Radiation Therapy Svcs, Inc (RTSX) - Description of business

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Company Description
We are a provider of radiation therapy services to cancer patients. We own, operate and manage treatment centers focused principally on providing comprehensive radiation treatment alternatives ranging from conventional external beam radiation to newer, technologically-advanced options. We believe we are the largest company in the United States focused principally on providing radiation therapy. We opened our first radiation treatment center in 1983 and as of December 31, 2006, we provided radiation therapy in 66 freestanding and 10 hospital-based treatment centers. In 2006 we acquired 11 treatment centers including 7 in Southeastern Michigan. Our treatment centers are clustered into 24 local markets in 15 states, including Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Rhode Island and West Virginia. In our 24 years of operation, we have developed a standardized operating model that enables our treatment centers to deliver high-quality, cost-effective patient care. We have a highly experienced management team and a number of our senior radiation oncologists are nationally recognized by the American College of Radiation Oncology for excellence and leadership in the field of radiation oncology. We also have affiliations with physicians specializing in other areas including gynecological and surgical oncology and urology in a limited number of our markets to strengthen our clinical working relationships. We completed our initial public offering in June 2004. Our principal executive office is located at 2234 Colonial Boulevard, Fort Myers, Florida and our telephone number is (239) 931-7275. We conduct much of our business under the name of our wholly-owned subsidiary, 21 st Century Oncology, Inc. Our corporate website is www.rtsx.com and we make available copies of our filings with the Securities and Exchange Commission on our website under the heading “Investor Relations” as soon as reasonably practicable after their filing. Our filings are also available on the Securities and Exchange Commission’s EDGAR database at www.sec.gov . Industry Overview Cancer is the second leading cause of death in the United States, exceeded only by heart disease. In 2007, the American Cancer Society estimates there will be 1.5 million new cancer cases diagnosed in the United States and that cancer will account for one in every four deaths. Treatment Options. There are many types of cancer, each of which is unique in how it grows and how it responds to treatment. A physician may choose which treatment or combination of treatments is most appropriate. Individuals diagnosed with cancer have four general treatment options:   •   radiation therapy (treatment with radiation to eliminate cancer cells);   •   surgery (to remove a tumor);   •   chemotherapy (treatment with anticancer drugs); and   •   biological therapy (treatment to stimulate or restore the ability of the immune system to fight infection and disease). We focus principally on radiation therapy, which may be used alone or in combination with surgery, chemotherapy or biological therapy. Radiation Therapy. According to the American Society for Therapeutic Radiology and Oncology, approximately 50% to 60% of patients diagnosed with cancer receive radiation therapy. Radiation therapy is used to treat the most common types of cancer, including prostate, breast, lung and colorectal cancer, and involves exposing the patient to an external or internal source of radiation. Radiation therapy can be used to cure cancer by destroying cancer cells and, when curing cancer is not possible, to shrink tumors and reduce pressure, pain and relieve other symptoms of the cancer to enhance a patient’s quality of life. Radiation Therapy Technology. The radiation utilized by a radiation oncologist for external beam treatments is produced by a machine known as a linear accelerator. A normal course of external beam radiation therapy ranges from 20 to 40 total treatments, given daily over a four to eight week period. Recent research has produced new, advanced methods for performing radiation treatments. These advanced methods result in more effective treatments that minimize the harm to healthy tissues that surround the tumor and therefore result in fewer side effects. Radiation Therapy Market. According to the American Society for Therapeutic Radiology and Oncology, it is estimated that there are approximately 4,200 radiation oncologists in the United States and over 2,200 hospital and freestanding radiation therapy centers. We believe that growth in the radiation therapy market will be driven by the following trends:   •   aging of the population in the United States, as 77% of all cancers are diagnosed in people over age 55;   •   earlier detection and diagnosis of cancer;   •   increased knowledge of and demand for advanced treatments by patients;   •   growing utilization of advanced treatment technologies; and   •   discovery of new and innovative means of delivering radiation therapy for the treatment of cancer. We believe most of our competitors are not in a position to take full advantage of the opportunities within the market due to barriers to entry, such as significant capital requirements, limited size of operations, lack of depth in important areas such as technology, limited number and experience of physicians, availability of resources and lack of management experience. Our Operating Strategy Our goal is to provide cancer patients with radiation therapy treatments to maximize clinical outcomes. We focus principally on providing a broad spectrum of radiation therapy in both a patient-friendly environment and cost-effective manner. Our model is designed to maximize our relationships with patients and referring physicians, as well as attract and retain radiation oncologists. We believe that our operating strategy enables us to maximize patient service, quality of care and financial performance. The key elements of our operating strategy are to: Emphasize Patient Service. We focus on providing our patients with an environment that minimizes the stress and uncertainty of being diagnosed with and treated for cancer. Our goal is to see patients within 24 hours of a referral and begin treatment as soon as possible thereafter. Our radiation oncologist discusses the proposed treatment, the possible side effects and the expected results of treatment with