October 2011 NASDAQ: RDNT

Safe Harbor
This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Specifically, statements concerning RadNet s ability to continue to grow the business by generating patient referrals and contracts with radiology practices, integrate acquired businesses, recruit and retain technologists, and receive third-party reimbursement for diagnostic imaging services, as well as RadNet's financial guidance, among others, are forward-looking statements within the meaning of the Safe Harbor. Forward-looking statements are based on management's current, preliminary expectations and are subject to risks and uncertainties which may cause RadNet's actual results to differ materially from the statements contained herein. These risks and uncertainties as well as those risks set forth in RadNet s reports filed with the SEC, including RadNet s annual reports on Form 10-K, for the year ended December 31, 2010 and RadNet s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. Undue reliance should not be placed on forward-looking statements, especially guidance on future financial performance, which speaks only as of the date it is made. RadNet undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

I. II. III. IV.

Introduction Diagnostic Imaging Industry Overview Overview of RadNet Financial Information and Core Strategy

RadNet Summary
Largest national owner and operator of fixed-site diagnostic imaging centers, with 206 locations
Founded as a one center CA operation in 1980 Largest fixed-site medical imaging center company in the U.S. Have emerged as the fastest growing consolidator in the highly fragmented imaging industry Have recently diversified the business to partner with hospitals and Accountable Care Organizations (Breast Oncology, Radiology Software, In-patient Staffing, Teleradiology)

Quadrupled size of company over last 5 years

Objective is to double size of company in next 5 years

Concentrated regional networks in CA, MD/DE, NJ and NY (203 of our 206 sites)
Strategy is to be the clear leader in regional markets Provides operational efficiencies and marketing and contracting benefits

RadNet Summary (cont.)

Emphasis placed on scale and multi-modality strategy
One-stop-shopping for referral sources Lessens our exposure to reimbursement changes, diversifies revenue base

Only imaging center player to provide exclusive managed care capitation arrangements with prominent medical groups and Independent Physician Associations (IPAs)
Provides sticky and predictable revenue base and substantial pull-through business Over 750,000 lives managed exclusively in California

Best positioned company to capitalize on industry dislocation caused by the continuing Medicare reimbursement pressure and the lack of availability of credit funding to the industry RadNet s management owns over 25% of common stock

Types of Imaging Exams:

Advanced Imaging
MRI Produces high resolution crosssectional images of soft tissue. Applications: brain, spinal cord and interior ligaments. CT Produces high resolution cross sectional images. Applications: tumors, strokes, hemorrhages and infections.

Modalities
Routine Imaging
Nuclear Medicine Producers images of anatomical structures. Applications: Assesses organ function in heart, kidney, thyroid and bones. X-ray Records images of organs and structures on film.

Mammography What: Visualizes breast tissue. Why: primary screening tool for breast cancer.

PET- Determines metabolic activity. Applications: tumors, epilepsy and cardiac evaluation.

Ultrasound Produces visual images of internal organs. Applications: viewing soft tissue.

Fluoroscopy What: video viewing of organs. Why: real time monitoring.

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I. II. III. IV.

Introduction Diagnostic Imaging Industry Overview Overview of RadNet Financial Information and Core Strategy

Diagnostic Imaging: A Large and Growing Market

National imaging market is estimated to be $100 billion
Approximately 80% of industry procedural volume is routine imaging (x-ray, ultrasound, mammo, etc.) Approximately 20% is advanced imaging (MRI, CT, PET/CT)

Industry remains highly fragmented; vast number of mom-and-pop operators Historically, advanced imaging procedures have had slow and steady growth
MRI and CT Growth: 1-3% sustainable PET / CT Growth: >3% sustainable

Growth has resulted from . . .

Aging population >65-year-old demographic is expected to increase significantly particularly in California, our largest market Growing population

Expanding cost-effective applications for diagnostic imaging Wider physician and payor acceptance for imaging Greater consumer and physician awareness of and demand for earlier intervention and preventive diagnostic screening

Industry is Currently Under Pressure

Volumes are challenged for the first time in the last 10 years Visits to primary care and specialist physicians are down in last 12 months CT volumes are challenged by concerns over radiation exposure Mammo volumes have been affected by economy and 2009 government taskforce changing the recommended age from 40+ to 50+ Radiology Benefit Managers are more prevalent preauthorization/utilization management

Overcapacity exists in advanced imaging modalities, particularly MRI In-office exemption from Stark Laws still allow physicians to own equipment and self-refer Availability of capital is constrained Vendor/OEM financing is limited Local banks and third party financing companies have significantly raised credit standards Medicare Reimbursement remains pressured and future healthcare legislation is uncertain The 2010 CMS Final Rule was superseded by healthcare reform which caps the utilization variable of the Medicare Fee schedule at 75% beginning January 1, 2011 (was previously scheduled to rise to 90% by 2013) We expect continued pressure from Medicare (20% of our business)
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Scale is Becoming Vital for Success; Industry Consolidation and Rationalization has Begun
mom-and-pop operators are struggling Not well capitalized and have a higher cost structure Single-modality facilities that are more impacted by reimbursement changes and competition from multi-modality facilities Unable to do network contracting or capitate with payors Small operators have less access to capital Vendor and bank financing has decreased dramatically for all but a few providers Smaller operators are less willing to give personal guarantees Higher facility accreditation / quality standards Fear of survival and many more sellers than buyers are driving acquisition multiples downward Marginal operators are choosing to close and can now be acquired at 3 4x EBITDA Other operators want to be consolidated into RadNet, which offers long-term stability

