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 $0.60 surged 22% marking its third consecutive quarter of double-digit growth. EPS also steered ahead of the Zacks Consensus Estimate of $0.57 and exceeded the company's guidance range. Revenues increased 17% and were ahead of the 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 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 Dec 2013, AmSurg operated 242 ASCs located in 35 states and the District of Columbia. Among these ASCs approximately 65% performed procedures in a single specialty and 35% performed procedures in more than one specialty, or multispecialty.

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.

At the end of Dec 2013, 50% of AmSurg's revenues was generated at gastroenterology centers, 38% at multi-specialty centers, which includes orthopaedic centers, and 12% was generated at the company's ophthalmology centers.

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), 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.

In 2012, reimbursement rates increased 1.6%, which positively impacted AmSurg's 2012 revenues by $5.0 million and net earnings per share by $0.05. In 2013, reimbursement rates again increased 0.6%, which positively impacted 2013 revenues by $2.5 million and net earnings per share by $0.02. CMS has announced that ASC reimbursement rates will increase by 1.2% for 2014, which the company expects to positively contribute to its 2014 revenues by $6.0 million, net of the continued effects of sequestration. There can be 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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