The Diagnostic Services division provides services including cardiac event monitoring, nuclear cardiology and ultrasound imaging. These services are provided to physician practices, hospitals and imaging centers. This segment also provides client-centric services for nuclear cardiology camera owners such as staffing, outreach, outsourcing and administrative support.
The Diagnostic Imaging division develops and manufactures solid-state gamma cameras for nuclear cardiology and nuclear medicine applications, while it also repairs and supports Digirad equipment as well as equipment from most other manufacturers of nuclear cardiology systems.
Digirad Corporation provides diagnostic solutions in the United States. The company operates in two segments, Diagnostic Services and Diagnostic Imaging. The Diagnostic Services segment provides in-office nuclear cardiology and ultrasound services, and cardiac event monitoring services to physicians who perform nuclear imaging, echocardiography, vascular or general ultrasound tests, or any combination of these procedures in their offices, hospitals, and imaging centers. The Diagnostic Imaging segment sells nuclear imaging cameras for nuclear cardiology and general nuclear medicine applications, as well as provides camera maintenance services to hospitals, imaging centers, physician offices, and mobile service providers. Digirad Corporation was founded in 1985 and is headquartered in Suwanee, Georgia.
(Summary) Company) (Chart)
20 July 2016
1yr Target $7.50
Payout Ratio 12.19%
1yr Cap Gain 29.53%
1yr Tot Return 32.98%
EPS (ttm) $1.64
EPS next yr $0.33
Forward P/E 17.82
EPS next 5yr 16.00%
1yr Price Support $5.28
Market Cap $112.50 Mil
Revenues $78.10 Mil
Earnings $32.50 Mil
Profit Margin 41.61%
Quick Ratio 1.20
Current Ratio 1.40
1yr RevGR 9.38%
3yr RevGR 6.32%
5yr RevGR 1.60%
1yr EarnGR 746.15%
3yr EarnGR ---
5yr EarnGR ---
1yr DivGR 0.00%
3yr DivGR 0.00%
5yr DivGR ---
Digirad designed and commercialized the first solid-state nuclear gamma camera for the detection of cardiovascular disease and other medical conditions. Their imaging systems are sold in both portable and fixed configurations, and provide enhanced operability and improved patient comfort. Their nuclear cameras fit easily into floor spaces as small as seven feet by eight feet, and facilitate the delivery of nuclear medicine procedures in a physician’s office, an outpatient hospital setting, or within multiple departments of a hospital (e.g., emergency and operating rooms).
Through Diagnostic Services, the company offers a convenient and economically efficient imaging services program as an alternative to purchasing a gamma camera or ultrasound equipment or outsourcing the procedures to another physician or imaging center. For physicians who wish to perform nuclear imaging, echocardiography, vascular or general ultrasound tests, or any combination of these procedures in their offices, Digirad provides the ability engage their services, which includes the use of an imaging system, qualified personnel, and related items required to perform imaging in the their own offices and bill Medicare, Medicaid, or one of the third-party healthcare insurers directly for those services.
The flexibility of their products and services allow physicians to ensure continuity of care and convenience for their patients and allows them to retain revenue from procedures they would otherwise refer to imaging centers and hospitals. The imaging services are primarily provided to cardiologists, internal medicine physicians, and family practice doctors who enter into annual contracts for a set number of days ranging from once per month to five times per week.
Most of the imaging services are focused on cardiac care. Many of the company's physician customers are reliant on reimbursements from Medicare, Medicaid, and third-party insurers where, in the past, there has been downward price pressure and uncertainty of reimbursement rates due to factors outside the physicians’ control. Future changes and related impacts may require modifications to the company's current business model in order for our physician customers and Digirad to maintain a viable economic model.
With the acquisition of Telerhythmics, LLC (Telerhythmics) on March 13, 2014, Digirad broadened their suite of service offerings through the Diagnostic Services segment, enabling the provision of outsourced cardiac event monitoring services. Providing these services offers flexibility and convenience to the company's customers who do not have to incur the costs of staffing, equipment, and logistics to monitor patients as part of their standard of care. These cardiac event monitoring services are provided primarily through an independent diagnostic testing facility model which allows Digirad to bill Medicare, Medicaid, or one of the third-party healthcare insurers directly for services provided. As such, the company's cardiac event monitoring services are directly subject to reimbursements from Medicare, Medicaid, and third-party insurers, which are subject to changes on a periodic basis.
Digirad's Diagnostic Imaging segment revenue results primarily from selling solid-state gamma cameras and camera maintenance contracts. The company sells their imaging systems to physician offices and hospitals primarily in the US, with a small number of imaging systems sold internationally.
The company's main strategic focus is on growing their Diagnostic Services business, which they plan to accomplish by driving revenue density by providing additional service offerings, such as cardiac event monitoring and by increasing the company's overall number of customers through territory expansion and acquisition of other health care solutions companies. Recent acquisitions have included the acquisition of Telerhythmics on March 13, 2014, MD Office Solutions on March 5, 2015 (a provider of in-office nuclear cardiology imaging in the northern and central California regions) and DMS Health Technologies on January 1, 2016 (a provider of mobile healthcare solutions and a seller of medical equipment and services to small and regional hospitals).
