AmSurg's fourth-quarter 2013 adjusted EPS of $0.53 increased 1.9%
year over year but lagged the Zacks Consensus estimate by $0.02. It
also remained at the low end of the company provided guidance
range. Revenues increased a mere 1.9% and failed to meet the
estimate. However, growth through strong performances of the
acquired centers was encouraging. Furthermore, the Sheridan
Healthcare acquisition plan, paving its way into the huge and
fast-growing fragmented physician outsourcing market is expected to
be a material upside. Nonetheless, headwinds like reduction in
workers' compensation reimbursement, sequestration and increased
interest expense are intimidating. We are Neutral on AmSurg.
Headquartered in Nashville, TN, 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 Mar 2014, AmSurg operated 242 ASCs located in 35
states and the District of Columbia. Among these ASCs, the company
owned majority interest in 235 centers and owned a minority
interest in seven (three of which are consolidated).
At the end of Mar 2014, 151 centers performed gastrointestinal
endoscopy procedures, 48 performed procedures in multiple
specialties, 36 performed ophthalmology procedures and seven
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 2013, AmSurg derived approximately 25% 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), 2009 (an additional $0.07), 2010 (an additional $0.06) and
by an additional $0.05 in 2011 based on the reimbursement rates for
the year (announced in Nov 2010), which included a 1.5% CPI
increase and a 1.3% productivity adjustment decrease.
In 2013, reimbursement rates increased 0.6%, which positively
impacted the company's 2013 revenues by approximately $2.5 million
and net earnings per share by $0.02. In 2014, reimbursement rates
have increased 1.2%, which the company estimates will positively
impact its 2014 revenues by approximately $6.0 million, net of the
continued effects of sequestration. There is however, no assurance
that CMS will not revise the ASC payment system or that any annual
CPI (Consumer Price Index) increases will take place.
AmSurg Corp. (AMSG): Read the Full Research
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