2016 In Review

M&A transaction volumes in the Hospital Outsourced Clinical Services (HOCS) segment saw their peak in 2015 as the rollout of ACA was complete. Driven by increased complexity and reimbursement uncertainty in the provision of healthcare, many anesthesia, emergency medicine and other hospital-based specialty practices chose to partner with larger organizations that offer greater management depth, better access to capital, greater financial stability and other expertise to support physician practices.

The falloff in deal volume in 2016 can be mostly attributed to TeamHealth’s acquisition of IPC Healthcare, which put an abrupt stop to M&A activity in the hospitalist category. Outside of hospitalists, transaction volume maintained a frenetic pace in 2016, with a total of 29 anesthesia and 16 emergency medicine transactions. Although the future of the ACA remains to be determined, 2016 saw CMS finalizing rules for MACRA governance, establishing new reimbursement frameworks based on health outcomes and performance, rather than fee-for-service volume, and these fundamental changes to reimbursement are here to stay, despite the change in the Oval Office.

2016 was a year of mega-mergers in healthcare in general (attempted managed care mega-mergers, St. Jude-Abbott Labs, Shire-Baxalta, Pfizer-Medivation), with the HOCS segment experiencing major activity and consolidation:

• AMSURG’s merger with Envision combined to create more than $8.5 billion in revenue and adjusted EBITDA of more than $1.1 billion
• TeamHealth acquired by Blackstone Group in a deal valued at approximately around $6.1 billion

HOCS Outlook For 2017

• Uncertainty around the administration and fate of ACA will continue to drive consolidation
• MACRA and other fundamental drivers of change will remain in place
• Competitive landscape shifting: integration of the merger between Envision and AMSURG
• Expected uptick in M&A activity in radiology driven by large consolidators (Envision, Mednax)
• Continued private equity interest will increase acquisition activity in new and existing platforms:
  • New Mountain Capital acquired Island Medical, establishing another HOCS consolidator
  • Welsh Carson backed platforms expand in both their Anesthesia (USAP) and Emergency Medicine (USACS) platforms

Edgemont M&A Experience

Edgemont Capital Partners is an investment banking firm dedicated to providing the highest quality strategic advisory and capital raising services to healthcare companies. Edgemont is the leading advisor to Emergency Medicine, Hospitalist Medicine and Anesthesia practices, having successfully closed 10 M&A transactions on behalf of hospital-based physician groups and management companies. Edgemont’s closed transactions have generated well in excess of $1 billion in cash consideration at close for independent group clients. Edgemont is the only firm to have completed M&A transactions with EmCare, MEDNAX, PhyMed, Sheridan and TeamHealth. Let us help you educate your practice on current market dynamics, and address how M&A may affect your practice or your local competitive landscape. For more information please contact Jeff Swearingen at Jeff@edgemontcapital.com