Destruction of Gamma Knife at NYU Medical Center; Replacement and Restoration

6 Months Ended

Jun. 30, 2016

Destruction of Gamma Knife at NYU Medical Center; Replacement and Restoration [Abstract]

Destruction of Gamma Knife at NYU Medical Center; Replacement and Restoration

Note C – Destruction of Gamma Knife at NYU Medical Center; Replacement and Restoration

USN opened its New York gamma knife treatment center in July 1997 on the campus of New York University (“NYU”) Medical Center.  USN installed a new Leksell gamma knife, the PERFEXION model, at the NYU Medical Center in March 2009 in replacement of the older gamma knife equipment.  In connection with this upgrade, USN modified its arrangement with NYU to extend the term for 12 years from March 2009.

In October 2012, USN’s facility at NYU was totally destroyed as a result of flooding from Hurricane Sandy. The gamma knife had to be removed to prevent any cobalt leakage that might occur due to rusting of the equipment. The removal cost was $525,000. USN paid a lease settlement of the outstanding principal balance only and received from insurance coverage $930,000 above the lease principal payments and removal costs.

USN finalized arrangements with NYU regarding the restored gamma knife center and USN’s long term contract with NYU in early 2014. USN’s new facility, with the Leksell PERFEXION gamma knife, is located in the Tisch Hospital of NYU Langone Medical Center. The facility reopened and began receiving patients at the end of April 2014.

USN entered into a six year lease in the amount of $4.7 million for the purchase of the replacement equipment and associated leasehold improvements. The first payment of $78,000 was made on September 1, 2014, including $18,000 of interest, and the final payment is due on May 1, 2020. USN entered into a second two year lease in the amount of $250,000 for the cost of the construction required at the relocated site. The first payment of $12,000 was made on November 1, 2014, and the final payment was paid on July 1, 2016.

In April of 2016 USN paid a deposit of $248,000 to Elekta for the installation of new ICON imaging technology in the NYU Gamma Knife equipment. This ICON technology is scheduled to be installed during the month of July 2016 and will be completed on or about August 1, 2016. The company will finance an additional amount of approximately $725,000 at an interest rate of approximately 4.5%. The monthly lease payment will be about $20,000. A monthly maintenance agreement will commence a year after the installation date and is estimated to be about $6,000 per month.

In July of 2016 USN entered into an agreement with NYU regarding the installation of the new ICON technology.  Following the installation, NYU will adjust the monthly fee structure by adding $30,000 to the monthly payment for the remaining term of the agreement. Afinal payment of $17,000 will be made for the partial month of operations in March 2021.

The major terms of the agreement with NYU continue in effect, terminating at the end of March 2021.  USN is responsible for the maintenance and insurance for the gamma knife equipment at the NYU facility and is reimbursed for use of the gamma knife based on a fee per procedure performed with the equipment.  NYU provides the medical and technical staff to operate the facility.  At the end of the contract term, costs associated with closing and restoring the NYU facility to its original condition are the responsibility of USN.