the patient and is available to respond to questions or concerns at any time. Other services we provide include nutritional counseling and assistance with reimbursement from third-party payers. We believe that our focus on patient service enhances the quality of care provided and differentiates us from other radiation therapy providers. Provide Advanced Radiation Treatment Alternatives. Within our local markets, we are a leader in providing the most advanced radiation therapy alternatives. The advanced radiation treatment alternatives we provide are designed to deliver more effective radiation directly to the tumor while minimizing harm to surrounding tissues and therefore reducing side effects. We have directly benefited from the increasing awareness of cancer patients to these advanced radiation treatment alternatives. Establish and Maintain Strong Clinical Relationships with Referring Physicians. Our team of radiation oncologists seeks to develop and maintain strong working clinical relationships with referring physicians by:   •   establishing a presence in the medical community and receiving referrals for radiation therapy based on our reputation for providing a high standard of quality patient care;   •   providing excellent patient service and involving the referring physician in the care of the patient;   •   educating our existing and potential referring physicians on new methods of radiation therapy; and   •   strengthening clinical relationships by fully integrating with key physicians through group practices in selected markets. Recruit and Retain Leading Radiation Oncologists. We recruit radiation oncologists with excellent academic and clinical backgrounds who we believe have potential for professional growth. Our more senior oncologists are members of numerous professional organizations and have developed national reputations for excellence. We attract and retain radiation oncologists by:   •   offering them the opportunity to join an established team of leaders in the field of radiation oncology;   •   providing them greater access to advanced technologies;   •   offering them the opportunity to develop expertise in advanced treatment procedures;   •   enabling them to conduct research and encouraging them to publish their results; and   •   providing them with the opportunity to earn above the national average compensation for radiation oncologists. Cluster Our Treatment Centers In Local Markets. We cluster treatment centers in our local markets, which enables us to offer our patients a wide array of radiation therapy services in a cost-effective manner. By concentrating our treatment centers within a given geography, we are able to leverage our investment in advanced treatment technologies and our clinical and operational expertise across a larger patient population. Treatment centers in each of our clusters also share support services, such as physics, which leads to lower operating costs per treatment center. We are also able to better leverage our relationships with managed care payers due to the number of patients treated within our local markets. Continually Enhance Operational Efficiencies. During our 24 years of operations, we have developed a standardized operating model that enables our treatment centers to cost-effectively deliver high-quality patient care. We continue to enhance our operating performance through the use of established protocols and procedures in our clinical operations. Furthermore, we have a centralized approach to business functions such as accounting, administration, billing, collection, marketing and purchasing, which we believe results in significant economies of scale and operating efficiencies. Our Growth Strategy Our growth strategy is to further increase our market share within our established local markets and selectively expand into new local markets. The key elements of our growth strategy are to: Increase Revenue and Profitability of Our Existing Treatment Centers We plan to increase revenue and profitability at our treatment centers within established local markets by:   •   increasing clinical referrals from physicians;   •   expanding our offering of advanced treatment services;   •   affiliating with physicians specializing in other areas including gynecological and surgical oncology and urology;   •   adding additional radiation oncologists; and   •   entering into additional payer relationships. Develop New Treatment Centers Within Our Existing Local markets We plan to develop treatment centers to expand our existing local markets. We have experience in the design and construction of radiation treatment centers, having developed 22 treatment centers located in California, Florida, Maryland, Nevada and Rhode Island. Our newly-developed treatment centers typically achieve positive cash flow within six to twelve months after opening. Selectively Enter New Local Markets We plan to selectively expand into new local markets through acquisition, new treatment center development and strategic alliances and joint ventures. We evaluate potential expansion into new local markets based on:   •   demographic characteristics, including the number and concentration of Medicare recipients, population trends and historical and projected patient population growth and radiation treatment volumes;   •   the extent to which we may have any pre-existing relationships with physicians or hospitals;   •   the current competitive landscape of existing freestanding or hospital-based radiation treatment centers;   •   the payer environment; and   •   the regulatory environment. Expand Through Acquisitions. We plan to enter new local markets through the acquisition of established treatment centers that provide us the opportunity to leverage our current infrastructure. We seek to acquire treatment centers with leading radiation oncologists, strong clinical referral sources and substantial prospects for growth. We believe that significant opportunity exists to add value to acquired treatment centers by providing advanced radiation therapy technology and services and by implementing our proven operating model, which includes our standardized operating systems. In 2006 we entered 2 new local markets and we acquired 11 treatment centers. We have entered 12 local markets through acquisitions and have acquired 44 treatment centers to date. Expand Through New Treatment Center Development. Where desirable, we plan to enter new local markets by internally developing new radiation