AmSurg Expands In Anesthesiology, Enters South California

In a bid to fortify its position in anesthesia specialty services, this time in the Southern California market, Sheridan – the Physician Services Division of Tennessee-based healthcare provider, AmSurg Corp. (NASDAQ:AMSG) – acquired Ambulatory Anesthesia Associates, Inc. and Genesis Anesthesia Services, Inc. However, the financial terms of the transaction have been kept under wraps.

These two anesthesia practice groups currently have 27 physicians in total covering six independent facilities, with Marina Del Rey Hospital representing the largest relationship.

According to AmSurg, these buyouts mark the company’s initial entry into the Southern California market. While Sheridan will provide the acquired businesses with vital delivery platform components, expertise and resources, these buyouts will help expand AmSurg’s presence in California as a whole.

The latest buyouts are in line with AmSurg’s investment strategy adopted by management to capitalize on the significant acquisition opportunities in the rapidly expanding physician services space, with particular focus on anesthesia services.

We note that the anesthesiology market is huge and growing. According to a recent report by Research and Markets, the global market for anesthetic and respiratory devices is expected to reach nearly $24.2 billion by 2020 from $14.4 billion in 2015, at a compound annual growth rate (CAGR) of 10.9%. This is expected to grow with the estimated rise in demand for anesthesia services. Meanwhile, AmSurg has been striving to capture a larger share of this market in order to ride the growth curve.

In line with these objectives, the company completed five additional Physician Services transactions and acquired four extra ASCs through first-half 2016, and deployed nearly $300 million of its capital for acquisitions.

In this context, we encouragingly note that the implementation of the Affordable Care Act, aging demographic trends in the U.S. and an increased insured population base should encourage a rise in surgery volumes. This will naturally enhance demand for emergency medical specialty services like anesthesia.

Following the acquisition of Sheridan Healthcare, AmSurg has become a prominent player in the physician-centric surgical center and physician outsourcing business with a diversified, complementary business mix and a significantly enhanced growth profile.

Given that the market for outsourced physician services is highly fragmented and predominantly served by small provider groups, AmSurg believes there exists significant opportunity for further growth through new contract wins from smaller provider groups and through targeted acquisitions. We expect AmSurg to confidently progress on its acquisition pipeline, supported by a strong cash position.

Zacks Rank

AmSurg currently carries a Zacks Rank #3 (Hold). Some favorably ranked medical stocks are Almost Family Inc. (NASDAQ:AFAM) , RadNet, Inc. (NASDAQ:RDNT) and US Physical Therapy Inc. (NYSE:USPH) . All the three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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