-edged side of that sword, which is beneficial, as that again it affects our competitors, makes them more vulnerable and potentially better targets for us. So I think that, that specter, which is being seen primarily on the East Coast more so than in California is something that can ultimately have benefit. But I do want to underscore something very important that I do speak to people about when these topics come up. The amount of imaging done on an outpatient basis roughly for a metric is about one imaging procedure per person in the United States. So there's somewhere in the neighborhood of perhaps as much as 325 million to 350 million procedures done annually for -- in the U.S. market. RadNet is in the states that have about 25% of the population. So the amount of imaging that we're currently doing relative to the total available is still very, very small. And again, that amount of business is impossible to be absorbed by hospital health systems. So they will always look to the outpatient sector to have the access and convenience for patients, which has really become the standard in the industry here. So in a way, you could say that the hospitals that buy physician practices and fill more of their capacity with that may in fact push out other people who want better access and may look at the hospitals as a threat to the practices that aren't purchased and want to move away from hospital systems themselves. So like always, I tend to look at the positives of what's going on in the industry as beneficial for RadNet. Brian Tanquilut - Jefferies & Company, Inc., Research Division: Okay. And then last question for you, Howard. The industry thesis have been under a lot of reimbursement pressure for -- I mean, going back to really 2006 with the DRA, I mean, as one of the leaders of the industry, I mean, what is the imaging sector doing to fight off incremental rate cuts? Because it seems you're just getting -- you're getting punches every year.

Well, I think the punches are coming primarily out of Washington, as they continue to target imaging as a place to get savings from. Unfortunately, many of the payors out there that tend to follow Medicare pass those cuts on to the imaging providers. What we're doing somewhat uniquely, I believe, in our strategy is actually uncoupling the Medicare payment system with the private payors and going in and renegotiating pricing. As Mark mentioned in his remarks, we were particularly successful with that in the Maryland marketplace, which, for the first time, actually resulted in substantial increases in the reimbursement that we got from the major payors in Maryland who recognize the importance of the RadNet presence in that marketplace, as well as the need for outpatient imaging to long term survive and provide the access that's necessary. So while I continue to see these punches and these issues being faced throughout the imaging industry, Brian, I think the RadNet model is the only one that can sustain some kind of successful strategy to fight this. And ultimately, the pendulum will swing the other way, as capacity has wrung out of the system. And there are fewer points of access. Eventually, the reimbursement hits will have to be reversed. Otherwise, there will be an enormous shortage in the way of imaging equipment and access, and we could wind up with the system not unlike what goes on in Canada, where if you want routine MRI today, it is about a 6-month wait before you can get 1 in any 1 of the Canadian provinces. So I believe that our model, again, speaks to -- and strategy speak to this. And while it will provide tough times, for us, it's far more severe for the smaller operators that don't have the resources to withstand these continual punches and declining reimbursement.

Up next from Deutsche Bank, we'll hear from Darren Lehrich.

So just a few things here. I wanted to first ask about some of your managed care payer relationships and curious just to get your thoughts on where you think you are if you're moving in a direction where you may start to have some real steerage or I don't know, maybe even some exclusive arrangements with payers, just trying to understand where you are in the evolution of managed care looking at you as a bigger partner in helping them manage their outpatient imaging trend.

Good question, Darren. The process of those conversations are a function really of 2 things: number one, how large and how important is RadNet in any given market; and then how much do the payors really want to start looking at different models other than perhaps traditional fee for service as a way to try to handle the cost or the rising cost of health care. In most of the markets that we're in, on the East Coast now, and I'm talking about not Maryland, Delaware, New Jersey and more recently, obviously, the New York marketplace, we are starting to get a lot of traction in our conversations, and I think that the long-term prospect, particularly, for example, in a state like New Jersey where we partner with the major health system, Barnabas, in New Jersey, these kind of conversations will take more and more substance as I think the market shrinks from the number of providers and somebody like RadNet emerges as a company that not only is willing to look at different models that perhaps take risk on like we do here in California but has the financial resources and internal management to take those kind of challenges on. I think that something like the RadNet model is absolutely critical to the evolving changes in health care that people talk about almost on a daily basis, whether you're talking about ACOs, accountable care organizations or some other provider networks that go in and try to manage the health care of a group or a population based on different metrics such as outcomes and managing it on perhaps even a disease management basis. So we are having some of those discussions. I would say that they're very early on in the consideration, but I think, ultimately, things like capitation, disease management, risk sharing are inevitable not just in imaging but in health care. And it will take imaging providers of size both in terms of their financial resources and their access points to be a serious player and consideration in these revised paradigms.