treatment centers. To date, we have established 22 treatment centers in 9 local markets located in California, Florida, Maryland, Nevada and Rhode Island by internally developing new radiation treatment centers. Although we did not internally develop any new treatment centers in 2006, we currently plan to develop new treatment centers in our new local markets in Palm Springs, California and Scottsdale, Arizona, as well as add centers to our existing markets in southwest Florida. Expand Through Strategic Alliances and Joint Ventures. We also plan to enter new local markets through strategic alliances and joint ventures. To date, we have entered 3 local markets through strategic alliances. These strategic alliances and joint ventures vary by market and can include the provision of administrative services, technology services and professional services or any combination thereof. To date, we have established these arrangements primarily with hospitals seeking our expertise in providing high-quality, cost-effective radiation therapy. Our desire and ability to enter into strategic alliances and joint venture arrangements depends on the regulatory and competitive environment and other economic factors. We have experience in effectively structuring these arrangements in a manner designed to meet the needs of multiple constituencies, including the physicians, the hospitals and regulatory authorities. Strategic alliances and joint ventures provide us with alternative methods to enter attractive new markets. Expand Through Affiliations with Other Oncologists and Specialists. Healthcare is delivered locally, and in certain local markets, it may be advantageous to fully integrate with key physicians with medical specialties other than radiation oncology. As the practice of oncology and radiation oncology has become increasingly sophisticated, there has been a need to integrate other medical specialties in our operations. High precision radiation therapy requires close cooperation with other physicians, often from the surgical fields, to be able to target and treat tumors. In these instances, we believe we can further strengthen both our clinical working relationships and our standing in the local oncology field. We currently operate as a group practice in a limited number of our markets, principally with other oncologists, including gynecological and surgical oncologists, and, beginning in December 2005, in one local market with urologists. We plan to continue to seek affiliations with physicians having specialties other than radiation oncology where desirable. Operations We have 24 years of experience operating radiation treatment centers. We have developed an integrated operating model, which is comprised of the following key elements: Treatment Center Operations. Our treatment centers are designed specifically to deliver high-quality radiation therapy in a patient-friendly environment. A treatment center typically has one or two linear accelerators, with additional rooms for simulators, computed tomography (CT) scans, physician offices, film processing and physics functions. In addition, treatment centers include a patient waiting room, dressing rooms, exam rooms and hospitality rooms, all of which are designed to minimize patient stress. Cancer patients referred to one of our radiation oncologists are provided with an initial consultation, which includes an evaluation of the patient’s condition to determine if radiation therapy is appropriate, followed by a discussion of the effects of the therapy. If radiation therapy is selected as a method of treatment, the medical staff engages in clinical treatment planning. Clinical treatment planning utilizes x-rays, CT imaging, ultrasound, positron emission tomography (PET) imaging and, in many cases, advanced computerized 3-D conformal imaging programs, in order to locate the tumor, determine the best treatment modality and the treatment’s optimal radiation dosage, and select the appropriate treatment regimen. Our radiation treatment centers typically range from 5,000 to 12,000 square feet, have a radiation oncologist and a staff ranging between 10 and 25 people, depending on treatment center capacity and patient volume. The typical treatment center staff includes: radiation therapists, who deliver the radiation therapy, medical assistants or medical technicians, an office financial manager, receptionist, transcriptionist, block cutter, file clerk and van driver. In markets where we have more than one treatment center, we can more efficiently provide certain specialists to each treatment center, such as physicists, dosimetrists and engineers who service the treatment centers within that local market. Standardized Operating Procedures. We have developed standardized operating procedures for our treatment centers in order to ensure that our professionals are able to operate uniformly and efficiently. Our manuals, policies and procedures are refined and modified as needed to increase productivity and efficiency and to provide for the safety of our employees and patients. We believe that our standard operating procedures facilitate the interaction of physicians, physicists, dosimetrists and radiation therapists and permit the interchange of employees among our treatment centers. In addition, standardized procedures facilitate the training of new employees. Coding and Billing. Coding involves the translation of data from a patient’s medical chart to our billing system for submission to third-party payers. Our treatment centers provide radiation therapy services under approximately 60 different professional and technical codes, which determine reimbursement. Our Medical Director along with our certified professional coders work together to establish coding and billing rules and procedures to be utilized at our radiation treatment centers providing consistency across centers. In each radiation treatment center, our office financial manager is in charge of executing these rules and procedures with the trained personnel located at each treatment center. To provide an external check on the integrity of the coding process, we have retained the services of a third-party consultant to review and assess our coding procedures and processes on a periodic basis. Billing and collection functions are centrally performed by a staff at our executive offices. Management Information Systems. We utilize centralized management information systems to closely monitor data related to each