AmSurg Corp. (AMSG): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
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.

Overview:

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.

Reimbursement Update:

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.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AMSG , CMS

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