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From the Survey: Team Health Holdings
Team Health Holdings (TMH) is a staffing company in the U.S. healthcare industry. The company sources physicians, physicians assistants, nurses, and other healthcare professionals, as well as administrators for hospitals and other medical practices across 47 states. Team Health provides these services to a vast assortment of treatment facilities in both permanent and temporary engagements. The company asserts to being “physician-founded”, which ensures leadership by actual physicians capable of best dealing with any concerns throughout all levels of the organization. Team Health also provides similar services to military treatment facilities.
President Obama’s signature legislation—the Patient Protection and Affordable Care Act (ACA)—is expected to have a major impact on Team Health’s business. Though complete implementation of all facets of the bill cannot be expected to be altogether rolled out immediately, we do anticipate a net benefit in the near future. It is entirely possible that the ACA will cap, or similarly attempt to limit the amount of payments to healthcare providers, in which case, we could expect lesser revenues per visit than prior to the healthcare reform. However, the ACA vastly expands the amount of people under coverage—the bill’s provisions dictate universal healthcare for Americans—so the number of visits to medical practices will eventually climb to an implicit saturation point. As a result, healthcare providers will continue to increase their payrolls to the point where healthcare is adequately available to the entire U.S. population. Essentially, Team Health and other healthcare staffing companies, such as Kelly Services (KELYA), and AMN Healthcare Services (AHS), among others, will be busy over the next few years, and should ultimately reap the benefits of heightened demand for capable medical practitioners and administrative personnel.
Given that the United States’ Supreme Court ruled in favor of upholding President Obama’s healthcare bill in mid-2012, we can reasonably expect that implementation of the universal healthcare legislation will continue. Given such, the healthcare industry should begin to see a major influx of new opportunities, both temporary and permanent in nature, over the next several years. TMH management recently attempted to quantify the benefit that it expects to realize from the new healthcare policies; the company figures that the healthcare reforms may boost annual revenues by more than $30 million once the full impact of the new law is in place.
Acquisitions are fairly regular within Team Health’s operations and accounted for the majority of the company’s revenue growth in 2012, ahead of volume growth and same-contract revenue growth. Continuing on this trend, just over a week into 2013, management announced its first acquisition of the year. In order to expand TMH’s California presence, the company acquired San Francisco Physicians Internationale, Inc., a group that provides services to a Northern California emergency department that cares for approximately 16,000 patients annually.
Company management continues to prepare for the possibility of more M&A activity in the short-term; towards the end of 2012, the company amended its credit facilities. The move increased the borrowing limits available on its revolving and senior credit facilities, which enables TMH to continue its shopping spree for the foreseeable future. The ability of TMH to support major expansion through acquisitions separates it from some of its competitors, as these moves expand the geographic reach, as well as the breadth of the type of positions it can fill within the medical community.
The expansion of healthcare coverage in the U.S. should prove to be majorly beneficial to TMH, though we believe some of this perceived potential may already be priced into the shares at this juncture. Those investors interested in a more detailed analysis of Team Health should study our full-page report in The Value Line Investment Survey.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.