AmSurg-Envision merger aims at hospital appetite for buffet of physician services

A key driver of the AmSurg and Envision Healthcare merger announced last week is the trend among hospitals to find a single vendor for outsourced physician staffing in multiple departments rather than contract the services a la carte, Envision CEO William Sanger said.

He added that Envision has passed on bidding for more comprehensive jobs because while it could cover the emergency departments and hospitalists, it could not provide some of the other specialties such as anesthesia, radiology and neonatology. AmSurg, on the other hand, is strong in those areas.

As a combined company, the new Envision Healthcare will be in a position to bid for those jobs and other services that hospitals require, such as ambulance transportation and outpatient surgery.

Nashville-based AmSurg owns more than 250 ambulatory surgery centers nationally, and Envision is one of the largest providers of hospital ambulance services.

“We'll hit the road running,” Sanger said of the combined company.

The merger is an all-stock deal valued at about $10 billion. When it closes, current Envision shareholders will hold 53% of the shares of the new company. AmSurg shareholders will hold 47%.

The two sides decided to go that route, with no cash trading hands, to preserve capital for additional acquisitions and maintain a combined debt level at about five times EBITDA, said AmSurg CEO Chris Holden.

Sanger will be executive chairman of the new company, while Holden is slated as CEO.

The companies have combined annualized revenue of about $8.5 billion and a market value of $10 billion. Merger and consulting fees are expected to be between $175 million and $200 million.

Holden said the merger would yield synergies of $100 million over the next three years.

He said the all-stock structure of the deal keeps the company's powder dry for acquisitions, especially for physician practices struggling with management duties and new risk-based reimbursement that relies on data.

Holden noted that although the two companies combined handle nearly 30 million patient encounters annually, there's plenty of room to grow. The two companies together get less than a 10% slice of the estimated $180 billion in revenue that hospitals generate annually from physicians working inside their institutions.

Most of that revenue is provided by hospital-employed doctors or private-practice groups.

That leaves huge opportunities for the new company to cross-sell AmSurg's anesthesiologists, radiologists and neonatologists into hospitals that use Envision's emergency doctors and hospitalists, he said. Those same opportunities exist for Envision doctors to win new business in hospitals already using AmSurg specialists.

Sanger said a not-for-profit hospital system recently wanted one vendor to handle physician staffing for five departments instead of contracting the work to multiple vendors. The departments were emergency, hospitalist, anesthesiology, neonatology and surgery.

Envision wanted the job, but didn't have capabilities in every one of those disciplines, Sanger said.

The company lost the job as a result, he said, though the system couldn't find any vendor to provide that comprehensive suite of services and ended up slicing it up anyway.

Sanger said under the new Envision, no job will be too big.

“If we were to respond to that RFP today, this company would be squarely in the center of that in terms of being able to win that contract,” he said.