treatment center’s operations and financial performance. Our management information systems are used to track patient data, physician productivity and coding, as well as billing functions. Our management information systems also provide monthly budget analyses, financial comparisons to prior periods and comparisons among treatment centers, thus enabling management to evaluate the individual and collective performance of our treatment centers. We developed a proprietary image and text retrieval system referred to as the Oncology Wide-Area Network, which facilitates the storage and review of patient medical charts and films. We periodically review our management information systems for possible refinements and upgrading. Our management information systems personnel install and maintain our system hardware, develop and maintain specialized software and are able to integrate the systems of the practices we acquire. Engineering and Physics Departments. We have established engineering and physics departments which implement standardized procedures for the acquisition, installation, calibration, use, maintenance and replacement of our linear accelerators, simulators and related equipment, as well as to the overall operation of our treatment centers. Our engineers perform preventive maintenance, repairs and installations of our linear accelerators. This enables our treatment centers to maximize equipment productivity and to minimize downtime. In addition, the engineering department maintains a warehouse of linear accelerator parts in order to provide equipment backup. Our physicists monitor and test the accuracy and integrity of each of our linear accelerators on a regular basis to ensure the safety and effectiveness of patient treatment. This testing also helps ensure that the linear accelerators are uniformly and properly calibrated. Total Quality Management Program. We strive to achieve total quality management throughout our organization. Our treatment centers, either directly or in cooperation with the appropriate professional corporation or hospital, have a standardized total quality management program consisting of programs to monitor the design of the individual treatment of the patient via the evaluation of charts by radiation oncologists, physicists, dosimetrists and radiation therapists and for the ongoing validation of radiation therapy equipment. Each of our new radiation oncologists is assigned to a senior radiation oncologist who reviews each patient’s course of treatment through the patient’s medical chart using our Oncology Wide-Area Network. Furthermore, the data in our patient database is used to evaluate patient outcomes and to modify treatment patterns as necessary to improve patient care. We also utilize patient questionnaires to monitor patient satisfaction with the radiation therapy they receive. Clinical Research. We believe that a well-managed clinical research program enhances the reputation of our radiation oncologists and our ability to recruit new radiation oncologists. Our treatment centers participate in national cooperative group trials and we have a full-time, in-house research staff to assure compliance with such trials and to perform related outcome analyses. We maintain a proprietary database of information on over 77,000 patients. The data collected includes tumor characteristics such as stage, histology and grade, radiation treatment parameters, other treatments delivered, complications and information on disease recurrences. In addition, follow-up data on disease status and patient survival rates are collected. This data can be used by the radiation oncologists to conduct research and improve patient care. We also assist the radiation oncologists with research in the form of outcome studies. These studies often are presented at international conferences and published in trade journals. To date, our radiation oncologists have published more than 215 articles in peer reviewed journals and related periodicals. School of Radiation Therapy. In 1989, we founded The Radiation Therapy School for Radiation Therapy Technology, which is accredited by the Joint Review Committee on Education in Radiologic Technology. The school trains individuals to become radiation therapists. Upon graduation, students become eligible to take the national registry examination administered by the American Registry of Radiologic Technologists. Radiation therapists are responsible for administering treatments prescribed by radiation oncologists and monitoring patients while under treatment. Since opening in 1989, the school has produced 97 graduates, 49 of whom are currently employed by us. Recognizing a growing need for individuals trained in treatment planning, we founded the School for Medical Dosimetry in 2005. Currently, two senior and four junior students are enrolled in this program. Among other duties, the medical dosimetrists, under the supervision of the medical physicist, are responsible for developing an appropriate treatment plan according to the radiation oncologist’s prescribed dose for each patient. Upon graduation, these students are eligible to sit for the certifying examination administered by the Medical Dosimetry Certification Board. Privacy of Medical Information. We focus on being compliant with regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, regarding privacy, security and transmission of health information. We have implemented such regulations into our existing systems, standards and policies to ensure compliance. Compliance Program. We have a compliance program that is consistent with guidelines issued by the Office of Inspector General of the Department of Health and Human Services. As part of this compliance program, we adopted a code of ethics and have a full-time compliance officer at the corporate level. Our program includes an anonymous hotline reporting system, compliance training programs, auditing and monitoring programs and a disciplinary system to enforce our code of ethics and other compliance policies. It also includes a process for screening all employees through applicable federal and state databases of sanctioned individuals. Auditing and monitoring activities include claims preparation and submission and also cover issues such as coding, billing, and financial arrangements with physicians. These areas are also the focus of our specialized training programs. Service and Treatment Offerings We believe our radiation treatment centers are distinguishable from