Thank you all for attending. I'm Chris Brustuen, Managing Director here at Morgan Stanley, and I'm joined today by Mark and Greg. Maybe I'll pass it to you for quick intros on your end. Sure. Mark Stolper, Chief Financial Officer of RadNet. Been with RadNet, this is my 23rd year in the same seat. Yeah, exactly. Greg Sorensen. What a great thing. I'm the Chief Strategy Officer. I've only been with RadNet here six and a half years, so the youngster on the team. But Chris, we're looking forward to the conversation. Thanks for having us. Excellent. So I want to start with the competitive landscape in radiology. Given your scale, can you provide a little perspective on the opportunity for further industry consolidation? Sure. I'll start. One of the interesting things about the diagnostic imaging industry is that it remains highly fragmented. When you look at other areas of healthcare services, like dialysis or clinical laboratory and home health systems, there's been a lot of consolidation, and our industry really is sort of the Wild West. If you take the top five players, of which we're the largest outpatient player in diagnostic imaging, we own less than 20% of the market. It's believed that there's somewhere north of 6,000 outpatient diagnostic imaging centers in the United States. We're the largest player by a factor of almost two to the next player, and we have 445 centers. A lot of room for continued growth and consolidation, which we believe will happen over the coming years. I would say, it's interesting, this is an industry where, at least we're seeing in our hands, scale really does make a difference. Especially, I think everybody who has IT at the core of what they're doing realizes that once you have scale, all those investments really start to pay off in a way that is difficult for the single or kind of smaller chains. I think there's going to be even more pressure in the future for consolidation to happen. Yeah, that's a good point. I mean, most of the centers out there are owned by mom-and-pop radiologist-owned facilities who don't have the benefits of scale in revenue cycle, billing and collecting, equipment purchasing, equipment service, up and down the cost structure. Like other areas of healthcare services, scale matters, particularly in an arena where there's a shortage of labor and labor is continuing to be more expensive. Yep. I want to expand on that point a little bit about when we think about kind of white space in the radiology market, what is reimbursement like in the market, and how can that help to impact incremental growth? When we think about that too, some of the efficiencies from a clinical staffing model that you kind of hit on. Sure. Well, when you talk about reimbursement, you really have to have a bifurcated discussion between government reimbursement and private pay or commercial insurance. The Medicare reimbursement has been fairly stable over the last few years in our industry. I think CMS recognizes the importance of diagnostic imaging as a gateway to the broader healthcare delivery system. They also recognize on the outpatient side, meaning the Physician Fee Schedule, that they want to move as much of this business out of the hospitals to the lower- cost sites of care, so there's been stability in the Medicare reimbursement side. This year, meaning 2026, we had a slight increase. Next year, it's about a net neutral for us. Unfortunately, with CMS and with our government, we can't count on increases going forward in our industry to deal with the rising costs of doing business. On the commercial side of our business, however, that's where we have a focus, and that's where we've got some greater ability to impact or affect reimbursement. We learned early on in the company's history, over 30 years ago, that it was extremely important to have concentration on a regional basis because that gives you a seat at the table with negotiating rates with the commercial insurance companies, because if you can prove to them that you're indispensable to their provider network, and if you were to not come to an agreement on pricing, that, that would create both access issues and quality issues, and the volume that you would no longer be doing for them would end up going back into the much more expensive hospitals. They have to deal with you. They have to come to an agreement. So we've been pretty effective as we've grown our concentrations on both the East Coast and the West Coast, in negotiating increases each year to our commercial book of business, which has been extremely important and very valuable in our ability to absorb the inflationary aspects of doing business today and growing our book of business. I would just add, Chris, I think one of the biggest sort of rumors or sort of news items in the government reimbursement is the Trump administration's chatter about site-neutral payments. This has been something that's been talked about for at least a decade, maybe two decades more, because if you look at your radiology spend, which for many payers is a substantial part of their spend, they can't help but notice that RadNet's rates are a fraction of what an inpatient or HOPD rate is, and that drives them nuts. This is an area where the commercial payers have actually been in the lead, so you've seen some of the bigger payers really put incentives to try to get to the imaging services to lower site's cost of care, like ours. We are also seeing that pressure, hence opening centers in Walmart and other kinds of. We are trying to get our cost down. If the Trump administration were to be successful in that, I think that would be a major disruption in the industry. We see it as a major potential tailwind positive for us because we have learned how to image at a low cost- Yeah. In a sustainable, scalable way. Most of my former colleagues that were at big AMCs, academic medical centers, don't have that cost discipline. It is just not part of their DNA. If imaging services were cut in half, reimbursement or a quarter down to our levels, I think they would just close. I don't think they