I. II. III. IV.

Introduction Diagnostic Imaging Industry Overview Overview of RadNet Financial Information and Core Strategy

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Strong Regional Presence Enables Scale and Leverage Over Competitors

Largest national owner and operator of freestanding fixed-site outpatient imaging centers
30-year operating track record; Consolidator in the highly fragmented imaging industry

206 diagnostic imaging facilities in concentrated markets of CA, MD, DE, NJ, NY and FL
Vast majority of facilities are multi-modality RadNet has scale and competitive relevance in all its markets Provides operational efficiencies and marketing and contracting benefits

NY 24

NJ

17

DE - 15 CA 101

MD - 46

FL 3

RadNet states comprise ~25% of the US population

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Favorable Revenue Mix Mitigates Reimbursement Risk

Emphasis placed on multi-modality strategy
One-stop-shopping for referral sources Lessens exposure to reimbursement changes, diversifies revenue base

Extensive offering of all routine imaging procedures partially insulates us from reimbursement cuts (like the DRA), which generally impact MRI, CT and PET/CT modalities disproportionately
2010 Scan Volume by Modality 2010 Scan Volume by Modality 2010 Net Revenue by Modality (1) 2010 Net Revenue by Modality (1)

1.

Net Revenue by modality based upon global payments received from consolidated Imaging Centers from that period s dates of service. Excludes payments from hospital contracts, Breastlink, eRAD software operations, Imaging on Call teleradiology operations, center Joint Venture management fees and other miscellaneous operations.

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Strong and Diversified Payor Mix

Strong payor relationships RadNet is a critical provider of diagnostic imaging solutions to healthcare insurance providers Payor diversity mitigates exposure to possible unfavorable reimbursement trends within any one payor class Exclusive capitation business decreases the Company s exposure to potential pricing changes from commercial payors Capitation price escalators create built-in increasing reimbursement mechanism
2010 Payor Mix (1) 2010 Payor Mix (1)

1.

Net Revenue by modality based upon global payments received from consolidated Imaging Centers from that period s dates of service. Excludes payments from hospital contracts, Breastlink, eRAD software operations, Imaging on Call teleradiology operations, center Joint Venture management fees and other miscellaneous operations.

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Capitated Contracts Create a Barrier to Entry

RadNet has over 25 capitated contracts with California physician groups representing approximately 15% of our revenue We receive a per-member-per-month fixed price for exclusively providing outpatient imaging to over 750,000 lives in CA Exclusive nature of capitated contracts provides revenue stability and predictability On average, RadNet s arrangements are over 5 years old RadNet has experienced extremely high contract renewal rate History of rate increases (minimum 5% annual increases) Eliminates costs associated with receivables, bad debt expense and billing costs Capitation contracts create pull-through revenue Doctors from capitated physician groups often refer to us their non-capitated patients (discretionary business) Risk of utilization is borne by RadNet and managed through the Utilization Management Division
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Recent Diversification: Breast Disease Management, Radiology Software & Teleradiology

In 2008, we acquired renowned specialty breast medical oncology and breast surgery practices in Southern California ( BreastLink ) Expanded into other areas of Orange County, Temecula, Palm Springs and San Fernando Valley of CA Imaging is an integral part of identifying, diagnosing, staging and tracking the progression of breast cancer BreastLink provides patients with a comprehensive and efficient continuum of care focused exclusively on breast disease Streamlines and shortens the process for patients; patient outcomes are improved Services can be provided at a cost benefit to payors

Recently acquired eRAD, Inc., provider of PACS/RIS products, and hired an industry leading software development team Will replace RadNet IT systems with eRAD and internally developed solutions by end of 2011 Expect a $2million+ annual savings in 2012 and beyond Seek to grow the eRAD solutions by continuing to sell them to other industry participants
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Recent Diversification: Breast Disease Management, Radiology Software & Teleradiology

On January 3, 2011, we acquired Imaging on Call, a Poughkeepsie, New York, provider of preliminary and final remote radiology interpretation Services hospital-based radiology groups, hospitals and imaging centers Daytime and nighttime reads Joint Commission Accredited benefits with credentialing within hospital settings

Including RadNet s contracted radiology groups, RadNet s affiliated physicians now number over 350, larger than any other similar group in the United States Physicians licensed to do business in 28 states

1. Diversification strategy augments RadNet s product and service offering to Hospitals and Accountable Care Organizations 2. New businesses are less capital intensive, requiring less ongoing investment than RadNet s core business
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Comprehensive Services Model Case Study: Pioneers Memorial Healthcare District

