SEC Filings

10-Q
ENVISION HEALTHCARE CORP filed this Form 10-Q on 11/03/2017
Entire Document
 
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

The following table shows selected statement of operations data expressed in dollars (in millions) and as a percentage of net revenue for our physician services segment.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net revenue
$
1,681.3

 
100.0
 %
 
$
507.6

 
100.0
 %
 
$
4,872.5

 
100.0
 %
 
$
1,363.9

 
100.0
%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
1,327.2

 
78.9

 
366.4

 
72.2

 
3,845.2

 
78.9

 
987.5

 
72.4

Supply cost
4.8

 
0.3

 
1.1

 
0.2

 
16.3

 
0.3

 
3.2

 
0.2

Insurance expense
43.5

 
2.6

 
17.8

 
3.5

 
131.2

 
2.7

 
51.5

 
3.8

Other operating expenses
134.8

 
8.0

 
32.1

 
6.3

 
381.3

 
7.8

 
85.5

 
6.3

Transaction and integration costs
17.0

 
1.0

 
8.9

 
1.8

 
60.6

 
1.2

 
13.1

 
1.0

Impairment charges

 

 

 

 
0.3

 

 

 

Depreciation and amortization
63.0

 
3.7

 
22.5

 
4.4

 
186.4

 
3.8

 
64.0

 
4.7

Total operating expenses
1,590.3

 
94.6

 
448.8

 
88.4

 
4,621.3

 
94.8

 
1,204.8

 
88.3

Net loss on disposals and deconsolidations
(1.0
)
 
(0.1
)
 

 

 
(10.0
)
 
(0.2
)
 

 

Equity in earnings (loss) of unconsolidated affiliates
(0.5
)
 

 
(0.6
)
 
(0.1
)
 
(1.2
)
 

 
4.3

 
0.3

Operating income
$
89.5

 
5.3
 %
 
$
58.2

 
11.5
 %
 
$
240.0

 
4.9
 %
 
$
163.4

 
12.0
%

Three and Nine Months Ended September 30, 2017 compared to Three and Nine Months Ended September 30, 2016

Physician services net revenue increased $1.17 billion, or 231%, to $1.68 billion and $3.51 billion, or 257%, to $4.87 billion in the three and nine months ended September 30, 2017, respectively, from $507.6 million and $1,363.9 million in the three and nine months ended September 30, 2016, respectively. During the three and nine months ended September 30, 2017, compared to the prior year periods, our total growth in net revenue of our physician services segment resulted primarily from a full period of results of operations received from the Merger, which represented $1.04 billion and $3.10 billion, respectively, and from physician practices acquired in 2017 and 2016, which contributed approximately $117.7 million and $182.2 million, respectively. In addition during the nine months ended September 30, 2017, we experienced an increase in net revenue as a result of same-contract growth which contributed approximately $7.9 million, which was partially offset by the impact of adverse weather conditions. We also experienced an increase in revenue of $83.2 million in the nine months ended September 30, 2017 due to the consolidation of a previously unconsolidated affiliate beginning July 1, 2016.

Salaries and benefits increased by $960.8 million, or 262.2%, to $1.33 billion and $2.86 billion, or 289.4%, to $3.85 billion in the three and nine months ended September 30, 2017, respectively, from $366.4 million and $987.5 million from the three and nine months ended September 30, 2016, respectively. The increase during the three and nine months ended September 30, 2017 is primarily due to increased compensation costs resulting from the Merger, which contributed $888.3 million and $2.57 billion, respectively, and both newly hired and existing physician and related staff to support growth in same-contracts and acquired contracts. As a percentage of revenue, salaries and benefits increased due to the inclusion of EHH's physician services, which historically has a higher percentage of salaries and benefits as a percentage of revenue compared to that of the legacy AmSurg physician services.

Insurance expense increased $25.7 million, or 144.4%, to $43.5 million and $79.7 million, or 154.8%, to $131.2 million in the three and nine months ended September 30, 2017, respectively, from $17.8 million and $51.5 million in the three and nine months ended September 30, 2016, respectively. The increase is primarily due to the inclusion of EHH, which contributed $23.9 million and $73.0 million, and acquisitions completed in 2016 and during 2017.

Other operating expenses increased $102.7 million, or 319.9%, to $134.8 million and $295.8 million, or 346.0%, to $381.3 million in the three and nine months ended September 30, 2017, respectively, from $32.1 million and $85.5 million during the three and nine months ended September 30, 2016, respectively. The increase is primarily due to the inclusion of EHH, which contributed $89.7 million and $250.7 million, respectively, and from recent acquisitions completed in 2016 and 2017.

Transaction costs were approximately $17.0 million and $60.6 million for the three and nine months ended September 30, 2017, respectively, and $8.9 million and $13.1 million for the three and nine months ended September 30, 2016, respectively, primarily resulting from the Merger, as well as our recent acquisitions of physician practices.


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