Profile: Alliance HealthCare Services, Inc. (AIQ)

Alliance Healthcare Services, Inc. (Alliance), formerly Alliance Imaging, Inc., incorporated on May 27, 1987, is a provider of outpatient diagnostic imaging services and radiation oncology services. The Company’s principal sources of revenue are derived from magnetic resonance imaging (MRI) and positron emission tomography/computed tomography (PET/CT). The Company provides imaging and therapeutic services primarily to hospitals and other healthcare providers on a shared-service and full-time service basis. Its also provides services through a number of fixed-site imaging centers, primarily to hospitals or health systems. In March 2008, Alliance Radiosurgery, LLC, a wholly owned subsidiary, acquired six CyberKnife robotic radiosurgery facilities from Accuray, Inc. In July 2008, it acquired Medical Outsourcing Services, LLC (MOS), a mobile provider of PET/CT. In December 2008, it acquired Shared PET Imaging, LLC (SPI), a mobile and fixed-site provider of PET and PET/CT. SPI serves approximately 90 clients in thirteen states, including Ohio, Michigan, Indiana, Illinois, Florida, Pennsylvania, New York, Tennessee and South Carolina. During the year ended December 31, 2008, it also acquired the remaining 20% minority interest in Alliance Oncology, LLC (AO).

Alliance’s services include the use of its imaging systems, technologists to operate the systems, equipment maintenance and upgrades, and management of day-to-day shared-service and fixed-site diagnostic imaging operations. It also provides non scan-based services, which includes only the use of its imaging systems under a short-term contract. The Company’s radiation oncology business is operated through its wholly owned subsidiary, AO, and includes a range of services for cancer patients covering initial consultation, preparation for treatment, simulation of treatment, actual radiation oncology delivery, therapy management and follow-up care. Its services include the use of the Company’s linear accelerators, therapists to operate such systems, administrative staff, equipment maintenance and upgrades, and management of day-to-day operations. It also provides stereotactic radiation oncology services through wholly owned subsidiary, Alliance Radiosurgery, LLC. During 2008, MRI and PET/CT services generated 54% and 34% of the Company’s revenue, respectively. The remaining revenue consisted of radiation oncology revenue, and other modality diagnostic imaging services revenue, primarily computed tomography (CT), and management contract revenue.

As of December 31, 2008, the Company had 505 diagnostic imaging and radiation oncology systems, including 301 MRI systems and 114 positron emission tomography (PET) or PET/CT systems, and served over 1,000 clients in 46 states. As of December 31, 2008, the Company operated 105 fixed-site imaging centers (four in unconsolidated joint ventures), which constitutes systems installed in hospitals or other medical buildings on or near hospital campuses, including modular buildings, systems installed inside medical groups’ offices, and free-standing fixed-site imaging centers, which includes systems installed in a medical office building, ambulatory surgical center, or other retail space. Of the 105 fixed-site imaging centers, 82 were MRI fixed-site imaging centers, 12 were PET or PET/CT fixed-site imaging centers, seven were other modality fixed-site imaging centers and four were in unconsolidated joint ventures. It also operated 21 radiation oncology centers and stereotactic radiosurgery facilities (including two radiation oncology centers in unconsolidated joint ventures), as of December 31, 2008.

As of December 31, 2008, approximately 79% of its revenues were generated by providing services to hospitals and other healthcare providers, referred to as wholesale revenues. As of December 31, 2008, approximately 21% of its revenues were generated by providing services directly to patients from the Company’s sites located at or near hospitals or other healthcare provider facilities, referred to as retail revenue. Its revenue from these sites is generated from direct billings to patients or their third-party payors, including Medicare, which are recorded net of contractual discounts and other arrangements for providing services at discounted prices.

The Company offered 60% of its systems on a part-time basis. These systems are located in mobile trailers, which are transported to its clients’ locations. The Company schedule deployment of these mobile systems so that multiple clients can share use of the same system. The Company offered 28% of its systems on a full-time, long-term basis. These systems are located in either mobile units or buildings located at or near a hospital or clinic. Full-time service systems are provided for the use of a particular hospital or clinic. The Company offers full-time services under contracts that range from five to 10 years in length. The Company offered 12% of its systems to clients on an unstaffed basis. These systems are located in mobile trailers, which are transported to its clients’ locations.

The Company competes with RadNet, Inc., InSight Health Services Corp., Medquest, Inc., Medical Resources, Inc., Shared Medical Services, Kings Medical Company Inc., DMS Health Group, Radiation Therapy Services, Inc., Oncure Medical Corp., Vantage Oncology, Inc. and US Oncology, Inc.