Officials at Envision Healthcare Holdings and AmSurg are in advanced discussions regarding a potential merger, with a deal to be announced as early as next week, sources tell The Wall Street Journal.
Related: Kaiser moves to acquire Group Health
It's not on the level of the Anthem-Cigna or Aetna-Humana mergers, but it's a big deal nonetheless. The estimated combined value of the two health care providers is $9 billion.
More importantly, the merger is yet another sign of an increasingly consolidated health care industry, every segment of which has seen an acceleration of mergers and acquisitions in recent years.
Nashville, Tenn.-based AmSurg is one of the top providers of ambulatory surgery centers, operating 250 facilities across the country where patients can go under the knife without having to stay overnight. In 2014 it also acquired Sheridan Healthcare, a major physician services company, for $2.3 billion, to provide outsourced medical services to hospitals.
Greenwood Village, Colo-based Envision similarly provides outsourced physician services and is a major player in providing ambulance and private fire protection services, particularly to small or rural communities across the country.
This is the second time in the past year that AmSurg has sought a partnership with a competitor. In 2015, it offered TeamHealth more than $5 billion, a proposal the latter company rejected, saying it was too low.
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The rejection appeared to be a blessing in disguise for AmSurg. Its offer valued TeamHealth at more than $70 a share. TeamHealth's shares have since dropped to $45.
In recent years, hospitals operating on tight budgets have increasingly turned to outsourcing certain medical functions, such as anesthesia, diagnostic imaging, and emergency services.
One potential trend that experts believe might counteract the move towards outsourcing is hospital mergers. The consolidation of the hospital industry, which was applauded in some quarters as promoting greater efficiencies, has come under fire in the past year in the face of evidence that areas with highly-consolidated hospital industries actually tend to be more expensive for patients.
In addition to hospitals and insurers, drug makers have also been seeking mega-mergers. Pfizer's proposed $160 billion merger with the Irish company Allergan, interpreted by many as an attempt to evade U.S. taxes by shifting its headquarters to Ireland, was scrapped after the Obama administration announced a rule change aimed at preventing such tax-dodging strategies.
Smaller but significant pharmaceutical deals have been successful. Thermo Fisher Scientific, for instance, announced it would buy FEI for $4.2 billion, while Abbott Laboratories is planning to buy St. Jude Medical for $25 billion, and Stryker is in the process of acquiring Sage Products for $2.8 billion.
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