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July 12, 2016 01:00 AM

Little business overlap greases AmSurg-Envision merger

Dave Barkholz
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    AmSurg CEO Chris Holden told analysts Tuesday that Nashville-based AmSurg expects to merge smoothly with Envision Healthcare because there is almost no overlap of business lines.

    Speaking at Cantor Fitzgerald's 2nd Annual Healthcare Conference in New York City, Holden said Envision and AmSurg provide complementary services. Envision concentrates on ambulance and emergency room and hospitalist staffing services, while AmSurg is strong in ambulatory surgery centers and specialty physician staffing inside of hospitals.

    There are only two small areas of overlap, Holden said. Envision has a small number of anesthesia practices that would have to merge with AmSurg's large anesthesiology practice. Conversely, AmSurg has some emergency room physicians that would merge into Envision's much bigger ER presence at hospitals.

    That overlap represents just $200 million in revenue of a combined new company with annual sales of about $8.5 billion, Holden said.

    “Really, it's the equivalent of doing two smaller-sized transactions,” Holden said of the integration.

    Holden said the complementary nature of the transaction should prevent any anti-trust issues from arising as the companies proceed to close. He said they expect to complete the merger before year end.

    The deal, announced last month, is an all-stock transaction valued around $10 billion. When it closes, current Envision shareholders will hold 53% of the shares of the new company. AmSurg shareholders will hold 47%.

    Holden told Cantor Fitzgerald analysts that the combined company expects to get a “first-mover advantage” over its smaller competitors by having a national presence across a broad line of services.

    The combined company's $8.5 billion in sales is nearly twice that of its nearest rival, TeamHealth. TeamHealth projects revenue in 2016 of about $4.75 billion, according to its February earnings release.

    Holden said hospitals increasingly are looking for its staffing vendors to provide services in multiple departments rather than bid the jobs a la carte.

    He said the combined company will have opportunities to cross-sell AmSurg services, including ambulatory surgery centers, to Envision customers and vice versa.

    AmSurg managers have been surprised how often hospital customers have asked about Envision's ambulance services since the deal was announced, Holden said.

    Ambulance services are expanding beyond emergency transportation. They are now a way to get patients to the most cost-effective setting for care.

    That's becoming crucial as reimbursement moves from fee-for-service to value-based reimbursement that puts hospitals and physicians at risk for the costs of care.

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