could afford to staff and provide the service at the level of, let's call it, relative inefficiency compared to the outpatient, more nimble market. That is a big unknown right now. In next year's proposal for reimbursement, there are some site-neutral provisions for non-contrast advanced imaging, where the HOPD schedule or the hospitals for the outpatient business is now going to essentially be reimbursed under the Physician Fee Schedule rates and not the HOPD rates, which are significantly higher. It is the first step towards what Greg is talking about towards site-neutral payments. It is one thing with CMS doing it. If the commercial insurance companies do it, and it is very often that the rates that they are paying within the hospitals for outpatient imaging are anywhere between 200% and 500% of the rates that they are reimbursing outpatient players like RadNet. If that happens, then the hospitals are really in trouble. We think that, that bodes really well for our joint venture business- Mmh. Which is a big and growing business for us. Impressive. I want to spend a little bit of time on organic growth and driving same-store volume trends. Can you talk a little bit about what levers and key initiatives you have in place to help drive organic growth and same-store volume growth? Sure. I divide those into operational initiatives, then technology initiatives, and I'll let Greg talk a little bit about that since he's the expert up here on the technology side. We are constantly monitoring backlogs. The great thing about our industry is the demand. Every year the demand is growing, so the overall pie for diagnostic imaging is growing, then you now have a market share shift that's occurring away from hospitals towards freestanding centers. The challenge that we have, and some believe it's a high-class problem, is managing the increased demand and the volume. We're always looking at operational initiatives that we can get patients, either expand hours. We monitor our backlogs, particularly around advanced imaging, where we expand hours. Like in Manhattan, here, we're scanning into 10:00, 11:00 o'clock at night in many of our centers. We're opened up on weekends in many of our centers, and we have a lot of initiatives to make certain investments in technology. For instance, on the equipment side, that have faster scanning time, more advanced post-processing software that allows for shorter scanning times that can get patients through our centers more quickly. Then there's a whole host of digital health initiatives, which I'll let Greg speak to, that are both designed for increasing our capacity as well as the speed through. Yeah. I actually think, in Q2, we reported a little over 10% same-store growth in MRI. Wow. This is actually one of those areas where the digital health initiatives have really been able to, I think you can connect the dots to that same-store growth- specifically our TechLive implementation now. Almost all, if not all, of our 400 MRI scanners are now connected to these remote boxes. What that means is we can hire a tech in Arizona to scan here in New York City. She can be at home in her pajamas scanning me or you while we're in one of three different scanners that she can control. That has allowed us to open on weekends and at night, and at times that previously we just had a hard time staffing. I've talked with other radiology groups, and it's quite common for them to need to cancel slots because they can't get a tech. Somebody calls in sick, and there's no backup because they're running so lean. This TechLive remote initiative is what's really allowed us to tap into this backlog. We didn't buy 10% more scanners and speed up slots. That's a hard thing to do. Just keeping things open more is one of the kind of highest incremental margin improvement ways we can go about doing things. One last anecdote. I was in L.A. at one of our centers recently, and the operators there said, "We're near LAX in Inglewood. We've started opening scan slots at 3:00 A.M. Because a lot of the shift workers finish at 1:00 or 2:00, and they've got a knee problem or a shoulder, and those slots are filling up." So, to Mark's point, I think the demand for what imaging can bring to the healthcare process is high and growing in recognition. We don't have a demand problem. We have a problem meeting that demand, and that generally comes down to labor. We can buy another scanner, but can we staff it? That's where these remote initiatives and the other sort of technical speed-up initiatives that the digital health business have created and are now embedding- that's really where I think we can legitimately point to that 10% and say, "It wouldn't have been that high w ithout things like TechLive. Yeah. Another example of this is thyroid and breast ultrasound. Yeah. We bought a company, I guess it is going back about a year and a half ago, an Australian-based company called See-Mode, who had an FDA-approved thyroid ultrasound product that does two things, essentially. One, it speeds up the exam time at the facility, so that the tech, which this is a laborious process for the tech who is identifying thyroid nodules and sizing thyroid nodules and putting that into a worksheet that ultimately gets synthesized into the radiologist's report. Now, all of that is done with AI and autonomously, such that the exam time can now be scheduled in 20-minute increments instead of 30-minute increments. That 50% shortening of that exam time has massive implications for the capacity at a particular center for ultrasound. We just got FDA approval for breast ultrasound as well, within the last few months. Between the two of those, it is about 1,250,000 of our 3.7 million ultrasound exams annually. That is also speeding up the interpretation and the reporting time for the radiologist by as much as 50%, which has big implications for the radiologist. We get to bill under what is called a Category III reimbursement code or what is called a T-code. These are the types of technology initiatives that will continue to allow us to service the