What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-03-16 · 93 added, 116 removed, 430 unchanged (33% of the section changed)

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Through our subsidiary eRAD, Inc., we sell computerized systems that distribute, display, store and retrieve digital images.

We have a focus on Artificial Intelligence (AI), with the contributions from our acquisitions of Nulogix and DeepHealth plus our investment in Whiterabbit.ai, to develop and deploy AI suites to enhance radiologist interpretation of images.

We have also established an Artificial Intelligence (AI) division, with the contributions from our acquisitions of Nulogix and DeepHealth plus our investment in Whiterabbit.ai, which develop and deploy AI suites to enhance radiologist interpretation of images initially in the field of mammography.

Early in 2022, after the period covered by this annual report, we expanded the division by the acquisition of two companies in the Netherlands, Aidence Holding B.V.

and Quantib B.V.

that are developing AI solutions initially targeted for lung and prostate cancer.

Available Information

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Diagnostic imaging services are typically provided in one of the following settings:

Fixed-site, freestanding outpatient diagnostic facilities

These facilities range from single-modality to multi-modality facilities and are generally not owned by hospitals or clinics.

These facilities depend upon physician referrals for their patients and generally do not maintain dedicated, contractual relationships with hospitals or clinics.

In fact, these facilities may compete with hospitals or clinics that have their own imaging systems to provide services to these patients.

These facilities bill third-party payors, such as managed care organizations, insurance companies, Medicare or Medicaid.

All of our wholly owned facilities are in this category.

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.

In fact, these centers may compete with hospitals or clinics that have their own imaging systems to provide services to these patients.

These centers bill third-party payors, such as managed care organizations, insurance companies, Medicare or Medicaid.

All of our wholly owned centers are in this category.

Many hospitals provide both inpatient and outpatient diagnostic imaging services, typically on site or at a dedicated center located on or nearby the hospital campus.

These can be owned and operated by the hospital and provide imaging services to inpatients as ordered or outpatients through physician referrals.

These centers can be owned and operated by the hospital and provide imaging services to inpatients as ordered or outpatients through physician referrals.

The hospital normally bills third-party payors such as managed care organizations, insurance companies, Medicare or Medicaid.

We have entered into joint ventures with certain hospitals both provide and manage their diagnostic imaging services, allowing them to leverage our industry expertise.

We have entered into joint ventures with certain hospitals to both provide and manage their diagnostic imaging services, allowing them to leverage our industry expertise.

Mobile Imaging

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Diagnostic Imaging Modalities

The principal diagnostic imaging modalities we use at our facilities are:

The principal diagnostic imaging modalities we use at our centers are:

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.

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PET scanning involves the administration of a radiopharmaceutical agent with a positron-emitting isotope and the measurement of the distribution of that isotope to create images for diagnostic purposes.

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.

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.

PET technology has been found highly effective and appropriate in certain clinical circumstances for the detection and assessment of tumors throughout the body, the evaluation of some cardiac conditions and the assessment of epilepsy seizure sites.

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Escalating Demand for Healthcare Services from an Aging Population

According to the United States Census Bureau estimates released in June 2020, the number of US residents age 65 or over increased from 35.0 million in 2000 to an estimated 73 million in 2020, and the median age for the United States is also expected to continue to increase.

According to the United States Census Bureau estimates released in February 2022, the number of US residents age over 65 stands at 55 million, representing 17% of the population, and according to the Pew Research Center, is expected to reach 81 million, or 19% of the total population by 2050.

Because diagnostic imaging use tends to increase as a person ages, we believe the aging population will generate more demand for diagnostic imaging procedures .

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The vast majority of our centers offer multiple types of imaging procedures, driving strong relationships with referring physicians and payors in our markets and a diversified revenue base.

At each of our multi-modality facilities, we offer patients and referring physicians one location to serve their needs for multiple procedures.

This prevents multiple patient visits or unnecessary travel between facilities, thereby increasing patient throughput and decreasing costs and time delays.

At each of our multi-modality centers, we offer patients and referring physicians one location to serve their needs for multiple procedures.

