Physician staffing and healthcare solutions giant giant Envision Healthcare lowered its earnings guidance Tuesday as it enters the home stretch of preparations for a mega-merger with rival AmSurg.
Net income in the third quarter fell to $28.4 million, or 15 cents per share, from $52.4 million, or 27 cents, in the year-earlier quarter.
On the strength of acquisition volumes and solid same-store growth on its physician staffing contracts, revenue in the third quarter increased 21% to $1.64 billion from $1.35 billion in the year-earlier quarter.
CEO Bill Sanger said earnings were dampened by additional investments that the company made to strengthen ambulance service in markets served by recent acquisition Rural/Metro as well as by payment delays from a Florida health plan where its Evolution subsidiary has won business.
“We remain confident that we will achieve our targeted financial performance for both Rural/Metro and Evolution's health plan contract during the first half of 2017,” Sanger said.
In recognition of those issues and the costs of putting together its merger with AmSurg, Greenwood, Colo.-based Envision lowered its full-year guidance on adjusted EBITDA to between $705 million and $715 million from a range of $715 million to $730 million during its second quarter earnings release.
Envision said its merger with Amsurg is on track. Proxies for the stock merger, valued at $10 billion, have been sent to shareholders of both Envision and AmSurg. Special shareholder meetings to approve the merger have been set separately by the companies for Nov. 28.
Regulatory approvals went smoothly because the two companies have complementary rather than overlapping business lines. Envision is heavily into emergency room physician staffing and ambulance services, while AmSurg focuses on physician staffing in hospital specialties such as radiology, anesthesiology and neonatology. Nashville-based AmSurg also is a major player in freestanding ambulatory surgery centers.
Together, the companies will create the nation's largest physician staffing company with annual revenue of about $8.5 billion. That far exceeds the just over $4 billion in revenue of TeamHealth of Knoxville, Tenn., which announced Monday that it is being sold to private-equity firm Blackstone Group for $6.1 billion.