those of many of our competitors because we are able to offer patients a full spectrum of radiation therapy alternatives, including conventional external beam radiation therapy and advanced services such as image guided radiation therapy, intensity modulated radiation therapy, 3-D conformal treatment planning, brachytherapy (including prostate seed implants and high dose rate remote after-loading of radioactive sources) and stereotactic radiosurgery. Radiation therapy is given in one of two ways: externally or internally, with some cancers treated with both internal and external radiation therapy. Most people undergoing radiation therapy for cancer are treated with external beam radiation therapy. Radiation therapy is used to treat the most common types of cancers including: prostate, breast, lung and colorectal. External Beam Therapy. External beam radiation therapy involves exposing the patient to an external source of radiation through the use of a machine that directs radiation at the cancer. Machines utilized for external beam radiation therapy vary as some are better for treating cancers near the surface of the skin and others are better for treating cancers deeper in the body. A linear accelerator, the most common type of machine used for external beam radiation therapy, can create both high-energy and low-energy radiation. High-energy radiation is used to treat many types of cancer while low-energy radiation is used to treat some forms of skin cancer. A course of external beam radiation therapy normally ranges from 20 to 40 treatments. Treatments generally are given to a patient once each day with each session lasting for 10 to 20 minutes. Internal Radiation Therapy. Internal radiation therapy also called brachytherapy, involves the placement of the radiation source inside the body. The source of the radiation (such as radioactive iodine) is sealed in a small holder called an implant and is introduced through the aid of thin wires or plastic tubes. Internal radiation therapy places the radiation source as close as possible to the cancer cells and delivers a higher dose of radiation in a shorter time than is possible with external beam treatments. Internal radiation therapy is typically used for cancers of the lung, esophagus, breast, uterus, thyroid, cervix and prostate. Implants may be removed after a short time or left in place permanently (with the radioactivity of the implant dissipating over a short time frame). Temporary implants may be either low-dose rate or high-dose rate. Low-dose rate implants are left in place for several days; high-dose rate implants are removed after a few minutes. Since all of our treatment centers are clustered into local markets, our treatment centers are distinguished from those of many of our competitors by our ability to offer advanced radiation therapy services. Our advanced radiation treatment services include: image guided radiation therapy, intensity modulated radiation therapy, 3-D conformal treatment planning, stereotactic radiosurgery and high-dose and low-dose rate brachytherapy. The following table sets forth the forms of radiation therapy services and treatments that we offer: Technologies:    Description: Image Guided Radiation Therapy (IGRT)    Enables radiation oncologists to utilize imaging at time of treatment to localize tumors and to accurately mirror the contour of a tumor from any angle. Intensity Modulated Radiation Therapy (IMRT)    Enables radiation oncologist to adjust the intensity of radiation levels delivered to more effectively treat certain cancers. Respiratory Gating    Enables radiation oncologist to treat cancers in the lung and upper abdomen with a noninvasive technique that accounts for respiratory motion allowing more accurate treatment. 3-D Conformal Treatment Planning    Enables radiation oncologist to utilize three dimensional images of tumors to more accurately and effectively plan radiation treatments. Stereotactic Radiosurgery    Enables delivery of very high doses of radiation treatment to certain lesions such as brain cancers. High-Dose Rate Remote Brachytherapy    Enables radiation oncologist to treat cancer by internally delivering higher doses of radiation directly to the cancer for a few minutes. Low-Dose Rate Brachytherapy    Enables radiation oncologist to treat cancer by internally delivering lower doses of radiation directly to the cancer over an extended period of time (e.g., prostate seed implants). Image Guided Radiation Therapy. This technology provides the radiation oncologist with a mechanism to achieve increased precision in radiation therapy targeting. The technique utilizes high-resolution x-rays, CT scans or ultrasound imaging to pinpoint internal tumor sites before treatment and overcomes the limitations of conventional skin marking traditionally used for patient positioning. IGRT represents the convergence of medical imaging and high precision external beam therapy. Intensity Modulated Radiation Therapy. With IMRT, radiation can be focused at thousands of pinpoints and delivered by varying levels of beam intensity directly to a tumor. Because IMRT uses variable intensity beams, it can be used to treat tumors to higher doses and better spare normal tissue. IMRT technology can be programmed to actually wrap and angle beams of radiation around normal tissue and organs, protecting “good cells” as it destroys the tumor. As such, IMRT patients typically experience fewer side effects, which helps them to maintain their strength and lead more normal lifestyles during treatment. Respiratory gating. This noninvasive technique allows radiation targeting and delivery to account for respiratory motion in the treatment of cancers in the lung and upper abdomen, protecting healthy structures while directing higher doses of radiation to the tumor. Respiratory gating matches radiation treatment to a patient’s respiratory pattern. When a person breathes, the chest wall moves in and out, and any structures inside the chest and upper abdomen also move. In the past, when radiation beams were aimed at a target inside those areas of the body, movement had to be accounted for by planning a large treatment area. With respiratory gating, radiation treatment is timed to an individual’s breathing pattern with the beam delivered only when the tumor is in the targeted area. 3-D Conformal Treatment Planning. 