This prevents multiple patient visits or unnecessary travel between locations, thereby increasing patient throughput and decreasing costs and time delays.

Our revenue is generated by a broad mix of modalities.

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Our Facility Density in Many Highly Populated Areas of the United States

The strategic organization of our diagnostic imaging facilities into regional networks concentrated in major population centers in seven states offers unique benefits to our patients, our referring physicians, our payors and us.

The strategic organization of our diagnostic imaging centers into regional networks concentrated in major population centers in seven states offers unique benefits to our patients, our referring physicians, our payors and us.

We are able to increase the convenience of our services to patients by implementing scheduling systems within geographic regions, where practical.

For example, many of our diagnostic imaging facilities within a particular region can access the patient appointment calendars of

other facilities within the same regional network to efficiently allocate time available and to meet a patient's appointment, date, time, or location preferences.

The grouping of our facilities within regional networks enables us to easily move technologists and other personnel, as well as equipment, from over-utilized to under-utilized facilities on an as-needed basis, and drive referrals.

For example, many of our diagnostic imaging centers within a particular region can access the patient appointment calendars of other centers within the same regional network to efficiently allocate time available and to meet a patient's appointment, date, time, or location preferences.

The grouping of our centers within regional networks enables us to easily move technologists and other personnel, as well as equipment, from over-utilized to under-utilized centers on an as-needed basis, and drive referrals.

Our organization of referral networks results in increased patient throughput, greater operating efficiencies, better equipment utilization rates and improved response time for our patients.

We believe our networks of facilities 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

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The collective experience and expertise of these radiologists translates into more accurate and efficient service to patients.

Our close relationship with Howard G.

Berger, M.D., our President and Chief Executive Officer, and Beverly Radiology Medical Group (“BRMG”) in California and our long-term arrangements with radiologists outside of California enable us to better ensure that the medical service provided at our facilities is consistent with the needs and expectations of our referring physicians, patients and payors.

Our Experienced and Committed Management Team

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The division is currently focused on developing both improved medical interpretation of scans and patient management within the field of mammography.

Early in 2022, after the period covered by this annual report, we expanded the division by the acquisition of two companies in the Netherlands, Aidence Holding B.V.

and Quantib B.V.

that are developing AI solutions initially targeted for lung and prostate cancer, respectively.

Combined with our established eRad subsidiary, which develops and sells computerized imaging systems for the industry, we have assembled an industry leading team of software developers to create radiology workflow solutions that improve patient care.

Business Strategy

Maximize Performance at Our Existing Facilities

We intend to enhance our operations and increase scan volume and revenue at our existing facilities by expanding physician relationships and increasing the procedure offerings.

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.

Focus on Profitable Contracting

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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 facilities in areas such as image storage, support personnel and financial management.

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

We intend to continue to expand the number of our facilities 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 center 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.

Our current plans are to strengthen our market presence in geographic areas where we currently have existing operations and to expand into neighboring and other areas where we believe we can compete effectively.

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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 facilities.

We have created a number of joint ventures in key markets with well-established hospital systems to manage additional centers.

We intend to continue to expand in established markets through additional joint ventures, particularly with hospital systems.

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Radiology Professionals

In the states in which we provide services (except Florida), a lay person or any entity other than a professional corporation or 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 provide services (except Florida and Arizona), a lay person or any entity other than a professional corporation or 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.

This doctrine is commonly referred to as the prohibition on the “corporate practice” of medicine.

In order to comply with this prohibition, we contract with radiologists to provide professional medical services in our facilities, including the supervision and interpretation of diagnostic imaging procedures.

The radiology practice maintains full control over the physicians it employs.

Pursuant to each management contract, we make available the imaging facility and all of the furniture and medical equipment at the facility for use by the radiology practice, and the practice is responsible for staffing the facility with qualified professional medical personnel.

In addition, we provide management services and administration of the non-medical functions relating to the professional medical practice at the facility, including among other functions, provision of 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.

As compensation for the services furnished under contracts with radiologists, we generally receive an agreed percentage of the medical practice billings for, or collections from, services provided at the facility, typically 79% of global net service fee revenue or collections after deduction of the professional component of the medical practice billings.