The company expects the number of states served to double in 2016 compared to 2015 as a result of the DMS Health acquisition, and should significantly impact the company's future financial results.
Nuclear Imaging. Nuclear imaging is a form of diagnostic imaging in which depictions of the internal anatomy or physiology are generated primarily through non-invasive means. Diagnostic imaging facilitates the early diagnosis of diseases and disorders, often minimizing the scope, cost, and amount of care required and reducing the need for more invasive procedures. Currently, the major types of non-invasive diagnostic imaging technologies available are: x-ray, magnetic resonance imaging (MRI), computerized tomography (CT), ultrasound, positron emission tomography (PET, which is a form of nuclear imaging), and nuclear imaging. The most widely used imaging acquisition technology utilizing gamma cameras is single photon emission computed tomography, or SPECT. All of the company' current cardiac gamma cameras employ SPECT technology.
Though the utilization rates of competing modalities such as CT, PET, and MRI, and diagnostic procedures such as CT angiography are high, SPECT procedures performed with gamma cameras are expected to continue to be used for a substantial number of cardiac-specific imaging procedures. The company believes that continued utilization of SPECT technology will be driven by patients having easier access to nuclear medicine services at physicians’ offices, lower purchase and maintenance costs, a smaller physical footprint, and easier service logistics of gamma cameras.
Clinical Applications for Nuclear Imaging. Nuclear imaging is used primarily in cardiovascular, oncology, and neurological applications. Nuclear imaging involves the introduction of very low-level radiopharmaceuticals into the patient’s bloodstream, which are specially formulated to concentrate temporarily in the specific part of the body to be studied. The radiation signals emitted by the radiopharmaceutical materials are then converted into an image of the body part or organ. Nuclear imaging has several advantages over other diagnostic imaging modalities, showing not only the anatomy or structure of an organ or body part, but also its function including blood flow, organ function, metabolic activity, and biochemical activity. Cardiologists as well as a number of internists and other physicians either purchase our nuclear cameras or subscribe to our Diagnostic Services services for in-office cardiac imaging for these advantages.
Ultrasound Imaging. Ultrasound imaging is a form of diagnostic imaging in which depictions of the internal anatomy are generated primarily through non-invasive means. Ultrasound imagers use sonar techniques to generate diagnostic images that facilitate the early diagnosis of diseases and disorders, often minimizing the scope and cost of care required and reducing the need for invasive procedures.
Clinical Applications for Ultrasound Imaging. Ultrasound is one of the most widely used imaging techniques in the United States. Ultrasound imaging is used primarily in obstetrics, internal medicine, cardiovascular care, and vascular health applications. Ultrasound imaging involves the transmission and detection of sound waves into and from a patient’s body. The sound waves transmitted by the ultrasound system are then converted into an image of the body part or organ.
Ultrasound imaging also shows the anatomy or structure of many internal organs or body parts, as well as key functional information including blood flow, wall motion, and organ function. Digirad's ultrasound services are used by cardiologists, internists, and other physicians for in-office echocardiography and general ultrasound imaging.
Cardiac Event Monitoring. Cardiac event monitoring is a diagnostic test that allows physicians to see the electrocardiogram (ECG) of a patient’s heart rhythm over a period of time or related to a specific event. The test includes a small monitor that is worn on the patient’s waist and is connected to lead wires affixed to the patient’s chest. The purpose of this test is to capture infrequent heart conditions that may only be experienced outside a physician’s office, as well as to observe the state of the heart in various resting and active situations.
Clinical Applications for Cardiac Event Monitoring. Cardiac event monitoring is a widely utilized cardiac test that provides clinical benefits in situations where the patient’s symptoms occur erratically or infrequently. Often symptoms can occur infrequently, but still be related to life-threatening cardiac conditions that need to be corrected. The use of a cardiac event monitor allows these symptoms to be captured and diagnosed, and ultimately corrected via prescription medications or use of invasive procedures, if required.
Our Imaging Services. Diagnostic Services offers portable nuclear and ultrasound imaging services. Digirad has obtained Intersocietal Accreditation Commission (IAC) and Intersocietal Commission for Echocardiography Laboratories (ICAEL) accreditation for their services. The company's nuclear modality services include an imaging system, a certified nuclear medicine technologist and a cardiac stress technician (often a certified or trained nurse or paramedic), the supply of radiopharmaceuticals, and required licensing services for the performance of nuclear imaging procedures under the supervision of physicians. Their licensing infrastructure provides the radioactive materials license, radiation safety officer services, radiation safety training, monitoring and compliance policies and procedures, and the quality assurance function, to ensure adherence to applicable state and federal nuclear regulations. The ultrasound imaging service is similar, in that Digirad provides the ultrasound equipment and an experienced ultrasound technologist to perform the service.