3-D conformal treatment planning and computer simulation produces an accurate image of the tumor and surrounding organs so that multiple radiation beams can be shaped exactly to the contour of the treatment area. Because the radiation beams are precisely focused, nearby normal tissue is spared from radiation. In 3-D conformal treatment planning, state-of-the-art radiation therapy immobilization devices and computerized dosimetric software are utilized so that CT scans can be directly incorporated into the radiation therapy plan. Stereotactic Radiosurgery / Stereotactic Radiotherapy. Stereotactic radiosurgery / radiotherapy involves a single or a few intense high-dose fraction(s) of radiation to a small area. This form of therapy typically is used to treat tumors that cannot be treated by other means, such as surgery or chemotherapy. Precise calculations for radiation delivery are required. Treatment also requires extensive clinical planning and is provided in conjunction with the referring surgeon and under the direct supervision of a radiation oncologist and a physicist. Stereotactic radiosurgery often involves very careful immobilization of the patient. For example, cranial radiosurgery might involve the use of a neurosurgical head frame to assure precise tumor localization. With recent advances in imaging technologies, stereotactic technique can now be used to treat extra-cranial cancers to a higher dose with target localization and image verifications. These advances broaden the types of cancers that can be successfully treated with stereotactic radiosurgery. Brachytherapy. Brachytherapy involves the use of surgical and fiberoptic procedures to place high-dose rate or low-dose rate sources of radiation in the patient’s body. This technique is used for implantation of sources into the prostate, intraluminal therapy within the esophagus and endobronchial therapy within the lungs. Prostate seed implants involve the permanent placement of radioactive pellets within the prostate gland. High-Dose Rate Remote Brachytherapy. In high-dose rate remote brachytherapy, a computer sends the radioactive source through a tube to a catheter or catheters that have been placed near the tumor by the specialist working with the radiation oncologist. The radioactivity remains at the tumor for only a few minutes. In some cases, several remote treatments may be required, and the catheters may stay in place between treatments. High-dose rate remote brachytherapy is available in most of our local markets and patients receiving this treatment are able to return home after each treatment. This form of brachytherapy has been used to treat cancers of the cervix, breast, lung, biliary tree, prostate and esophagus. MammoSite ® Radiation Therapy is used for partial breast irradiation and works by delivering radiation from inside the lumpectomy cavity directly to the tissue where the cancer is most likely to recur. Low-Dose Rate Brachytherapy. We are actively involved in radioactive seed implantation for prostate cancer, the most frequent application of low-dose rate brachytherapy. There are several advantages to low-dose rate brachytherapy in the treatment of prostate cancer, including convenience to the patient as the patient generally can resume normal daily activities within hours after the procedure. This procedure is performed by a team of physicians and staff with nearly a decade of experience in prostate brachytherapy. During the procedure, radioactive sources or “seeds” are inserted directly into the prostate, minimizing radiation exposure to surrounding tissues while permitting an escalation of the dose concentrated in the area of the cancer. All of our markets provide external beam treatments and following is a list of the advanced services and treatments that we offer within each of our 24 local markets as of December 31, 2006:                               Stereotactic    Brachytherapy Local market    Year Established    Number of Centers    IMRT    3-D    IGRT    Cranial    Extra-Cranial    HighDose    Low Dose Lee County—Florida    1983    5    ü    ü    ü    ü    ü    ü    ü Charlotte/ Desoto Counties—Florida    1986    2    ü    ü    ü    ü    ü    ü    ü Sarasota/ Manatee Counties—Florida    1992    4    ü    ü    ü    ü    ü    ü    ü Collier County—Florida    1993    2    ü    ü    ü    ü    ü    ü    ü Broward County—Florida    1993    4    ü    ü    ü    ü       ü    ü Dade County—Florida    1996    2    ü    ü    ü             ü Las Vegas, Nevada    1997    9    ü    ü    ü    ü    ü    ü    ü Westchester/ Bronx—New York    1997    3    ü    ü    ü    ü    ü    ü    ü Mohawk Valley, New York    1998    3    ü    ü    ü    ü       ü    ü Delmarva Peninsula    1998    3    ü    ü    ü          ü    ü Northwest Florida    2001    3    ü    ü    ü          ü    ü Western North Carolina    2002    7    ü    ü             ü    ü Palm Beach County—Florida    2002    1    ü    ü    ü          ü    ü Central Kentucky    2003    3    ü    ü    ü          ü    ü Florida Keys    2003    1    ü    ü    ü             ü Southeastern Alabama    2003    2    ü    ü    ü          ü    ü Central Maryland    2003    4    ü    ü    ü             ü South New Jersey    2004    3    ü    ü    ü          ü    ü Rhode Island    2004    3    ü    ü    ü    ü       ü    ü Scottsdale, Arizona    2005    1    ü    ü    ü    ü       ü    ü Holyoke, Massachusetts    2005    1    ü    ü             ü    ü Palm Springs, California    2005    1    ü    ü    ü    ü    ü    ü    ü Los Angeles, California    2006    2    ü    ü             ü    ü Southeastern Michigan    2006    7    ü    ü             ü    ü Treatment Centers As of December 31, 2006, we owned, operated and managed 66 freestanding and 10 hospital-based treatment centers in our 24 local markets of which:   •   22 were internally developed;   •   44 were acquired; and   •   10 are hospital-based. Internally Developed. As of December 31, 2006, we operated 22 internally developed treatment centers located in California, Florida, Maryland, Nevada and Rhode Island and although we did not internally develop any new treatment centers in 2006, we plan to continue developing new treatment centers within our local markets. Our team is experienced in the design and construction of radiation treatment centers, having developed 5 treatment centers in the past three years. Our newly-developed treatment centers typically achieve positive cash flow within six to twelve months after opening. The following table sets forth the locations and other information regarding each of our internally developed radiation treatment