Okay. That's really helpful. Few other things here. First, I just want to understand a little bit more the salary increase that you, I guess, front loaded here in the fourth quarter. Can you help us just think about what part of your labor cost structure you've, I guess, brought forward that expands? And then did you, in fact, eliminate merit increases for 2013 because of the Medicare pressures for a population of your employees? Just help us think through that action please.

Okay. Well, part of our decision making towards the end of the year had not so much to do with our forecasting for 2013 or Medicare. It really had more to do with the tax law changes that we were seeing. So in answer to one part of your question, there were no merit increases in base salary composition -- compensation, I should say, for 2013. And what we did in order to benefit some of the employees and management team was accelerate what might have otherwise been some of those increases into 2012 so that there would be a more favorable tax treatment on it.

Okay. That's helpful. And then just I wanted to ask Mark just about free cash flow. Are you guys still seeing consolidation and debt reduction as the best use of capital at this point? Anything changed there?

Well, I think the answer is -- has to be we need to be somewhat opportunistic as to what is the best and most efficient use of our cash flow so that in the absence of the opportunities to go out and consolidate attractive acquisition targets in our markets that can be bought in the 3 to 4x range, what we would do with our free cash flow is to repay debt. I think that what we're seeing in our pipeline with respect to acquisitions is that there are numerous smaller transactions out there that we look at and that germinate from our operations teams out in the field that we'll take action on this year. But there aren't any or significantly large transactions here that would be taking up a lot of our capital so that I think we're seeing for 2013 as of today a more balanced approach to our free cash flow dividing up between debt paydown and acquisitions. Now having said that, the caveat here is that our acquisition queue changes on a daily basis. Sometimes acquisitions fall out, and then other days, we get a phone call that -- of an opportunity that is of size. So sitting here today, we think it's a balanced approach, but that can change. And the one other thing I'll add is that when we look at these acquisitions, part of the reason why our target is at 3 to 4x EBITDA is because we not only want this to be accretive equity because on a trailing basis we're trading at about 5.5x trailing EBITDA, but we also wanted to be deleveraging. And so we feel a combination of actual debt paydown, as well as continuing to acquire and consolidate these small operations, both will provide the objective of deleveraging.

Yes, and a lot less than 5.5x if you include the NOL now that it's obtainable based on the tax accounting here, I might add. The last thing, just, Howard, just sort of a left-field question here, but we noted a transaction in the CRO diagnostic space, and I'm just curious if you can update us briefly on just the CRO capabilities, I think, you talked about maybe a year and 1.5 years ago.

Are you talking about a CRO opportunity that...

Well, you had, I think, been developing a network for imaging capabilities for clinical research, and I'm not sure if that ever got fully off the ground or where it is, but what see did a transaction that was pretty hefty evaluation on that very type of business.

No, I'm not familiar with the transaction that you're talking about, Darren. But internally in RadNet, we did launch 2 -- actually, 3 research projects last year, 1 related to Alzheimer's disease testing using a new PET isotope, another related to contrast-enhanced mammography to evaluate breast cancer and a third related to various Breastlink initiatives that look at different or new chemotherapy regimens. So that is a active part of the business, which started to take route in late 2012 and which will provide nice additional revenue and visibility for what RadNet's doing. I would not really categorize what we're doing as being able to evolve these various research programs into a CRO, but clearly, that is something that we're constantly looking at both that RadNet can do itself uniquely because of the ownership of imaging centers, as well as potential partnering with other CROs to help manage, I think, far more effectively the imaging component of their needs and evaluation of other drugs. But I think that represents good upside opportunity for RadNet but is still somewhat in the early stages of development.