growing demand and increase the same-center performance that is driving the growth and profitability of the business. If you don't mind, Chris, I'd love to segue just briefly about this story on the Category III CPT codes, these T-codes. Yeah, great. Because there's a couple of interesting tidbits in there. For sure, a big one is that now, this is one of the few instances where an AI tool, these ultrasound post-processing AI solutions, are generating added revenue. If I just put my DeepHealth hat on, I look at how other AI tools are being sold, most of them are being sold as an efficiency story for the doc or a quality- improvement story. You're going to find that stroke faster or something like that. But there's been rare examples only where there was actually new revenue coming in for using the AI itself. That's exactly what's happening with these ultrasound post-processing codes. So that's one interesting thing. The second thing that I think is super interesting about this is, this wouldn't have happened without the marriage of RadNet and DeepHealth software companies in the same vertical stack. Let me just tell you a little bit about that. When we bought See-Mode, their AI worked, but it didn't work perfectly for our team, that's pretty common. Once you get the solution into a provider at scale, it always needs a little tweaking. But what they didn't know is that the RadNet payer team is quite good at negotiating with payers; these Category III codes, by definition, are not required to be paid. They're experimental. Category I, you have to pay. Category III is optional, and most payers opt out. In fact, prior to this, I would've told you Category III isn't really a path for successful reimbursement because so many payers just say, "Never mind." But our payment team has been able to bring the data about the better quality and the improved care to the payers, especially fewer false positives, less biopsies, and convince them to start paying for these Category III codes. Now more than half our payers pay us about a $60 fee for these Category III ultrasound code payments. If I'm selling software that often is-- Prior to this, you were happy to get a couple of dollars a click on the software. Now I can go to an outside customer as a DeepHealth sales guy and say, "Look, more than half the time you're going to get $60 for using my software. You should pay me $10 or $20 or $30 because I'm going to help you make another $30 or $60 or $50 on each case." That's a totally different story, and that's part of the reason why more than half of the DeepHealth revenue story on the digital side is external customers. They're seeing, "Oh, we can use your software just like RadNet is to, not just make these efficiencies and get more same-store growth, but actually boost revenue." These T-codes are certainly millions of dollars of added income or added revenue for both the services and the digital health side of the business. It's a big C change, and again, I don't think that would've happened without the combination of both the tech and the services pieces together. Going essentially to the payer with this compelling story. That's helpful. Thank you. That's very helpful. I want to expand on that point a little bit, specifically about DeepHealth. When we think about that platform, it's very unique. What it does for your business as a whole on the remaining piece of the business as well, to drive some same- store growth. But also on that item, can you discuss a little bit more about new revenue streams that maybe come in as a result of that, maybe plays through with the rest of the entire- Yeah, exactly. I'm a former, I would call myself sometimes a recovering academic. In academic medicine, the revenue streams don't, or even sustainability, is not really the focus. You're trying to do new things, and innovation is the top priority. At a place like RadNet, we're publicly traded. We want to bring new innovations, but they have to be sustainable. We can't subsidize them. As a result, our AI team at DeepHealth we've really been focusing on what AI tools have a sustainable business model. That's really been a pressure that I didn't feel seven years ago, and it has led us to focus on AI tools that really do have a model towards sustainability, which typically means new revenue sources in some way, shape, or form. These Category III codes are, I think, the biggest new thing for us in the last year or two. There were some Category I post-processing codes. The Prostate AI tool and the Neuro Suite tool used to bill under those. The new Category III codes for those are actually better paying, so we're shifting to those, and they're a little more appropriate because of the physician work component. We started five years ago now, four years ago, self-pay for the mammography, in part to get a new revenue stream to offset the cost, both of the software and of the added novel workflow that the AI enabled, where we bring in an expert, a second radiologist. I think your question is really spot on. If you don't not just make efficiencies, but actually bring in new revenue, it's really hard for a lot of companies to justify the investment. I was talking with a guy who works with a lot of AMCs. They often don't even know their margin. So to say, "Well, this is going to give you margin expansion," they're like, "What does that even mean?" But if you say, "Hey, there's a billing code. You can bill for this. It's going to bring added revenue. It will cover the cost, then the light bulb goes on, and it's starting to sort of click. I think in a similar way, the remote technologist scanning is one of those things where they can just instantly see that that's something that will bring them added revenue because they can open Saturdays where they couldn't before. I would say just one last thing on the remote tech area, maybe one quick story. One of the biggest challenges we have with our labor force is getting the right expertise to the right place. That has led in the past to, I would say, effectively overstaffing, so that when there was a