centers in our local markets as of December 31, 2006: Treatment Center    Year    Owned/Managed Lee County—Florida       Broadway    1983    Owned Cape Coral    1984    Owned Lakes Park    1987    Owned Bonita Springs    2002    Owned Lehigh Acres    2003    Owned Charlotte/ Desoto Counties—Florida       Port Charlotte    1986    Owned Arcadia    1993    Owned Sarasota/ Manatee Counties—Florida       Englewood    1992    Owned Sarasota    1996    Owned Venice    1998    Owned Bradenton    2002    Owned Collier County—Florida       South Naples    1993    Owned North Naples    1999    Owned Northwest—Florida       Destin    2004    Owned Crestview    2004    Owned Palm Beach County—Florida       West Palm Beach (1)    2002    Owned Las Vegas, Nevada       Henderson    2000    Managed Lake Mead    2000    Managed Central Maryland       Owings Mills (2)    2003    Owned Rhode Island       Woonsocket (3)    2004    Owned South County (4)    2005    Owned Palm Springs, California       Palm Springs    2005    Managed (1) We own a 50.0% ownership interest in the limited liability company (LLC) that provides radiation oncologists and operates the treatment center; we also provide physics and dosimetry services to the LLC. (2) We have a 90.0% ownership interest in this treatment center. (3) We have a 62.0% ownership interest in this treatment center. (4) We have a 63.5% ownership interest in this treatment center. Acquired Treatment Centers. As of December 31, 2006, we operated 44 acquired treatment centers located in Alabama, Arizona, California, Florida, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, and West Virginia. Over the past three years, we have acquired 24 treatment centers of which 11 were acquired in 2006. We plan to continue to enter new markets through the acquisition of established treatment centers that provide us the opportunity to leverage our current infrastructure. As part of our ongoing acquisition strategy, we continually evaluate potential acquisition opportunities. The following table sets forth the locations and other information regarding each of the acquired radiation treatment centers in our local markets as of December 31, 2006: Treatment Center    Year    Owned/Managed Broward County—Florida       Plantation    1993    Owned Deerfield Beach    1994    Owned Coral Springs    1994    Owned Tamarac    1999    Owned Northwest Florida       Fort Walton Beach    2001    Owned Florida Keys       Key West    2003    Owned Las Vegas, Nevada       Las Vegas (2 locations)    1997    Managed Las Vegas (5 locations)    2005    Managed Westchester/ Bronx—New York       Riverhill    1998    Managed Delmarva Peninsula       Berlin, Maryland (1)    1998    Owned Western North Carolina       Asheville    2002    Managed Clyde    2002    Managed Brevard    2002    Managed Franklin    2002    Managed Marion    2002    Managed Rutherford    2002    Managed Park Ridge    2003    Managed Central Kentucky       Danville    2003    Owned Louisville (2)    2003    Owned Frankfort    2003    Owned Southeastern Alabama       Dothan    2003    Managed Opp    2006    Managed South New Jersey       Woodbury    2004    Owned Voorhees    2004    Owned Willingboro    2004    Owned Central Maryland       Martinsburg, West Virginia (3)    2005    Managed Greenbelt, Maryland    2005    Managed Belcamp, Maryland (4)    2005    Owned Bel Air, Maryland    2006    Owned Scottsdale, Arizona       Scottsdale    2005    Owned Holyoke, Massachusetts       Holyoke    2005    Managed Los Angeles, California       Santa Monica    2006    Managed Beverly Hills    2006    Managed Southeastern Michigan       Pontiac    2006    Managed Madison Heights    2006    Managed Clarkson    2006    Managed Monroe    2006    Managed Farmington Hills    2006    Managed Eastpointe    2006    Managed Macomb    2006    Managed (1) We have a 50.1% ownership interest in this treatment center (2) We have a 90.0% ownership interest in this treatment center. (3) We have a 60.0% ownership interest in this treatment center. (4) Belcamp treatment center included in the acquisition of the Bel Air, Maryland treatment center, as we expect to combine the external beam treatments. Hospital-Based Treatment Centers. As of December 31, 2006, we operated 10 hospital-based treatment centers. We provide services at all of our hospital-based treatment centers pursuant to written agreements with the hospitals. At the Florida treatment centers, we provide the services of our radiation oncologists to the hospital and receive the professional fees charged for such services. We also provide physics and dosimetry services on a fee-for-service basis. In 1998, we entered into a joint venture arrangement with a hospital in Mohawk Valley—New York. We have a 37% interest in the joint venture, which provides equipment for the three treatment centers that provide service in the Mohawk Valley local market. We also manage these treatment centers pursuant to an agreement with the hospital. On May 15, 2002, we executed an administrative services agreement with a hospital in Bronx, New York to provide administrative services and do so for a monthly fixed fee. In addition, effective March 1, 2006, we extended an administrative services agreement with a hospital in Salisbury, Maryland to provide administrative services for a 34-month term for a monthly fixed fee. A professional corporation owned by certain of our shareholders provides the radiation oncologists for this treatment center and the treatment centers in Mohawk Valley—New York. In connection with our hospital-based treatment center services, we provide technical and administrative services. Professional services in New York are provided by physicians employed by a professional corporation owned by certain of our officers, directors and principal shareholders. Professional services consist of services provided by radiation oncologists to patients. Technical services consist of the non-professional services provided by us in connection with radiation treatments administered to patients. Administrative services consist of services provided by us to the hospital-based center. The contracts under which the hospital based treatment centers are provided service are generally three to seven years with terms for renewal. The following table sets forth the locations and other information regarding each of our hospital-based radiation treatment centers in our local markets as of December 31, 2006:           Services Provided

