A small medical-device maker is diversifying and growing by acquiring medical practices in a very narrow sub-specialty, gastroenterology anesthesia.
Edward Wright, CEO of Vancouver, British Columbia-based CRH, said the company is using its relationship as a longtime supplier to physicians of the O'Regan System to help those gastroenterologists spin out their anesthesia businesses to a national player.
This month CRH hired Jay Kreger, a former HCA vice president, to run its anesthesia operation. Kreger had been the vice president of development for Medical Care America, the ambulatory surgery center (ASC) division of HCA. He is based in Atlanta.
“We made a paradigm shift,” Wright said.
In June CRH acquired Austin Gastroenterology Anesthesia Associates in Austin, Texas; Community Anesthesia in Brockton, Mass.; and Arapahoe Gastroenterology Anesthesia Associates in Littleton, Colo. Terms were not disclosed.
Wright said CRH bought a majority stake in the practices. They typically are staffed with certified registered nurse anesthetist either as employees or on a contractual basis, he said.
Every year, physicians perform about 15 million colonoscopies. In about 15% of cases, they find evidence of hemorrhoids. CRH's O'Regan System is a banding device in which the hemorrhoid is tied off and the tissue dies rather than being removed surgically.
It is a popular device among gastroenterologists, said Richard Close, an analyst in Nashville for the Canadian securities firm, Canaccord Genuity. And CRH has been able to parlay its entrée into those doctors offices to diversify in the anesthesia space, he said.
He estimated that the three recent acquisitions will add annualized revenue of $22.2 million and an adjusted EBITDA contribution of $6.5 million.
Revenue has grown rapidly since CRH began its diversification into the gastroenterology anesthesia business two years ago, Close said.
He projected CRH revenue in 2016 from its anesthesia services line, before factoring in the Brockton and Littleton acquisitions, of $57 million.
In 2014, anesthesia services generated revenue of $3.4 million, while medical device sales totaled $8.6 million. That was turned on its head in 2015. Anesthesia service revenue jumped to $36.5 million in 2015, while medical devices $9.6 million after the company bought the anesthesia practices and consolidated the revenue.