Seeking Alpha: AmSurg Has Surged Far Enough

The uncertainty in the healthcare services space created by the Affordable Care Act, sequestration, Medicare policies, and the economy has led to some interesting days for the service providers. While there's still a lot of doom-and-gloom talk, service providers like Team Health (TMH), Mednax (MD), and AmSurg (AMSG) have actually fared quite well in the market over the past year.

In the case of ambulatory surgery center (ASC) operator AmSurg, though, I think the momentum has gotten ahead of itself. It's true that shifting more procedures from hospitals to ASCs could save billions, but the company is at risk from ongoing reimbursement cuts, tighter restrictions on physician financial conflicts of interest, and new procedures and technologies reducing center volumes. While these shares admittedly don't look so expensive by popular metrics, the underlying cash flow picture doesn't seem to support today's price.

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AmSurg Has Surged Far Enough

Seeking Alpha: Lincare's Short-Term Pain Can Become Long-Term Gain?

Some investors love to parrot the thesis that the aging of America will be a boon to health care companies of all stripes. What these investors aren't always able to explain, though, is who is going to pay for all of that growth. That's a key issue with home oxygen therapy provider Lincare (LNCR). While efforts to diversify the business are pressuring margins and cash flow in the near-term, long-term investors should support these as moves towards better long-term sustainability.

First Quarter Results Not Bad On Balance
Revenue growth of 16% looks pretty flashy, but organic growth was a more modest 6%. Lincare saw a 1% negative impact from Medicare rate changes, with about 11% growth coming from various acquisitions. Interestingly, patient growth was the slowest it has been in some time (up about 2%), while revenue per patient rose by double-digits.

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Lincare's Short-Term Pain Can Become Long-Term Gain

Is Community Health The Right Prescription For Tenet?

Community Health (NYSE:CYH) is taking a time-tested route in its efforts to seal a deal to acquire fellow hospital operator Tenet Healthcare (NYSE:THC) - if you cannot get the other company's board of directors to say "yes," take the negotiations public and hope that your target's shareholders force the matter. While Tenet's arguments for rejecting the deal are not without merit, the 50% jump in Tenet's stock price suggest that shareholders would like a deal and expect an improved offer to come. 

The Deal That Community Health Wants
Community Health, an operator of 126 hospitals in largely suburban areas or small communities, is offering a $7.3 billion deal to Tenet shareholders, including an equity offer of $3.3 billion. In addition to taking on Tenet's substantial debt, CYH would give Tenet shareholders $6 per share in consideration for their shares - $5 in cash and $1 in CYH stock. That deal would have represented a 40% premium for THC shares. (For more, see Mergers And Acquisitions: Understanding Takeovers.)

All in, this would create a hospital operator with 176 locations in 30 states. In contrast to CYH, Tenet operates mostly in urban areas, so there would not be all that much overlap between the two companies. Moreover, this would create the largest hospital operator in the country, surpassing once-public HCA and its 163 hospitals across 20 states. It would also create a highly-leveraged company, with upwards of $15 billion in debt being serviced by less than $3 billion in EBITDA.


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