In order to comply with this prohibition, we contract with medical groups to provide professional medical services in our centers, including the supervision and interpretation of diagnostic imaging procedures.

The medical group maintains full control over the physicians it employs.

Through our management agreements, we make available the imaging facility and all of the furniture and medical equipment at the facility for use by the radiology practice, and the practice is responsible for staffing the facility with qualified professional medical personnel.

The medical groups are compensated for their services from the professional component of the global net service fee revenue.

Many states have also enacted laws prohibiting a licensed professional from splitting fees derived from the practice of medicine with an unlicensed person or business entity.

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The Consolidated Medical Group

The consolidated medical group ("the Group") consists of professional corporations owned or controlled by individuals within our senior management, namely Howard G.

Berger, M.D., our President and Chief Executive Officer, and John V.

Crues, III, M.D., RadNet's Medical Director, both of whom are members of our Board of Directors.

The Group provides professional medical services in California, Delaware, Maryland, New Jersey and New York, and includes Beverly Radiology Medical Group (BRMG).

BRMG is responsible for the professional medical services at nearly all of our facilities located in California.

We believe that physicians are drawn to the Group, and the other external radiologist groups with whom we contract, by the opportunity to work with the state-of-the-art equipment we make available to them, as well as the opportunity to receive specialized training through our fellowship programs, and engage in clinical research programs, which generally are available only in university settings and major hospitals.

Under our management agreement with BRMG, we are paid a percentage of the amounts collected for the professional services BRMG physicians render as compensation for our services and for the use of our facilities and equipment.

For the year ended December 31, 2020, this percentage was 79%.

The percentage may be adjusted, if necessary, to ensure that the parties receive fair value for the services they render.

The following are the other principal terms of our management agreement with BRMG:

• The agreement expires on January 1, 2024.

The agreement automatically renews for consecutive 10-year periods, unless either party delivers a notice of non-renewal to the other party no later than six months prior to the scheduled expiration date.

Either party may terminate the agreement if the other party defaults under its obligations, after notice and an opportunity to cure.

We may terminate the agreement if Dr.

Berger no longer owns

at least 60% of the equity of BRMG;

as of December 31, 2020, he owned indirectly 99% of the equity interests of BRMG.

• At its expense, BRMG employs or contracts with an adequate number of physicians necessary to provide all professional medical services at almost all of our California facilities.

• At our expense, we provide all furniture, furnishings and medical equipment located at the facilities and we manage and administer all non-medical functions at, and provide all nurses and other non-physician personnel required for the operation of, the facilities.

• If BRMG wants to open a new facility, we have the right of first refusal to provide the space and services for the facility under the same terms and conditions set forth in the management agreement.

• If we want to open a new facility in California, BRMG must use its best efforts to provide medical personnel under the same terms and conditions set forth in the management agreement.

If BRMG cannot provide such personnel, we have the right to contract with other physicians to provide services at the facility.

• BRMG must maintain medical malpractice insurance for each of its physicians with coverage limits not less than $1 million per incident and $3 million in the aggregate per year.

BRMG also has agreed to indemnify us for any losses we suffer that arise out of the acts or omissions of BRMG and its employees, contractors and agents.

The management contracts with the remaining professional medical corporations within the Group are on a basis similar to our contract with BRMG.

The consolidated medical group ("the Group") consists of professional corporations owned or controlled by individuals within our senior management that provide professional medical services in Arizona, California, Delaware, Maryland, New Jersey and New York.

Under management agreements, we are paid compensation for our technical services and for the use of our centers and equipment.

Other Professional Radiology Groups

At locations where the Group does not provide professional medical services, we have entered into long-term contracts with prominent third-party radiology groups in the area to provide physician services at those facilities.

At locations where the Group does not provide professional medical services, we have entered into long-term contracts with third-party radiology groups in the area to provide physician services at those centers.

These third-party radiology practice groups provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers.

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a history of growth and potential for continued growth.

In these facilities we have entered into long-term agreements (typically 10-40 years in length) under which, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the practice group’s professional revenue.

