Physician staffing giant Envision Healthcare is considering selling its ambulance and population health businesses.
The company said it intends to conduct a strategic review of the businesses that might lead to “potential joint ventures, alternative structures or possible divestiture.”
Envision, of Greenwood Village, Colo., merged with rival Amsurg in December to create the nation's largest physician staffing contractor to hospitals, with more than $10 billion in annual revenue.
Post-merger, management of the combined company is taking a hard look at what's really core to the new Envision and where it wants to direct capital resources, said Richard Close, analyst in the Nashville office of securities firm Canaccord Genuity.
The answer was made known during Envision's release of disappointing fourth-quarter earnings Tuesday when management said $750 million of the company's $900 million capital budget in 2017 would be spent on buying physician practices.
Only $75 million was earmarked for its medical transportation business and $100 million for ambulatory surgery centers.
“Capital expenditures are skewed toward physician staffing, which is higher growth and higher value than the more capital-intensive ambulance business,” Close said.
Envision is far from the only provider going through this type of exercise. Hospital giants Community Health Systems and Tenet Healthcare are pruning noncore hospitals.
And not-for-profit hospital systems Providence Health & Services, based in Renton, Wash., and Catholic Health Initiatives in Englewood, Colo., recently agreed to sell their joint-venture contract lab business to Laboratory Corporation of America because the operation was no longer deemed core.
Envision's earnings miss Tuesday, which was announced after markets closed, proved costly to its stock price.
It opened down sharply by $7, or 10%, to about $63 per share before recovering some of the losses throughout the day.
In the fourth quarter, Envision reported a net loss of $137.8 million on merger-related costs, including an impairment charge of $221 million related to the planned phase-out of the Sheridan trade name, transaction and integration costs and debt extinguishment costs.
In giving 2017 guidance Tuesday, Envision, which surpassed TeamHealth as the largest physician staffing company, said revenue in 2017 would be between $10.4 billion and $10.7 billion.
Envision brought the ambulance business American Medical Response and its Evolution Health population health management business to the merger with Amsurg. AMR is one of the largest patient transportation operators in the country.
Envision's price recovered some of its losses on the day, closing down $4.46, or 6%, to $65.54.