Up next, we'll hear from Miles Highsmith of RBC Capital Markets.

Just a couple others for me. Will it be fair to say that you're continuing to not lose market share? I know you gave some California volume stats. I'm wondering if you can us maybe volume x hurricane and holidays or something of that nature.

Yes. I don't think our decline in the fourth quarter in volumes, either on an aggregate basis or same-center basis, has anything to do with market share. We said throughout 2012 that actually we believe we were picking up market share because everything that we had heard in our regions and everything that we had seen when we did due diligence on the acquisition targets in our region showed declining volumes in 2012 were up until the fourth quarter, our same-center and aggregate volumes were either flat to growing. So from a market share perspective, if anything, we think we're picking up market share. I think 2000 -- you can't look at the volumes of 2000 -- of the fourth quarter of 2012 and glean any trend from that. As you said, when we separated out the volumes of the northeastern operations, which were affected by Hurricane Sandy and looked at our West Coast volumes in the fourth quarter of 2012, our volumes were actually up over 5%. A fair amount of that was same-center volume because we really didn't -- other than the West Coast acquisition, we didn't have other acquisitions in 2012 relative to 2011. So I think the consolidation we're seeing in the markets, the pressure that the industry has on it including utilization pressures, as well as pricing pressures has not only decreased the overall pie but has put a lot of pressure on small mom and pops, many of whom are contracting or going out of business. And if anything, this has helped us gain some market share over the last 3 years during this very difficult broader economy. So I think we see this trend continuing in 2013 and beyond where the industry is going through a transition of small mom-and-pop fragmentation to more scale operators and professional operators like ourselves. And in our markets, at least, we think we're in the forefront of that change in that transition.

Okay. Great. And then I just wanted to touch on the Medicare pieces quickly to make sure we're thinking about this correctly. We've got the sequester small impact for you guys starting here. I think we have the year 4 of the PE RVU changes started in 2010, and I think you quantified the impact of that in the past. And then, I guess, the American Taxpayer Act is going to put the utilization rate at 90%. Have you quantified that? And did I mess anything up in my assessment of the Medicare pieces for 2013?

No. Let me just reiterate what we said in the past and give you a little bit more information. We quantified last year that the impact in 2013 from the changes in the Medicare Fee Schedule, which was released as its final rule in November, was going to be a $7 million to $8 million impact to RadNet in 2013. The sequestration adds another 2% impact on our Medicare business and any contracts that might be tied to Medicare, which we are estimating to be another $3 million or so impact in 2013. Beyond 2013, the only thing that we do know is that, as you said, the utilization rate is going to increase from 75% to 90%, which -- and for those who are not familiar with it, the utilization variable is one of many variables in the practice expense portion of the RVU or relative value unit calculation, which determines Medicare reimbursement. And the impact of that will be another several million dollars for 2014. Having said that, all bets are off because we don't know in June and July of 2013, Medicare will come out with its proposal for comments dictating 2014 reimbursement and then at the end of 2013, in November, they'll come out with their final rule. Often what happens or at least what's happened over the last 3 years, Medicare makes many other changes to the RVU calculations and the RVU table such that no one can bet that, that several million impact from that utilization rate going from 75% to 90% will be the only impact we'll feel in 2014. There might be mitigating factors, which make the impact less than the $3 million or $4 million we think it's going to be, and there may be other changes that could increase that. So that's one of the fun things about being in this business. We don't know until we see the Medicare Fee Schedule. And that's also why we've been working extremely hard, as Dr. Berger mentioned earlier, in all of our regions to try to unbundle or unlink our private payer contracts from the Medicare Fee Schedule or from floating with the Medicare Fee Schedule, and we've been very successful in doing that. And we should start seeing a bifurcation of how we get reimbursed from the private payers versus where we're getting reimbursed with Medicare.