We typically receive 100% of the technical reimbursements associated with imaging procedures plus certain fees paid to us for providing additional management services.

The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us.

The medical groups retain the professional reimbursements associated with imaging procedures after deducting management service fees paid to us.

Management Services

We provide the use of our diagnostic imaging equipment, technical and management services, and administration of the non-medical functions of the professional medical practices at our centers, including the provision of non-medical staff, accounting services, billing and collection, medical and office supplies, transcription services, maintenance of medical records, and marketing.

As compensation for the services furnished under management contracts with our medical groups, we receive technical fees for the use of our diagnostic imaging equipment and technical services and an agreed percentage of the medical practice billings for, or collections from, services provided at our centers.

Additionally, we perform certain management services for a portion of the professional groups with whom we contract who provide professional radiology services at local hospitals.

For performing these management services, which include billing, collecting, transcription and medical coding, we receive management fees.

The fees charged for diagnostic imaging services performed at our facilities are paid by a diverse mix of payors, as illustrated for the following periods presented in the table below:

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.

The fees charged for diagnostic imaging services performed at our centers are paid by a diverse mix of payors, as illustrated for the following periods presented in the table below:

% of Net Service Fee Revenue

2020 Year Ended

2019 Year Ended

Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Commercial Insurance (1)

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Managed Care Capitation Agreements

Under these agreements, which are generally between BRMG in California and outside of California between the contracted radiology group (typically an independent physician group or other medical group) and the payor (which in most cases are large medical groups or Independent Practice Associations), the payor pays a pre-determined amount per-member per-month in exchange for the radiology group providing all necessary covered services to the managed care members included in the agreement.

Under these agreements that are generally between the medical groups and the payor (which in most cases are large medical groups or Independent Practice Associations), the payor pays a pre-determined amount per-member per-month in exchange for the radiology group providing all necessary covered services to the managed care members included in the agreement.

These contracts pass much of the financial risk of providing outpatient diagnostic imaging services, including the risk of over-use, from the payor to the radiology group and, as a result of our management agreement with the radiology group, to us.

We believe that through our comprehensive utilization management, or UM, program we have become highly skilled at assessing and moderating the risks associated with the capitation agreements, so that these agreements are profitable for us.

Our UM program is managed by our UM department, which consists of administrative and nursing staff as well as BRMG medical staff who are actively involved with the referring physicians and payor management in both prospective and retrospective review programs.

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.

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However, we often agree to a specified rate for MRI and CT procedures that is not tied to the Medicare Fee Schedule.

Our facilities are primarily located in geographic networks that we refer to as regions.

The majority of our facilities are multi-modality sites, offering various combinations of MRI, CT, PET, nuclear medicine, ultrasound, X-ray, fluoroscopy services and other related procedures.

A portion of our facilities are single-modality sites, offering either X-ray or MRI services.

Consistent with our regional network strategy, we locate our single-modality facilities near multi-modality facilities, to help accommodate overflow in targeted demographic areas.

The following table sets forth the number of our facilities operated directly or managed through joint ventures for each year during the five-year period ended December 31, 2020:

Imaging Centers

Our centers are primarily located in geographic networks that we refer to as regions.

The majority of our centers are multi-modality sites, offering various combinations of MRI, CT, PET, nuclear medicine, ultrasound, X-ray, fluoroscopy services and other related procedures.

A portion of our centers are single-modality sites, offering either X-ray or MRI services.

Consistent with our regional network strategy, we locate our single-modality centers near multi-modality centers, to help accommodate overflow in targeted demographic areas.

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, 2021:

2017 2018 2019 2020 2021

Total facilities owned or managed (at beginning of the year) 300 305 297 344 335

Facilities added by:

Total centers owned or managed (at beginning of the year) 305 297 344 335 331

Centers added by:

Acquisition 8 55 9 13 27

Internal development 4 5 4 4 1

Facilities closed or sold (13) (20) (13) (22) (21)

Total facilities owned or managed (at year end) 305 297 344 335 331

Centers closed or sold (20) (13) (22) (21) (12)

Total centers owned or managed (at year end) 297 344 335 331 347

Diagnostic Imaging Equipment

The following table indicates, as of December 31, 2020, the quantity of principal diagnostic equipment available at our facilities operated directly or through joint venture investments:

The following table indicates, as of December 31, 2021, the quantity of principal diagnostic equipment available at our centers operated directly or through joint venture investments:

Equipment Count Years Ended December 31,

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Information Technology

Our corporate headquarters and many of our facilities are interconnected through a state-of-the-art information technology system.

