Becker's ASC Review

14 ASC MANAGEMENT USPI may exceed $175M acquisitions for the right deal + how PE firms become an opportunity, not competition By Laura Dyrda D allas-based Tenet Healthcare CEO Ron Rittenmeyer touted the com- pany's financial and cultural change in the company's 2018 earnings call, driven by a strong year from its ambulatory divi- sion, United Surgical Partners International, which reported a 7.5 percent net operating revenue increase to $2 billion. Last year, Tenet acquired the remaining 15 percent minority share of USPI from Welsh, Carson, Anderson & Stowe, and now holds 95 percent of the company. e company, which includes 227 consolidated facilities, continued to add to its ambulatory portfolio and sees energy around USPI continuing in 2019. "We invested $240 million in ambulatory M&A including adding 27 facilities and seven new health system partners," said Mr. Rittenmeyer during the fourth quarter and full-year earnings call, as transcribed by Seeking Alpha. "is was a great year for ac- quisitions and de novos and we will continue to pursue these opportunities aggressively." Mr. Rittenmeyer anticipates USPI will deliver another 10 percent to 12 percent growth in adjusted EBITDA less facility NCI in the coming year, with a focus on acquisi- tions as well as same-facility growth. In 2018, the company reported 5.1 percent same- facility revenue growth and cases were up 3.4 percent. e overall revenue per case also increased 1.6 percent. "Growth in our hospitals and USPI is depen- dent on building and sustaining greater loy- alty from our patients," said Mr. Rittenmeyer. "is is about how we handle arrival to departure and everything in between. What we do impacts new and returning patients and our objective is to be seen and known as the location desired for quality care." President and CEO of USPI Brett Brodnax also discussed the company's future, laying the foundation for even bigger growth than initially predicted. "As we look at 2019, our pipeline continues to be robust," he said. "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" During Mr. Rittenmeyer's presentation at the J.P. Morgan Healthcare Conference in January, he said the company owned around 5 percent of Medicare-certified ASCs in the country and sees a huge opportunity for future growth. But they're not the only orga- nization with an eye on the ASC market. "e 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." Mr. Brodnax also discussed private equity investors changing the landscape heading into 2019. "Some people would view that as competi- tion," he said. "Quite honestly, we see that as an opportunity. 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." n Surgery Partners names new EVP, COO: 5 key notes By Laura Dyrda Nashville, Tenn.-based Surgery Partners named former Dallas-based Tenet Healthcare leader Eric Evans executive vice president and COO. Five things to know: 1. Mr. Evans has around 15 years of experience in operating and strategic roles with healthcare organizations. He previously served as president of hospital operations for Tenet. 2. While with Tenet, Mr. Evans was responsible for 68 acute care hospitals and 161 hospital-affiliated facilities. There were 2,200 employed providers and other healthcare services employees under his purview. 3. Mr. Evans took on his new role with Surgery Partners April 1. Mr. Evans will focus on fully integrating the company's operations to help drive value for stakeholders and partners. 4. During his tenure with Tenet, Mr. Evans was CEO of the system's Texas region and market CEO of The Hospitals of Providence in El Paso, Texas. He also spent time as CEO and COO of Lake Point Health Network in Dallas. 5. Surgery Partners CEO Wayne DeVeydt sees Mr. Evans' experience as an asset to the organization's future growth. "Eric's deep experience with surgi- cal facilities, results-driven management focus and proven track record in overseeing large diversified businesses will only help to accelerate Surgery Partners' efforts to build and scale our leading platform and drive long-term sustainable growth," he said. n

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