Last one for me. If I just think about 2013 versus 2012 as it relates to your guidance, I think Howard made the comment that commercial should largely make up the Medicare pressure in 2013. And you've got some acquisitions, especially in New York, that'll be fully reflected in '13 and not in 2012. Core market share seems to not be going down, might even potentially go up and you have kind of a weak comp from Q4 '12 on the weather side. The guidance is kind of flat in 2013. Is there -- is it reasonable to say there might be a slight bit of conservatism associated with it? Or is it just too early to tell at this point? Or are there some maybe other negatives that weren't mentioned that I should be thinking about?

Well, I think there is some conservatism in the guidance, I mean, particularly because we missed the EBITDA guidance for 2012 with this fourth quarter, which we could not have predicted sitting here earlier in 2012 would ever happen. So we're trying to give ourselves some leeway if there should be nonrecurring events next year that we don't -- can't predict right now. But also it is showing some growth from where we ended up the year of $113-and-change million of EBITDA going to somewhere between $120 million and $130 million. But we wanted to be very conservative with respect to any assumptions we made about same-center growth. Same-center growth has been very challenging over for the last 3 years. We didn't want to assume that the economy was suddenly going to turn around or that utilization of health care services, in general, was going to increase in 2013. So our guidance assumes very flat same-center volumes in 2013, and I think that if they're -- if we start comping positively relative to 2012 on a same-center basis, it could provide some upside in our guidance.

And our final question today comes from Deutsche Bank's Henry Reukauf.

Just some guidance questions, I guess, and this is sort of follow-up to Miles' question. So if we think about the year in your guidance, it's sort of the headwinds from reimbursement in total are $10 million to $11 million. Where is kind of -- where are you seeing the price, I guess, on the HMO side of the business?

Pricing has been somewhat flat with the exception of some significant pricing concessions or increases that we received from the -- from several East Coast payers, especially those where we've been successful in renegotiating the rates on the CT bundling issue, CT of the abdomen and pelvis. But outside of those increases, we've seen flat to slightly declining reimbursement in our other markets. So overall, we've internally felt here that if we can accomplish stable pricing or flat pricing year-over-year with the private payers, we've done pretty well, and we've utilized our leverage. Now having said that, the big part of our strategy here is to continue to consolidate our regional marketplaces and become indispensable to the private payers so that we have a strong leveraged position at the table when negotiating for fair and stable long-term pricing. I think we've accomplished that in certain markets such as Maryland. I think we'll accomplish that pretty quickly here in New Jersey with our partnership with Barnabas Health, who is a -- has very large presence or largest health system in Northern and Central New Jersey. I think we've got a ways to go in other markets where we currently operate. So I think that going forward, our outlook on Medicare pricing is that we think there's going to be continued pricing pressure on the Medicare side of the business given all of the things that we and all of us here out of Washington is that things aren't getting any better. And there's going to continue to be budget cuts, and some of that's going to have to come out of Medicare, and imaging is a -- not a nonmaterial piece of the Medicare and the health care spend. So we think that there will be continued pricing pressure on the Medicare side. What we're trying to do with our strategy is to get the leverage that we need in our markets on the private payers side so that we can have stable pricing. But to answer your question directly, in 2013, we've assumed flat pricing on the private pay side.

Okay. So generally, the same-store volume is flat. The pricing is going to be relatively flat on the commercial side, and then you'll have the $10 million to $11 million headwinds on the Medicare side. In the guidance, I'm assuming that's correct. If it's not please do correct me ...

Yes, with the exception of some private payer price increases that we got on the East Coast that we talked about.

But not really materially moving the needle.

Well, it will materially move the needle in mitigating the Medicare impact for 2013.

Okay. So those particular pricing increases basically cover the $10 million to $11 million decline that you guys cited?

Yes.

