AmSurg's third-quarter 2013 adjusted EPS of $0.53 surged 10%
marking its second consecutive quarter of double-digit growth.
Although, EPS remained in line with the Zacks Consensus Estimate,
it touched the upper end of the guidance. Revenues increased 19%,
ahead of the Zacks Consensus Estimate. Double-digit sales growth
came on the back of increased revenues per procedure owing to the
higher percentage of multi-specialty centers. Still, headwinds like
reduction in workers' compensation reimbursement, sequestration and
increased interest expense are intimidating. However, we are
encouraged by AmSurg's new alliance with a hospital system that
will create growth prospects going forward. We are Neutral on
Headquartered in Nashville, Tenn., AmSurg Corporation (AMSG) is
a leading operator of single-specialty practice-based ambulatory
surgery centers (ASCs). The company develops, acquires, and
operates practice-based ASCs in partnership with physician practice
groups throughout the U.S.
At the end of Dec 2012, AmSurg operated 240 ASCs, of which the
company owned 51% or greater interest in 235 ASCs and a minority
interest in 5 ASCs (3 of which is consolidated). The ASCs are
located in 35 states and the District of Columbia.
Among these 229 ASCs, 149 centers were performing
gastrointestinal endoscopy procedures, 48 were for procedures in
multiple specialties, 36 for ophthalmology procedures and the
remaining 7 centers performed orthopedic procedures.
Sources of Revenues
Revenues are derived entirely from facility fee charges, which
are largely funded by third-party reimbursement programs such as
government and private insurance. The fee varies depending on the
procedure but usually includes all charges for operating room
usage, special equipment usage, supplies, recovery room usage,
nursing staff and medication and in some cases, billing for
anesthesia services. However, it does not include consultation
charges of the surgeon, anesthesiologist or other attending
physicians for patients as these are billed directly by the
physicians themselves. In 2012, AmSurg derived approximately 31% of
revenues from governmental healthcare programs, primarily Medicare
and Medicare managed programs, and the remainder from a wide mix of
commercial payors and patient co-pays and deductibles.
Effective Jan 1, 2008, Centers for Medicare & Medicaid
Services (CMS) revised the payment system for services provided in
ASCs and the phase-in of the revised rates was completed in 2011.
The revised payment system resulted in a significant reduction in
the reimbursement rates for gastroenterology procedures, which
comprise approximately 75% of the procedures performed by AmSurg's
surgery centers, and certain ophthalmology and pain procedures.
Accordingly, AmSurg's EPS were negatively impacted in 2008 (by
$0.05), in 2009 (an additional $0.07), 2010 (an additional $0.06)
and by an additional $0.05 in 2011 based on the reimbursement rates
for 2011 (announced in November 2010), which included a 1.5% CPI
increase and a 1.3% productivity adjustment decrease.
The final reimbursement rates announced by the CMS in Nov 2011
for 2012 reflected a 1.6% increase. This had favorably impacted the
company's 2012 revenues by $5.0 million and net EPS by $0.05. The
reimbursement rates announced by CMS for 2013 reflect a 0.6% net
increase, which is expected to have a positive impact of
approximately $2.5 million and $0.02 on the company's 2013 revenue
AmSurg currently expects a 0-1% increase in same-center revenues
for 2013, which reflects positive rate adjustments from CMS in
2013. The increase may however, be offset by a statutory decrease
in reimbursement for procedures associated with worker's
compensation claims at the company's centers in California.
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