Becker's ASC Review

16 JOINT VENTURES Moody's: Envision could sell AmSurg for $3B-$3.5B — Will they? By Laura Dyrda A new Moody's report outlined Nashville, Tenn.-based Envision's strategy aer the KKR leveraged buyout, which detailed the uncertainty around Nashville-based AmSurg, the company's ambulatory division. e report's lead analyst, Jonathan Kanarek, examined Envision as a whole, expecting the company to take a more "targeted approach" to acquisitions in the future, spending around $200 million per year. is is a decrease from previous years; from 2013 to 2017, Envision spent around $1.2 billion on acquisitions annually. Here are five quick thoughts on where AmSurg may be headed: 1. Despite the leveraged buyout, Mr. Kanarek estimated in the report that Envision could sell AmSurg for around $3 billion to $3.5 billion, based on the assumption that the company owns approximately 51 percent of each ASC in its portfolio. e report estimated AmSurg's sale could reach multiples of 12 times to 14 times EBITDA and generate proceeds net of minority interest of around $1.5 billion to $1.8 billion. "KKR's proclivity for taking debt-financed dividends suggests by exten- sion that Envision might sell the ASC business if it could dividend a portion of the sale proceeds," according to Mr. Kanarek. 2. Potential buyers include Nashville-based HCA Healthcare, Dallas- based Tenet and UnitedHealth's OptumHealth, based in Eden Prairie, Minn.; all of which already have significant ASC platforms. 3. e report outlined what may happen with the proceeds if Envision decided to sell AmSurg. "If Envision was to sell the ASC business, we believe there would be significant cash leakage because the company does not need to use all proceeds to pay down debt or reinvest in the business," according to Mr. Karanek. 4. If Envision decides to keep AmSurg, it could use the ASCs to, "attract new business opportunities," for its physician staffing business. "We expect ASCs to continue [to] create savings for the U.S. health system, particularly because technical advancements allow for a grow- ing number of procedures to be performed in lower-cost, outpatient settings," according to Mr. Karanek. "Further, by retaining its ASCs, Envision will have a valuable way to attract partnerships with large hos- pital systems. About 10 percent of the company's ASCs are co-owned by health/hospital systems. Given how attractively other healthcare con- stituents view ASCs, hospitals may be interested in an ownership stake in some of these ASCs in return for forging a relationship with Envision to provide physician staffing services." 5. AmSurg accounts for around 15 percent of Envision's revenue, and keeping the ASC business would give the company an advantage over the competition. "While we would view the reduction in scale and diversity in the event of an ASC sale as credit negative, Envision would still remain the most diversified physician staffing company," Mr. Karanek said in the report. 6. Envision is on track to reach its $50 million revenue goal by the end of 2019 based on synergies from the AmSurg merger, according to the report. n Naples Day Surgery shuts down: 5 details By Angie Stewart N aples (Fla.) Day Surgery closed permanently Oct. 19, 2018, due to low patient volume and competition from other surgery centers, Na- ples Daily News reports. Here's what you should know: 1. The center was predominantly physician-owned and managed. Naples-based NCH Healthcare System had a 15 percent stake in the ASC, and a private investment group including several physicians owned 85 percent. 2. The physicians involved elected to close the center. Some of them now perform surgeries at NCH facilities and some are at other locations. 3. The ASC's 64 employees were informed of the deci- sion to close in September 2018. Most found new jobs, according to Naples Day Surgery Center Executive Director Cathy Blanchard. Patients were informed of the closing through signs and other notices. 4. NCH, which opened Naples Day Surgery in 1986, owns the building where Naples Day Surgery oper- ated. The space has five surgical suites. 5. At its height, the surgery center had 100 active physicians performing a variety of procedures and services, according to Ms. Blanchard. n Physician-owned hospital in El Paso closes, citing financial & operational challenges By Laura Dyrda E l Paso (Texas) Specialty Hospital, a physician- owned facility, closed in late 2018 for finan- cial and operational reasons, according to a KFOXTV report. A statement made to the publication said the hospital aimed to support employees during the transition and provide severance packages. The hospital was owned by local physicians in partnership with Nashville, Tenn.-based Surgery Partners. It provided a variety of orthopedic, emergency care and weight loss services. The closing may have been unexpected for some pro- viders and staff. As recently as August , the hospital was adding physicians. Orthopedic surgeon Zachary Lovato, DO, joined the hospital in August as a fellow- ship-trained adult spinal deformity and reconstruction surgeon, according to the El Paso Herald-Post. n

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