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Where 5 major ASC companies stand in 2019: Strategy, market share & more

Tuesday, March 12, 2019   (0 Comments)
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March 12, 2019, Becker's ASC Review  

 

United Surgical Partners International, AmSurg, Surgical Care Affiliates, SurgCenter Development and Surgery Partners have made significant changes in the past year and are looking to new strategic opportunities in the future.

Here is a brief overview of the key areas of focus for each company and where trends in the ASC industry are headed.

AmSurg


In October, private equity firm KKR completed it's $9.9 billion acquisition of Envision, including AmSurg. Post-acquisition, KKR had around 300 ASCs in its portfolio. AmSurg now has more than 2,000 physician partners in centers across the country focused primarily on endoscopy, ophthalmology and orthopedics. Prior to the acquisition, AmSurg reported $328 million in second quarter net revenue for 2018, with same-center revenue growth hitting 2.9 percent.

One month after the acquisition, Moody's analyst Jonathan Kanarek said Envision could sell AmSurg for around $3 billion to $3.5 billion purchase price and estimated the sale could reach multiples of 12x to 14x EBITDA as well as generate proceeds net of minority interest of around $1.5 billion to $1.8 billion.

AmSurg accounts for around 15 percent of Envision's revenue and around 10 percent of the company's ASCs are co-owned by hospitals and health systems. By the end of 2019, Envision is on track to achieve $50 million in revenue synergies from the AmSurg merger, according to the Moody's report.

SurgCenter Development

As of March 8, SurgCenter Development had 114 operational centers and 94 include total joint replacements. Over the past two years, the company has added 40 new ASCs, including five new de novo facilities since Jan. 1, and has 16 ASCs in development. Since launching its total joint replacement program, surgeons have performed 37,000 total joints at SurgCenter Development facilities.

"We are very fortunate to have excellent surgeon partners, many of whom are pioneers in outpatient orthopedic and neurosurgery," said President and CEO Stacey Berner, MD. "This has positioned us quite well for the future, as many stakeholders have realized the value of migrating complex cases to the ambulatory surgery center setting. SurgCenter's outpatient total joint and complex spine programs are well established and thriving. Our facilities began performing these procedures before others in the industry believed it was feasible. We will complete our 40,000th outpatient total joint in the second quarter of 2019."

The company has ASCs in 21 states performing total joint replacements and reports among total joint replacement patietns, 99 percent return home the same day. SurgCenter Development's 2,200 surgeon partners treat 210,000 patients at the company's centers annually.

In February, the company reported its 200th ASC partnership and Principal and Chief Development Officer Chris Urban, MD, said the company was in full growth mode. "We continue to see the demand increase from patients who want high quality, convenient surgical care and from physicians who can offer their services in a setting that is patient-centric, comfortable and financially affordable."

Surgery Partners

Surgery Partners has more than 180 locations nationwide and 4,000 affiliated physicians. During the third quarter of 2018, the company reported a 45 percent revenue increase and 11.4 percent jump in same store revenue. Through the first three quarters, the company's revenue increased 48.3 percent to $1.3 billion.

"We continue to advance our agenda both operationally and strategically, as we remain focused on pruning the portfolio, investing in our platforms and processes and deploying capital to continue to execute on our inorganic growth opportunities," said CEO Wayne DeVeydt.

Last September, Executive Vice President and CFO Tom Cowhey participated in the Wells Fargo Securities 2018 Healthcare Conference in Boston. He said the company sees opportunity to acquire new centers and is poised to remain independent as other large chains become acquired. "As it relates to what we are seeing from other providers and payers, our independence is a real asset right now," Mr. Cowhey said. "We can work with a provider in a larger system in a particular geography to help them manage a facility differently or bring different doctors to bear or do things a little bit differently than they might have thought of."

Over the past year, the company more than doubled the size of it's physician recruiting team and aimed to complete $80 million to $100 million in mergers and acquisitions by the end of 2018. In 2019, the company is focused on growing its musculoskeletal services.

Surgical Care Affiliates

OptumCare's Surgical Care Affiliates now includes more than 210 surgical facilities, 8,500 teammates and 7,500 physicians that complete 1 million procedures at affiliated facilities per year. The ASC chain also has several hospital and health system affiliations, including Arlington-based Texas Health Resources, West Des Moines, Iowa-based UnityPoint Health and Fountain Valley, Calif.-based MemorialCare.

In an October 2018 interview with Becker's, SCA CEO Tony Kilgore discussed the company's growth plan for the next five years. "We expect to expand the number of SCA facilities significantly in the next five years. By aligning with OptumCare medical groups (39,000 physicians and growing), we have a compelling opportunity to meaningfully improve surgical care for millions of people," he said. "At the same time, we must be thoughtful about our growth. We choose the right partners that we know have the potential to be successful with us, and in the right markets. As we unlock markets, we will invigorate independent physicians and we'll have even more tools for growth and relevance on a national basis. Our multi-payer approach is strong, and we can meaningfully engage in the value discussion."

In 2018, Optum reported a 17.4 percent year-over-year increase in revenue, hitting $101.3 billion. In the company's most recent fourth quarter and full year 2018 earnings call Optum CEO Andrew Witty mentioned he was thrilled with the progress of OptumHelath and its ASCs. "I would expect roll out and to extend those networks over the next several years," he said.

USPI

In 2018, USPI invested $240 million in ambulatory mergers and acquisitions, adding 27 facilities and seven health system partners. The company anticipates delivering another 10 percent to 12 percent growth in adjusted EBITDA less facility NCI in the coming year, focused on acquisitions and same-facility growth. Over the past year, USPI reported 5.1 percent same-facility revenue growth, and case volume increased 3.4 percent.

"As we look at 2019, our pipeline continues to be robust," said USPI CEO Brett Brodnax during an earnings conference call in February. "We have guided $150 million to $175 million [for acquisitions], but if we continue to find high quality acquisitions, it could be a little bit higher than that."

USPI currently has ownership in around 5 percent of Medicare-certified ASCs nationwide and the CEO of Dallas-based Tenet, USPI's parent company, Ron Rittenmeyer sees huge opportunity for future growth in the ASC space, although the company faces competition from other organizations in the market.

"The primary competition that we continue to see is related to other surgery center companies that are playing in the space," said Mr. Brodnax, on the conference call. "We're also seeing a little bit of resurgence of competition from health systems around the country who are trying to figure out how they accelerate ambulatory growth. Now, many of those health systems are looking to organizations like us to partner with, but there are health systems around the country who are deciding to go it alone and we deal [with] those as obviously competitors."

Interestingly, Mr. Brodnax sees the emergence of private equity in the ASC space as an opportunity instead of competition. "If we can work with some of these PE firms to help leverage our infrastructure as opposed to them having to replicate the infrastructure, we think there is an opportunity to partner with the PE firms to help grow their footprint and scale out of their business at a much more expeditious pace," he said.


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