Newly merged Envision Healthcare Corp. intends to spend $700 million on acquisitions in 2017, predominantly for physician practices that are lining up to sell, Envision CEO Chris Holden told analysts Wednesday.
Speaking at the Citi Global Healthcare Conference, less than a week after Envision and AmSurg Corp. completed their $10 billion, all-stock merger, Holden said the new Envision has “a robust pipeline” from which to select practices to buy.
The merger was largely complementary. It brought together Envision's core of staffing emergency rooms and providing ambulance services with AmSurg's focus on specialists, like anesthesiologists, radiologists and neonatal physicians, as well as ambulatory surgery centers.
Holden told Citi analysts that hospitals are looking for one-stop vendors that can staff all of their departments. He joked that hospital management liked “one throat to choke” if there were problems.
Holden said AmSurg and Envision structured the deal as all-stock, instead of cash, to preserve capital for acquisitions to fuel growth at the new company. Holden also said Greenwood Village, Colo.-based Envision will eschew a stock repurchase plan aimed at providing a short-term boost in stock price to keep its cash flow available for those acquisitions.
The merger created the nation's largest physician-staffing company with annual revenue of about $8.5 billion. That's nearly twice the previous leader, TeamHealth of Knoxville, Tenn.
Independent physician groups are looking for partners like Envision that can buy them out and provide their practices with modern information technology and business practices so they can concentrate on clinical care, Holden said. The payer shift away from fee-for-service medicine is forcing physicians to prove their quality and efficiency to optimize reimbursement.
Envision Chief Financial Officer Claire Gulmi, also speaking at the Citi conference, said the merger would produce about $50 million in cost savings over three years, mostly through the reduction of corporate overhead, and $50 million in new revenue from cross-selling opportunities.
Gulmi said most of the $50 million in cost savings would be seen in the first year of the merger. The cross-selling revenue would mostly be gained in the final 18 months of the three-year plan.
Holden said he would be personally leading a board evaluation of all of Envision's products to determine if they should be kept or divested. He gave no specific timeline on the review.