HealthSouth Corp.'s next deal will add more than 120 outpatient rehabilitation facilities to the company's rapidly growing network, giving it about 700 rehabilitation and surgery centers nationwide.
HealthSouth said it will acquire Caremark International's outpatient rehabilitation subsidiary, Caremark Orthopedic Services, in a $127.5 million cash transaction.
Last week, the boards of both companies approved the deal, which still awaits regulatory approval and is expected to close by the end of the year. HealthSouth's existing bank credit facilities will fund the purchase, the company said.
Caremark's orthopedic unit has annualized 1995 revenues of approximately $80 million. The Northbrook, Ill.-based company said the sale will allow it to better allocate capital to its four primary businesses: physician practice management, pharmaceutical services, disease management and international operations.
By adding the Caremark facilities to its network, HealthSouth will penetrate further into metropolitan markets in California, Ohio and Texas, as well as in Chicago, Seattle and St. Louis, said Richard M. Scrushy, HealthSouth's chief executive officer.
Two weeks ago, the Birmingham, Ala.-based company agreed to acquire Nashville, Tenn.-based Surgical Care Affiliates in a $1.2 billion stock swap.
That deal, which sent HealthSouth to the forefront of the ambulatory-care market, pushed the company's estimated fiscal 1996 revenues over the $2 billion mark.
The company established itself as the top rehabilitation chain in the nation two years ago, and has reinforced that foothold through an aggressive course of acquisitions (See chart). It operates nearly 600 facilities in 39 states.
All the action this year has raised the question of whether HealthSouth is doing too much too quickly.
But Scrushy said the company has been building up its infrastructure to prepare for the acquisitions.
"We're developing a company here that's positioning itself to do business with every major insurance company, every major workers' compensation company and every large self-insured company in the country," Scrushy said.
With 23,000 employees, HealthSouth is "well staffed to absorb all this," he said.
In addition, the acquisitions have improved the company's financial health, he said.
Last month, HealthSouth netted $335 million through a public offering of about 15 million shares at $23.25 per share. That allowed the company to pay off debt and reduce its debt-to-equity ratio from 70% to 49%, Scrushy said.
"We literally could pay all of our debt off in a little over a year," he added. The company's cash flow over the next year will be $600 million, which is equal to its debt, he said.
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HealthSouth's acquisition spree
October 1995 Agrees to buy Caremark Orthopedic Services for $127.5 million in cash.
October 1995 Agrees to acquire Surgery Care Affiliates in a $1.2 billion stock swap.
August 1995 Makes deal to purchase Sutter Surgery Centers for $38 million in stock.
June 1995 Merges with Surgical Health Corp. for $155 million in stock.
May 1995 Acquires NovaCare's rehabilitation facilities for $215 million in cash.
December 1994 Buys ReLife for $180 million in stock.
December 1993 Purchases National Medical Enterprises' rehabilitation facilities for $300 million in cash.