Yes. Okay. And then in the EBITDA calculation with Lenox Hill, I'm thinking that's about $10 million of EBITDA. Should that -- what's built into the guidance in terms of kind of a pro forma EBITDA coming from acquisitions?

Yes. I mean, we -- when we announce acquisitions, we talk about the revenue associated with those acquisition, and we talk generally about margins. As you remember, many of the acquisitions that we do are situations where the assets are underperforming, and we have a very short-term plan to turn those assets around and layer the RadNet cost structure on top of those acquisitions. Lenox Hill was not one of those types of acquisitions. Lenox Hill was performing fairly nicely, and we believe that it'll continue to perform well in 2013. Most of the other acquisitions, though, such as the CML acquisition we did at the end of 2011, were turn-around situations. So you can assume with -- for our guidance that for 2013 that the acquisitions that we have layered in there, such as Lenox Hill, the EBITDA contribution of those will be similar to the overall EBITDA margin of the entire company.

So it sounds like another, at least another $10 million -- at least $10 million of kind of layered-in acquisition EBITDA with the -- just for Lenox Hill alone with the $40 million purchase price and say, 3 to 4x acquisition or maybe that was a little bit more. Is that right?

Yes. Your number's a little high for Lenox Hill.

Okay. All right. And then cost savings, just what are you trying to think for cost savings for 2013? You mentioned a bunch of initiatives that seem like they're coming into play. How much are they supposed to help you for the year?

Well, I think that's where we're probably being a little bit conservative or hedging a little bit on this, Henry. Many of the cost initiatives that relate primarily, let's say, to IT meaningful use and some purchasing opportunities that we have to reduce costs are currently underway, and the impact of those throughout the year will vary depending upon when they get fully implemented. The range we're looking at on these is rather substantial. And how much of that actually is realized in 2013, again, depends upon when they actually get implemented. By 2014, we should be able to give better guidance in the 2014 fiscal year as to what the impact of these actually will be when we have the hindsight benefit of seeing what they would be on a full year basis.

Part of the conservatism with the IT is that it's the amount of savings that we'll achieve in 2013 also is highly dependent upon the rollout schedule of the RIS and the PACS and the voice recognition, and should the rollout schedule slip, it's -- we'll achieve fewer savings in 2013. We'll still have the same savings in 2014. Should it be accelerated, we'll get more of that savings in 2013. So it's -- a part of it is determined by how quickly we can integrate these products, and although we have a schedule, schedules particularly with IT projects tend to change.

If just in total, if it -- say, it all just got implemented at the end of 2013, what would the -- what was the range of savings, I guess, that you would anticipate getting from all these initiatives in total, independent of when -- how they roll in?

I think it's fair to say that we think conservatively there's $5 million to $10 million of additional EBITDA that we can achieve when all of these systems are in place and fully operational.

Okay. And just last one, meaningful use, is that going to be a material amount for you guys? Or is it -- just do you have a range on that I guess? Is it this year or next?

Again, that's another one of those, Henry, where we've analyzed it, and it depends upon when the radiologists qualify. The range of that potential benefit to the company is $10 million to $12 million, but it'll depend upon when the radiologists qualify because to the extent that they don't qualify by October this year, it does drop down. And that would be, then, the lower range of our expectations of $10 million. The other side of that, though, is it doesn't get paid out all at one time. There's a schedule of how the meaningful use payments are allocated over about a 4-year period of time, and for RadNet, it wouldn't be -- it would probably roll out relatively evenly over that period. So if we hit the lower end of that range of $10 million, it would be about $2.5 million a year for the next 4 years.

Next 4 years, and that's separate from the $5 million to $10 million of kind of savings from the IT systems that you talked to?

Yes, correct, yes. Yes.

And it appears that is all the time we have for questions. I would like to turn the conference back over to our speakers for closing remarks.

Okay. Well, thank you again for joining us. I look forward to our next close call for the first quarter of 2013 and appreciate all of you dedicating a part of your day to listen to Mark and I. Thank you.

Thank you, and again, that does conclude today's conference. We thank you all for joining us.