A New York hedge fund is poised to gobble up free-standing ER chain Adeptus Health after snapping up $212.7 million of Adeptus' debt.
Deerfield Management, which is led by investor James Flynn, said in a regulatory filing Tuesday that it intends to own and operate Dallas-based Adeptus, possibly through a bankruptcy restructuring. Adeptus missed a bridge loan payment on March 31, leading to Deerfield's debt purchase.
Adeptus is the nation's largest operator of freestanding ERs, with 66 locations under the First Choice Emergency Room brand. The company operates 24 of those locations via joint ventures with hospitals, including not-for-profits such as Arlington, Texas-based Texas Health Resources.
Deerfield now owns Adeptus' entire senior debt and just short of 10% of the company's battered common shares, the hedge fund noted in its filing.
Once a high-flyer on Wall Street with shares trading as high as $115 in late 2015, Adeptus has been in a tailspin since November when it surprised investors with major losses and revelations of a cash crisis. Its shares closed Tuesday at $1.33.
Deerfield noted in its filing that Adeptus may be headed for Chapter 11 restructuring. The hedge fund said it “would provide further bridge and debtor-in-possession financing to the company in connection with a court-supervised restructuring of the company.”
Deerfield's goal is to control Adeptus and continue to operate it in collaboration with its hospital partners as well as other creditors, the fund said.
In a separate filing Tuesday, Lewisville, Texas-based Adeptus said a restructuring would likely wipe out current shareholders and leave their current holdings valueless. An Adeptus spokesman declined to comment Wednesday.
Adeptus has seen greater competition in its non-joint venture markets from hospitals and other freestanding ER rivals looking to provide convenient access points for patients away from their often-crowded hospital ERs. HCA Holdings, the nation's largest investor-owned hospital company, has 60 freestanding emergency departments in 14 of its markets and plans to expand to 80 such facilities by early 2018.
During the third quarter that ended on Sept. 30, Adeptus' joint-venture facilities performed better than those operated independently by Adeptus.
The company reported that patient volumes at the hospital-owned facilities increased to 32,086 patient visits in the third quarter, an increase of 39% from the 23,038 visits logged in the same quarter a year earlier. Revenue from those visits increased to $40.3 million, a jump of 18% from the prior year.
Volumes at Adeptus' stand-alone centers deceased 19% in the third quarter to 24,243 patient visits. Revenue at those centers fell 23% to $50 million from $65 million in the year-earlier quarter.