RGX Radiologix

DALLAS, Feb. 9 /PRNewswire-FirstCall/ -- Radiologix, Inc. (AMEX:RGX), a leading national provider of diagnostic imaging services, today provided an update on the impact of federal legislation on its Medicare reimbursement. On February 8, 2006, the President signed into law the Deficit Reduction Act of 2005 (DRA). The DRA provides that reimbursement for the technical component for imaging services (excluding diagnostic and screening mammography) in non-hospital based freestanding facilities will be capped at the lesser of reimbursement under the Medicare Part B physician fee schedule or the Hospital Outpatient Prospective Payment System (HOPPS) schedule. Currently, the technical component of our imaging services is reimbursed under the Part B physician fee schedule, which generally allows for higher reimbursement than under the HOPPS. Under the DRA, we will be reimbursed at the lower of the two schedules, beginning January 1, 2007. The DRA also codifies the reduction in reimbursement for multiple images on contiguous body parts previously announced by the Centers for Medicare and Medicaid Services (CMS). In November 2005, CMS announced that it will pay 100% of the technical component of the higher priced imaging procedure and 50% for the technical component of each additional imaging procedure for imaging procedures involving contiguous body parts within a family of codes when performed in the same session. Under current methodology, Medicare pays 100% of the technical component of each procedure. CMS will phase in this rate reduction over two years, so that the reduction will be 25% for each additional imaging procedure in 2006 and another 25% in 2007. We believe the implementation of the reimbursement reductions contained in the DRA will have a significant effect on our business, financial condition and results of operations. For the fiscal year ended December 31, 2005, Medicare revenue from our imaging centers represented approximately 26% of our total revenue from our imaging centers. If both reimbursement reductions contained in the DRA had been in effect during fiscal year 2005, we estimate that our Medicare revenue would have been reduced by approximately $13.3 million. The estimated future reduction in revenue and pre-tax earnings from the reimbursement changes contained in the DRA is as follows: Estimated Reduction in Revenue and Pre-Tax Earnings from DRA (In thousands of dollars) 2006 2007 Contiguous Body Parts $ 1,900 $ 2,900 Fee Schedule Change $ 0 $ 10,400 Total $ 1,900 $ 13,300 These estimated reductions do not assume any impact from our unconsolidated joint ventures and do not include any reductions that would result if commercial payors adopt reimbursement reductions similar to those contained in the DRA. We have been notified by one payor that it will adopt the contiguous body part imaging reduction in 2006. If commercial payors adopt reimbursement reductions similar to those contained in the DRA, this would result in additional reductions in our estimated revenue and pre-tax earnings that could be much greater than the reductions shown above, leading to a further material and substantially negative effect on our business. About Radiologix Radiologix (http://www.radiologix.com/) is a leading national provider of diagnostic imaging services, owning and operating multi-modality diagnostic imaging centers that use advanced imaging technologies such as positron emission tomography (PET), magnetic resonance imaging (MRI), computed tomography (CT) and nuclear medicine, as well as x-ray, general radiography, mammography, ultrasound and fluoroscopy. The diagnostic images created, and the radiology reports based on these images, enable more accurate diagnosis and more efficient management of illness for ordering physicians. Radiologix owned or operated 72 diagnostic imaging centers located in 7 states as of December 31, 2005. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include words such as "may," "will," "would," "could," "likely," "estimate," "intend," "plan," "continue," "believe," "expect" or "anticipate" and other similar words, and include all discussions about our acquisition and development plans. We do not guarantee that the events described in this press release will occur as described, or that any positive trends noted in this press release will continue. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that our plans and objectives reflected in, or suggested by, such forward-looking statements are reasonable, we may not achieve such plans or objectives. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this press release. You should read this press release completely and with the understanding that actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future. Specific factors that might cause actual results to differ from our expectations include, but are not limited to: * economic, demographic, business and other conditions in our markets; * the highly competitive nature of the healthcare business; * changes in patient referral patterns; * changes in the rates or methods of third-party reimbursement for diagnostic imaging services; * changes in our contracts with radiology practice groups; * changes in the number of radiologists operating in our contracted radiology practice groups; * the ability to recruit and retain technologists; * the availability of additional capital to fund capital expenditure requirements; * lawsuits against Radiologix and our contracted radiology practice groups; * changes in operating margins, particularly changes due to our managed care contracts and capitated fee arrangements; * failure by Radiologix to comply with state and federal anti-kickback and anti-self referral laws or any other applicable healthcare regulations; * changes in business strategy and development plans; * changes in federal, state or local regulations affecting the healthcare industry; * our indebtedness, debt service requirements and liquidity constraints; * risks related to our Senior Notes and healthcare securities generally; * interruption of operations due to severe weather or other extraordinary events; and * charges for unusual or infrequent (non-recurring) matters. A more comprehensive list of such factors is set forth in the Company's Annual Report on Form 10-K, for the year ended December 31, 2004, and our other filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is made. The information in this press release is as of February 9, 2006. Radiologix undertakes no obligation to update any forward-looking statement or statements to reflect new events or circumstances or future developments. First Call Analyst: FCMN Contact: paul.streiber@radiologix.com http://www.newscom.com/cgi-bin/prnh/19991026/RLGXLOGO http://photoarchive.ap.org/ DATASOURCE: Radiologix, Inc. CONTACT: Paul R. Streiber, Investor Relations of Radiologix, Inc., +1-214-303-2702, or Web site: http://www.radiologix.com/

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