problem, you could solve the problem with a technologist who knew how to solve, say, a complex cardiac MRI. We've started putting this remote scanning technology on more and more of our modalities. One of my ultrasound techs told us a really nice story. There was an ultrasound tech actually here in Newyork in one of our solo offices, where sometimes we just put a single machine to help the local docs do their work more efficiently, the referring physicians. They really want X-ray and ultrasound right there in the same building. This tech was doing an ultrasound on a newly pregnant woman. She was about six weeks pregnant, so that means we usually do the ultrasounds transvaginally. This tech couldn't find the baby's heartbeat, the fetus's heartbeat. That makes you nervous as a tech because the mom says she's pregnant. By five weeks, there's a heartbeat if the fetus is viable. She got nervous, so she, on her headset, basically called for help with using TechLive, and one of our super techs was able, without the patient even knowing, to see the screen remotely and guide, coach the tech on how to move the transducer. She found the heartbeat. Everything was fine. Didn't need to reschedule the patient. Patient never even knew that there was this struggle because the anatomy was a little tricky, and everything went great. That's somebody we didn't have to reschedule. It was a patient who was happier. It was a referring doctor who was happier. Getting that expertise with these remote tools to the right place at the right time, it really just is helping the whole process, and it's keeping our same-store growth up. You can argue to your question: here's going to be added revenue if you deploy these kinds of technologies. It was a really nice anecdote. That's an interesting example. Thank you for that. I want to go back to the labor environment that we're in today. Mark, you hit on that a little bit earlier. When we think about that, have you been able to automate any processes with your radiologists and techs to alleviate some of this pressure? Anything on the AI side or more from an efficiency standpoint too? Yeah. I think one of the challenges the entire healthcare delivery system, or healthcare services within that, is having is around labor, and we're seeing it in our industry, and it was exacerbated by COVID, where many people just never came back to work after the COVID period. We're seeing, or we've experienced, labor inflation throughout our organization, I think specifically around technologists and the shortage there. But front office people in our administrative functions, like revenue cycle, as well as radiologists, where they're struggling to keep up with the growing demand. Our focus in the DeepHealth division is around creating tools that either can automate certain manual processes today or provide tools for the existing labor force to be more efficient and more effective. Examples of some of the things that we're doing today are things like digital registration. We are rolling that out as we speak today. As patients come into the centers, either before they show up or while they are in the waiting room, they can now register for their exam digitally without having to go up to the front office person, get a whole bunch of clipboards with a bunch of paper, and fill that out. What that has done is it has allowed us to lower the number of employees that are sitting at the front desk, which has a big implication when you have 445 different locations. That is one example. Examples of the productivity of radiologists are all these tools, such as See-Mode, such as the Enhanced Breast Cancer Detection program, where the radiologist is using AI to do the initial interpretation of the exam. We are really focused in the DeepHealth division on our new Reporting Pro product. Oh. This is a tool that integrates. Our industry has used,for a number of years now, voice recognition transcription, so that when a radiologist dictates his or her report, it gets transcribed automatically. Back in the old days, when I started and when Greg started, we used to have people literally listening to WAV files and typing, but ultimately, we moved to voice recognition transcription. The next wave of technology, which we have brought to the marketplace, is this product called Reporting Pro, where it integrates with the clinical AI tool so that the AI, when the radiologist opens up the exam, the AI already shows a heat map where the pathology is or bounding boxes where the pathology is, and then has already written the report, so that the radiologist then never even has to dictate the report. He or she becomes a reviewer and an editor as opposed to a drafter, and that has major implications because it is believed- I have never been a radiologist, but you could speak to this, but half the time or more of the radiologist's time is on the reporting and the editing side, not on the interpretation side. These are the types of tools that the DeepHealth division is creating, and RadNet or the imaging centers act as a living laboratory to test these ideas and to be sort of a co-creator at scale in our environment. I would echo that. This co-creation story, I do not think we can emphasize enough. Okay. It is really valuable for us as software developers to have the services piece to interact and vice versa. Just two quick examples. I think when we were first looking at digital registration, we looked at other groups, and we thought, "Oh, well, we see people using kiosks. Maybe we should try kiosks." We did a couple of pilots with the services team. Bad. Did not work. Right. They take up space in a small waiting room. They were clunky. Patients did not like them. We pivoted with guidance from the operations team to the phone-based digital stuff. Everybody gets that, and it is a lot more convenient. It is more private. People were worried about who can see what on the kiosk. Those were things that I think, without being embedded inside the services organization, we as digital developers might not have done. Similarly, the drafting, the templating, all of those are things that are very iterative. You try it, you get feedback from the doc, you realize, okay, that is working, that is not working, and you change. Being able to do that, not just with one small group, but across the hundreds of centers, really makes a big difference. It speeds up the innovation cycle substantially, and it helps us deploy tools that the docs actually will use or that the techs actually will use. I think an open question right now is there more value to be gained by speeding up the physician, the professional side, or is there more to be gained by speeding up the operations, the technical? I think there is value creation in both, for sure. Mark has explained this before. 