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.

This technology has created cost reductions for our facilities 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:

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;

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We further our objectives of inclusion by providing training and growth opportunities, market-competitive compensation and a responsive benefits plan to support the needs of our human capital.

We employ imaging center managers who are responsible for overseeing day-to-day and routine operations at each of our facilities, including staffing, modality and schedule coordination, referring physician and patient relations and purchasing of materials to effectively manage their location(s).

These imaging center managers report to regional managers and/or directors, who are responsible for oversight of the operations of all facilities within their region, including sales, marketing and contracting.

We employ imaging center managers who are responsible for overseeing day-to-day and routine operations at each of our centers, including staffing, modality and schedule coordination, referring physician and patient relations and purchasing of materials to effectively manage their location(s).

These imaging center managers report to regional managers and/or directors, who are responsible for oversight of the operations of all centers within their region, including sales, marketing and contracting.

The regional managers and directors, along with our directors of contracting, marketing, facilities, management/purchasing and senior human resources leadership all report to our chief operating officers.

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Our initiatives include:

• Building a Harmonious Workforce – a three part training series aimed at education, awareness and sensitivity training for senior management, center level management and our team at large

• RadRecruit – training on best in class recruiting practices to ensure equity in the interview/hiring process and education regarding unconscious bias for our management team;

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• High School, Vocational School and Collegiate outreach.

• The 2020 second quarter launch of RadNet Voices, an internal DE & I committee, sponsored by senior leadership, and comprised of a core members and rotating group of team members to capture and respond to team member experience.

Approximately 77% of the Company’s workforce at December 31, 2021 was female and 48% were from under-represented groups.

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Employee Development.

We continue to emphasize employee development and education.

We provide a range of internal education and development programs and opportunities to support the advancement of our employees.

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Beyond the fundamental needs of health, welfare and retirement programs, we are focused on the specific needs of our individual employees.

In 2020, our employees adapted to an unprecedented amount of change and uncertainty driven by the COVID-19 pandemic, including rescheduled work priorities, and closure of schools and daycare facilities for families.

We have continued to provide resources and ongoing support to employees facing these challenges throughout the year, such as a wellness incentives, , home office setup allowance, expanded health coverage, and flexible work schedules.

Since March 2020, our employees have adapted to an unprecedented amount of change and uncertainty driven by the COVID-19 pandemic, including rescheduled work priorities, and closure of schools and daycare facilities for families.

We have continued to provide resources and ongoing support to employees facing these challenges throughout the year, such as a wellness incentives, home office setup allowance, expanded health coverage, and

flexible work schedules.

Additionally and as a result of many of our hospital and managed care partners we were able to provide access to COVID vaccinations for our patient facing healthcare workers first, then our lower risk but essential infrastructure team.

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Physician Marketing

Each customer service representative on our physician marketing team is responsible for marketing activity on behalf of one or more facilities.

Each customer service representative on our physician marketing team is responsible for marketing activity on behalf of one or more centers.

The representatives act as a liaison between the facility and referring physicians, holding meetings periodically and on an as-needed basis with them and their staff to present educational programs on new applications and uses of our systems and to address particular patient service issues that have arisen.

In our experience, consistent hands-on contact with a referring physician and his or her staff generates goodwill and increases referrals to our facilities.

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.

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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 facilities and the reputation of the physicians with whom we contract all serve as tools for obtaining new or repeat business from payors.

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.

Sports Marketing Program

Our west coast operations provide diagnostic digital X-ray services for the following organizations at their respective stadiums:

Los Angeles Clippers, Dodgers, Lakers, Kings and Sparks and the USC Trojans football team.