Digirad's portable nuclear imaging operations use a “hub and spoke” model in which centrally located regional hubs anchor multiple van routes in the surrounding metropolitan areas. At our Diagnostic Services hubs, clinical personnel load the equipment, radiopharmaceuticals, and other supplies onto specially equipped vans for transport to the physician’s office or other customer locations, where they set up the equipment for the day. After quality assurance testing, a technologist under the physician’s supervision will gather patient information, inject the patient with a radiopharmaceutical, and then acquire the images for interpretation by the physician.
Digirad provides nuclear and ultrasound services primarily under contracts for services delivered on a per-day basis. Under these agreements, physicians pay us a fixed amount for each day and they commit to the scheduling of a minimum number of service days during the contract term, which typically runs for one year, as well as a variable cost associated with the associated volume of patients utilizing our services and radiopharmaceuticals. The same fixed payment amount is due for each day regardless of the number of patients seen or the reimbursement or payment obtained by the physician, practice, hospital, or imaging center.
Our Cardiac Event Monitoring Services. Diagnostic Services also offers remote cardiac event monitoring services. These services include provision of a monitor, remote monitoring by registered nurses, and 24 hours a day, 7 days a week monitoring support for patients and physician customers.
Digirad offers modalities of: mobile cardiac telemetry (MCT), mobile cardiac event monitoring (both in wireless and analog versions), holter monitoring, and pacemaker analysis. The company's monitoring service operates out of a centralized monitoring center located near Memphis, Tennessee. From this location, the majority of monitoring equipment is shipped directly to patient homes once they are enrolled in our service. Patients hook up the equipment with easy to follow instructions, as well as assistance from our monitoring center. Once they are hooked up to the monitoring device, patients are monitored for a period of time ranging from 2 to 30 days. At the conclusion of the monitoring period, the equipment is packaged up and sent back to our monitoring center, after which the equipment is redeployed to the next patient.
Digirad provides their services under contracts with their customers that typically allow for direct billing to Medicare, Medicaid, or third-party private payors once the monitoring cycle is complete. Typically, contracts can be canceled at any time, and are generally present to create understanding on billing responsibilities.
Digirad sells a line of nuclear imaging cameras for nuclear cardiology and general nuclear medicine applications. Cameras are used in hospitals, imaging centers, physician offices, and by mobile service providers. The central component of a nuclear camera is the detector, and it ultimately determines the overall clinical quality of the image a camera produces. The company's nuclear cameras feature detectors based on advanced proprietary solid-state technology. Solid-state systems have a number of benefits over conventional photomultiplier tube-based camera designs typically offered by the company's competitors. Digirad's solid-state technology systems are typically 2-5 times lighter and considerably more compact than most traditional nuclear systems, making them far easier and less costly to build, very reliable, and able to be utilized for mobile applications. Digirad is a market leader in the mobile solid-state nuclear camera segment.
Our Cardius family of dedicated cardiac SPECT solid-state imagers are noted for their compactness, portability, and unique upright imaging capabilities that make it possible to image patients up to 500 pounds in a sitting position. Upright imaging makes it possible to image large bariatric, chronic obstructive pulmonary disease (COPD), or claustrophobic patients that typically could not be imaged lying down on competitive systems. Digirad offers fixed dual-head and triple-head cardiac camera models for dedicated use within a facility, and portable configurations that make it possible to move the system to provide service to multiple rooms or sites. The Cardius® XACT SPECT/CT system features a triple-head design and a low dose volume CT attenuation correction methodology, making it possible to perform studies faster with greater interpretation diagnostic confidence. The XACT camera is sought by departments seeking to improve productivity, increase clinical accuracy, or employ new low dose clinical protocols.
The ergoTM large-field-of-view imaging system is targeted to hospitals with multi-camera general nuclear medicine departments, academic centers, pediatric hospitals, regional trauma centers, women’s health centers, and cancer centers. Most general nuclear medicine departments have the need for a single-head planar portable camera for imaging patients more conveniently on hospital stretchers, for imaging patients that can not be moved, and for imaging patient’s at their bedside (pediatrics, intensive care units, critical care units, emergency rooms, surgical suites, women’s health clinics, or on regular patient floors). A single-head planar camera provides a more economical and convenient way to perform approximately 25% or more of all studies commonly performed in general nuclear medicine. It also opens the door to perform studies on critically ill patients in the patient’s room and the ability to perform molecular breast imaging protocols that offer new revenue generation potential while improving the standard of patient care.
Digirad initially built up an infrastructure based on the assumption that the company would grow a lot faster than it has over the last few years. As a result, they've had to downsize their operations and earnings have taken a hit. But I think they may finally have things under control and may have finally right-sized the company for a future that includes expanding sale and subsequent expanding earnings.
I also like that the company has continued to pay a dividend throughout this period even though revenues and earnings may not have been ideal. That tells me that management has faith in the future of the company. Hopefully in the future as earnings increase, so will the dividend.
This is obviously a smaller company than I usually invest in but I really think there's potential for gains and a remote possibility that the company may be bought out one day by a larger health or technology company. With a price just over $5 per share, it's not hard to accumulate a few hundred shares of this company to see where it goes.