Treatment Center

   Year    Professional    Technical    Administrative Dade County—Florida            

Hialeah

   1996    ü      

Aventura

   1999    ü    ü    Westchester/ Bronx—New York            

Bronx (1)

   2003       ü    ü

Northern Westchester (1)

   2005       ü    ü Mohawk Valley—New York            

Utica (1)

   1998       ü    ü

Rome (1)

   1999       ü    ü

Herkimer (1)

   1999       ü    ü Delmarva Peninsula            

Salisbury, Maryland (2)

   2003       ü    ü

Seaford, Delaware (2)

   2003       ü    ü Rhode Island            

Providence (3)

   2005       ü    ü (1) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned New York subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services. (2) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned Maryland subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services. (3) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned Massachusetts subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services. Treatment Center Structure Arizona, Florida, Kentucky, Maryland, New Jersey, and Rhode Island Treatment Centers. In Arizona, Florida, Kentucky, Maryland, New Jersey, and Rhode Island we employ or contract with radiation oncologists and other healthcare professionals. Substantially all of our Florida, Kentucky, Maryland, New Jersey and Rhode Island radiation oncologists have employment agreements with us. While we exercise legal control over radiation oncologists we employ, we do not exercise control over, or otherwise influence, their medical judgment or professional decisions. Such radiation oncologists typicall

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