80% of our revenue-ish is in the technical side. It is kind of natural to want to go there, but I think we are seeing these very sophisticated modern tools really speeding up the doctor shortage, and they play hand in hand. I think we are seeing positive effects from both. Yeah. Other examples that we've deployed over the years has been around the revenue cycle area. In terms of pre-authorization and insurance verification. Back in the day, when a patient came in, we'd have to call the insurance company. Where is this patient within his or her deductible? Do we have to collect a copay? We were very ineffective of collecting the patient's portion of responsibility at the time of service or at the time of scheduling. Today, built into our RIS system, our radiology information system, which we own and develop and now is called DeepHealth OS, we can automatically query digitally the insurance authorization and verification of insurance for the patient, and all of this calculation about what we should collect at the time of service is done behind the scenes so that a $21- an- hour front office person doesn't have to try to do the math and collect the money. It just says, "Hey, Mr. Smith, you owe $200 at the time of service or $50 at the time of service. Yeah. We're being incredibly effective at collecting the patient portion responsibility, which has huge implications on your ultimate collection results and your bad debt and your revenue cycle. Thank you. I want to spend some time on the multi-modalities strategy and some of your exclusive managed care capitation arrangements that you have. How important is that for growth of the business? What do you think about that? Yeah. We've been doing capitation primarily in California for over 30 years now, and that's how we grew the company as a California-only operator at the beginning of our history. We still maintain great relationships with a lot of the large medical groups. Who are the counterparties to these capitation arrangements? They are taking capitated risk for all patient care from the various HMOs and managed care providers in California, and they pass on to us the risk of outpatient diagnostic imaging, which we've done. It's about a $130 million, $140 million book of business. It represents 6%ish of our revenue. But it's one of those areas where we like it because it's predictable revenue, predictable cash flow. The same doctors who are obligated to send us the managed care capitated patients also tend to send us their fee-for-service business as well, so we get a lot of what we call pull-through business there. At one time, and this is going back 5- 10 years, when healthcare seemed to be moving towards value-based care and capitation and risk-taking and risk-sharing, we thought that that business was going to be a bigger part of what we do, and maybe it will in the future if healthcare ends up moving in that way, because we are comfortable in taking risk and managing risk and managing the utilization at scale. But we'll see. It's very much around the nation; you still have a fee-for-service mentality. Where the more you do, the more you get paid for. We'll see, because we'd love to do more of it. Yeah. Thank you. I want to spend some time on the de novo development strategy and JVs that you have with some of these hospitals and health systems. You hit on that a little bit earlier. How has that further accelerated growth for the company? Yeah, it's a big part of what we do now. Today, about 35% of all of our centers, or over 150 centers, are held within partnerships with some of the larger health systems in our various markets. On the West Coast, we partner with names like Cedars-Sinai, and MemorialCare, and Adventist Health, and Dignity Health, or CommonSpirit. On the East Coast, big academic partners such as the University of Maryland. RWJBarnabas. RWJBarnabas in New Jersey. We have a statewide joint venture in New Jersey. So, what many health systems have realized is that this movement of volumes away from hospitals into lower-cost ambulatory sites of care is happening throughout healthcare, not just in diagnostic imaging. Some of the more forward-thinking entrepreneurial health systems are saying, "Look, we want to be on the winning side of that trend. Yeah. One way to do that is to participate on the outpatient side. Many recognize that they don't have the experience and the background and the scale to operate these sites of care efficiently, so they look to a partner. We've allowed them to own an equity position. They've been instrumental in driving incremental volumes to our jointly owned centers that otherwise we would not have seen. In some cases, they've helped us contract more favorably with some of the payers than we would've been able to do ourselves. So that's a bigger part of what we're doing, and you're going to see some moves from us in the future to make the hospital health system focus even bigger for the company. We're selling a lot of digital health tools and products to the hospital system. We're partnering with them on the outpatient side. There's other areas and services, and products that we think that we can help them with in the future, so you should stay tuned for that. Excellent. Mark, Greg, thank you very much for being here. Absolutely. We really appreciate it. Thanks for having us. Thanks so much. Appreciate it.