Los Angeles Clippers, Dodgers, Kings and Lakers.

In exchange for these services the teams provide us with season tickets and parking.

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We also provide radiology services at select imaging centers for the Anaheim Ducks, Los Angeles Angels, Los Angeles Rams, Oakland Athletics and San Francisco 49ers organizations.

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 permits us to state we are the imaging partner to each organization.

The sponsorship agreement with the Ravens lasts through 2022 and the Orioles through 2021.

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 2022.

We acquire our major diagnostic imaging equipment directly from original equipment manufacturers or through third party financing companies and purchase medical supplies from various national vendors.

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We employ direct purchase or finance arrangements to accomplish our needs with such firms as GE, Hologic, Key Equipment, Philips, Siemens and Spectrum.

At December 31, 2020, our liabilities for financing arrangements for radiology equipment, inclusive of operating and finance leases, amounted to approximately $58.9 million.

If we open or acquire additional imaging facilities, we may incur material lease obligations.

At December 31, 2021, our liabilities for operating arrangements of radiology equipment amounted to approximately $43.8 million.

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.

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Our competitors include independent imaging operators and smaller regional operators, as well as hospitals and hospital groups that operate their own imaging services.

In addition, some physician practices have established their own diagnostic imaging facilities within their group practices.

In addition, some physician practices have established their own diagnostic imaging centers within their group practices.

We experience additional competition as a result of those activities.

We compete principally on the basis of our reputation, our ability to provide multiple modalities at many of our facilities, the location of our facilities, the quality of our diagnostic imaging services and technologists and our ability to establish and maintain relationships with healthcare providers and referring physicians.

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.

Some of our competitors may now or in the future have access to greater financial resources than we do, which could allow them to establish more facilities and provide access to newer, more advanced equipment.

Some of our competitors may now or in the future have access to greater financial resources than we do, which could allow them to establish more centers and provide access to newer, more advanced equipment.

Each of the third party contracted radiology practices has entered into agreements with its physician shareholders and full-time employed radiologists that generally prohibit those shareholders and radiologists from competing for a period of two to five years within defined geographic regions after they cease to be owners or employees, as applicable.

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Licensing and Certification Laws

Ownership, construction, operation, expansion and acquisition of diagnostic imaging facilities are subject to various federal and state laws, regulations and approvals concerning licensing of facilities and personnel.

In addition, free-standing diagnostic imaging facilities 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.

Ownership, construction, operation, expansion and acquisition of diagnostic imaging centers are subject to various federal and state laws, regulations and approvals concerning licensing of centers and personnel.

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

In the states in which we operate, other than Florida, 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.

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.

We structure our relationships with the radiology practices, including the purchase of diagnostic imaging facilities, 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.

Medicare and Medicaid Fraud and Abuse – Federal Anti-kickback Statute

During the year ended December 31, 2021, approximately 21% 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).

purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs.

Federal law known as the Anti-kickback Statute prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under the Medicare, Medicaid or other governmental programs or (iii) the purchase, lease or order or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under the Medicare, Medicaid or other governmental programs.

Noncompliance with the federal Anti-kickback Statute can result in exclusion from the Medicare, Medicaid or other governmental programs and civil and criminal penalties.

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The regulations governing the Stark Law were also recently amended as part of the Regulatory Sprint to Coordinated Care initiative.

These new regulations, which among other things establish new exceptions for value-based arrangements, were published by the Centers for Medicare & Medicaid Services (CMS) on November 20, 2020.

These new regulations, which among

other things establish new exceptions for value-based arrangements, were published by the Centers for Medicare & Medicaid Services (CMS) on November 20, 2020.

We believe that, although we receive fees under our service agreements for management and administrative services, we are not in a position to make or influence referrals of patients.

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In addition, we believe that we have structured our acquisitions of the assets of existing practices, and we intend to structure any future acquisitions, so as not to violate the Anti-kickback Statute, Stark Law and the regulations related to these laws.

Specifically, we believe the consideration paid by us to physicians to acquire the tangible and intangible assets associated with

their practices is consistent with fair value in arms’ length transactions and is not intended to induce the referral of patients or other business generated by such physicians.