Announced June 1, 2011, RadNet executed a series of agreements with a health system east of San Diego, CA to include: Joint Venture outpatient imaging center Imaging On Call Teleradiology (daytime and nighttime access to sub specialist radiology reads) eRAD information technology solutions (PACS and RIS) Future possibility of BreastLink oncology center Comprehensive suite of RadNet solutions to address several objectives To expand Pioneers reach into the outpatient medical community To improve the access patients in the Imperial Vally of CA to high quality specialized medicine To create an efficient and profitable delivery model of comprehensive solutions Pioneers Agreements represent the first manifestation of RadNet s strategic vision of a comprehensive service and partnering model

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Experienced Management Team

Howard Berger, MD Chairman and Chief Executive Officer Mark Stolper Chief Financial Officer

Co-founded RadNet in 1981 Over 25 years of experience in the development and management of successful healthcare businesses University of Illinois Medical School Board Certified in Nuclear Medicine and Internal Medicine residency as well as in a masters program in medical physics in the University of California system
Norman Hames Chief Operating Officer of Western Operations Jeff Linden

Deep experience in investment banking and private equity Dillon Read investment banking and Saratoga Partners private equity Archon Capital Partners backed by Milken family and NewsCorp Business development at Eastman Kodak Co-founder of Broadstream Capital Partners
General Counsel

Over 20 years of experience in the industry Was President of Diagnostic Imaging Services (14 imaging centers), which he sold to RadNet Operated imaging center for American Medical International (AMI)
Steve Forthuber Chief Operating Officer of Eastern Operations Mike Murdock

An attorney for the SEC Chairman of the Business Organizations Section (1974-75) and President (1979) of the Century City Bar Association and is a member of the Corporation, Banking and Business Law and Health Law Sections of the American Bar Association Advised on the roll-up, public financing and sale to RadNet of Diagnostic Imaging Services, Inc.
Chief Development Officer

23 years of healthcare experience; 18 of those years in radiology practice management Was COO of Radiologix Held various roles at PerSe Technologies' Physician Services Division, including Regional Vice President and Area Executive for the Northeast

Spent most of his career in senior financial positions with healthcare companies including American Medical International, Physician Reliance Network and Dental One Was CFO of Radiologix Responsible for merger and acquisition activities at RadNet 18

I. II. III. IV.

Introduction Diagnostic Imaging Industry Overview Overview of RadNet Financial Information and Core Strategy

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Proven Track Record of EBITDA Growth and Cash Flow Generation

RadNet has a consistent track record of achieving profitable growth and generating significant cash flow Procedure Volumes Procedure Volumes
0 07- 1 R: CAG 12.4%

Net Revenue Net Revenue

: 9.0% CAGR 07- 10

Adjusted EBITDA Adjusted EBITDA

GR: 7.6% 07- 10 CA

Cash Flow from Operations Cash Flow from Operations

($ in millions)

% Margin

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Strong Performance Trends in Q2 2011

Despite a difficult operating and economic environment, Revenue increased 12.0% to $155.6 million as compared with $139.0 million in Q2 2010 EBITDA increased 11.2% to $30.5 million as compared with $27.4 million in Q2 2010 Net Income was $3.5 million as compared with a loss in Q2 2010 Same Center procedural volumes increased 2.0% Trailing twelve month EBITDA increased to $114.4, within 2011 full-year guidance range Net Revenue Net Revenue
$35

Adjusted EBITDA Adjusted EBITDA

+11.2%
$27.4m m $30.5mm

$190 $170 $150 $130 $110 $90 $70 $50

+12.0%

$155.6mm $139.0mm

$30 $25 $20 $15 $10

Q2 2010

Q2 2011

Q2 2010

Q2 2 011

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Summary Valuation Metrics: RDNT

EBITDA Valuation Metrics Equity Market Capitalization @ $2.45 per share Net Debt Current Enterprise Valuation Trailing 12 Mo. EBITDA - 6/30/2011 Midpoint of 2011 EBITDA Guidance Enterprise Value / Trailing 12 Mo. EBITDA Enterprise Value / 2011 Guidance Midpoint EBITDA
2 1

91.7 mm

521.1 mm $ 612.8 mm $ 114.4 mm $ 115.0 mm 5.4 x 5.3 x

Company completed a comprehensive refinancing on Apr. 6, 2010 $100mm undrawn/fully-available revolving line of credit (L+375bps*) due Apr. 6, 2015 $285mm Senior Term Loan (L+375bps*) due Apr. 6, 2016 $200mm Senior Unsecured Notes due Apr. 1, 2018 (10 3/8%) 2010 Free Cash Flow (EBITDA less CAPEX and Cash Interest) was $26mm; Represents an attractive Free Cash Flow Yield to equity holders and provides for deleveraging Future earnings and cash flow shielded by Federal and State NOLs of approximately $200 million
1 2

Source: Per closing stock price as of September 29, 2011. Source: RadNet 10Q ended 6/30/11

* LIBOR on floating rate facilities is subject to a floor of 2.0%

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