Envision Healthcare has fixed some problems with physician overstaffing and money-losing hospital contracts. CEO William Sanger said during a fourth-quarter and year-end earnings call with analysts that the staffing giant is now preparing for a year of revenue and earnings growth.
The company also expects margins to improve from its big late-year acquisition of Rural/Metro Corp. as the business is fully absorbed, Sanger said.
"Strategic investments that we've made over many years allow us to succeed under emerging patient-care models that reward providers for improving quality while effectively managing the total cost of care," Sanger said in the company's earnings release.
Net income in the fourth quarter fell to $41.9 million, or 22 cents per share, compared with net income of $49.9 million, or 27 cents, in the prior year quarter. Revenue in the quarter jumped to $1.48 billion from $1.16 billion in the fourth quarter of 2014.
For 2015, Envision posted net income of $144.9 million, or 78 cents per share, compared with net income of $125.5 million, or 66 cents, for 2014. Revenue in 2015 totaled $5.45 billion vs. $4.4 billion in 2014.
Sanger said the company has improved the way it monitors physician staffing needs to peg it to hospital patient volumes. That has helped clear up an overstaffing problem that the company identified in the third quarter of 2015 and corrected throughout the fourth quarter.
Greenwood Village, Colo.-based Envision also found money-losing hospital contracts in the second half that it either modified or shed, Sanger said. To avoid those in the future, the company is putting a 90-day cancellation clause in new contracts rather than the one year often seen in new contracts. That change is meant to give Envision leverage in renegotiating contracts if they are not profitable, he said.
Envision paid $620 million in cash in October for Rural/Metro, bolstering its position as a leading provider of ambulance and fire-protection services. The company is being absorbed into its American Medical Response unit. Envision Chief Financial Officer Randel Owen said margins are expected to increase on the Rural/Metro book of business as integration continues.
Sanger said Envision is eyeing additional acquisitions of physician groups for its staffing business, and less so for medical transportation until Rural/Metro is absorbed.
The sweet spot for Envision is large physician groups of 500-700 clinicians, Sanger said. The company also is seeing rapid growth in a business dedicated to providing ambulatory-care management and bundled hospital services to healthcare providers by offering ambulance services to the hospital, emergency-room and hospitalist staffing, and discharge transportation.
Sanger said the business aligns with government and private payers evolving toward a bundled-contracting model.