Specifically, we believe the consideration paid by us to physicians to acquire the tangible and intangible assets associated with their practices is consistent with fair value in arms’ length transactions and is not intended to induce the referral of patients or other business generated by such physicians.

Should any such practice be deemed to constitute an arrangement designed to induce the referral of Medicare or Medicaid patients, then our acquisitions could be viewed as possibly violating anti-kickback and anti-referral laws and regulations.

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These audits are expected to intensify governmental scrutiny of individual providers.

An unsatisfactory audit of any of our diagnostic imaging facilities or contracted radiology practices could result in any or all of the following:

An unsatisfactory audit of any of our diagnostic imaging centers or contracted radiology practices could result in any or all of the following:

significant repayment obligations, exclusion from Medicare, Medicaid or other governmental programs, and civil and criminal penalties.

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Excluded from the adjustment is low-technology imaging modalities such as ultrasound, X-ray and fluoroscopy.

The Health Care and

Education Reconciliation Act of 2010 (H.R.

The Health Care and Education Reconciliation Act of 2010 (H.R.

4872), or Reconciliation Act, which was passed by the Senate and approved by the President on March 30, 2010, amends the provision for higher presumed utilization of advanced diagnostic imaging services to a presumed rate of 75%.

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 (“ATRA”), effective as of January 1, 2014.

This utilization rate was further increased to 90% by the American Taxpayer Relief Act of 2012, effective as of January 1, 2014.

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.

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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.

A person or entity that knowingly and willfully obtains the money or property of any healthcare benefit program by means of false or fraudulent representations in connection with the delivery of healthcare services is subject to a fine or imprisonment, or potentially both.

A person or entity that knowingly and willfully obtains the money or property of any healthcare benefit program by

means of false or fraudulent representations in connection with the delivery of healthcare services is subject to a fine or imprisonment, or potentially both.

In addition, HIPAA authorizes the imposition of civil money penalties against entities that employ or enter into contracts with excluded Medicare or Medicaid program participants if such entities provide services to federal health program beneficiaries.

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Moreover, we cannot guarantee that enforcement agencies or courts will not make interpretations of the HIPAA standards that are inconsistent with ours, or the interpretations of our contracted radiology practices or their affiliated physicians.

A finding of liability under the

HIPAA standards may result in significant criminal and civil penalties.

A finding of liability under the HIPAA standards may result in significant criminal and civil penalties.

Noncompliance also may result in exclusion from participation in government programs, including Medicare and Medicaid.

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Our mammography systems are regulated by the FDA pursuant to the Mammography Quality Standards Act of 1992, as amended by the Mammography Quality Standards Reauthorization Acts of 1998 and 2004 (collectively, the “MQSA”).

All mammography facilities are required to meet the applicable MQSA requirements, including quality standards, be accredited by an approved accreditation body or state agency and certified by the FDA or an FDA-approved certifying state agency.

All mammography centers are required to meet the applicable MQSA requirements, including quality standards, be accredited by an approved accreditation body or state agency and certified by the FDA or an FDA-approved certifying state agency.

Pursuant to the accreditation process, each facility providing mammography services must comply with certain standards that include, among other things, annual inspection of the facility's equipment, personnel (interpreting physicians, technologists and medical physicists) and practices.

Compliance with these MQSA requirements and standards is required to obtain Medicare payment for services provided to beneficiaries and to avoid various sanctions, including monetary penalties, or suspension of certification.

Although the Mammography Accreditation Program of the American College of Radiology is an approved accreditation body and currently accredits all of our facilities which provide mammography services, and although we anticipate continuing to meet the requirements for accreditation, if we lose such accreditation, the FDA could revoke our certification.

Although the Mammography Accreditation Program of the American College of Radiology is an approved accreditation body and currently accredits all of our centers which provide mammography services, and although we anticipate continuing to meet the requirements for accreditation, if we lose such accreditation, the FDA could revoke our certification.

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.

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Radiologist Licensing

The radiologists providing professional medical services at our facilities are subject to licensing and related regulations by the states in which they provide services.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business