Envision Healthcare Continues to Expand Physician Services

Envision Healthcare Corp.EVHC is rapidly transforming its business after its merger with AMSURG last December. The deal created one of the nation's largest physician-staffing companies.

Envision Healthcare is now focusing on expanding its core business of physician services (contributing nearly 81% to total revenues) and selling non-core assets. In this vein, it recently announced that it will divest American Medical Response, its medical transportation business, to KKR & Co. in an all-cash deal valued at $2.4 billion.

The company is optimistic about the physician services market which is witnessing consolidation. Various factors such as mandate for clinical integration, value-based pricing innovation, lack of scaled physician practices, shortage of supply of physicians, hospital-cost pressures, MACRA readiness and increasing regulations will lead to increased demand for physician services.

In the first half of 2017, the physician services segment reported revenues of $3.19 billion, up from $0.86 billion in the year-ago quarter. Management expects same-contract revenue growth of 3% to 4% in the segment for 2017.

In order to expedite growth of the physician services market, the company is planning to grow inorganically. It had an active start to its acquisition strategy for 2017, and completed the buyout of nine physician practices in the six months ended Jun 30, 2017 for an aggregate $440.8 million.

Recently, the company announced organizational changes to align its senior leadership structure with physician-centric strategy.

The company, however, saddles high debt and plans to utilize part of funds from the pending divestiture to reduce debt.

Other players from the same space are Amedisys Inc. AMED , Chemed Corp. CHE and LHC Group LHCG .

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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 Nasdaq, Inc.

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

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