Healthcare Providers & Facilities

Transcription

1 Market Monitor Fall 2015 MOSS ADAMS CAPITAL LLC

2 Selected Healthcare Transactions 2 MOSS ADAMS CAPITAL LLC

3 Contents Section Industry Update Public Company Stock Performance & Valuations Recent M&A Activity & Valuations Mid-Market M&A Overview Moss Adams Overview Contact Information Page MOSS ADAMS CAPITAL LLC

4 Industry Update Obama Signs Budget Deal that Cuts Hospital Payments On November 2 nd, President Obama signed into law a two-year budget deal that will curb payments to new hospital-owned physician practices and extend other reimbursement cuts. Under the deal, commencing in 2017 Medicare will no longer pay certain hospital-owned physician practices higher rates than independently owned practices. The reimbursement changes will apply to hospital-owned physician practices that were acquired or opened since 11/2/15, and that are more than 250 yards from a hospital's main campus. The American Hospital Association ( AHA ) and the Federation of American Hospitals have both spoken out against severely limiting hospitals ability to receive HOPD reimbursement for services furnished at off-campus facilities. (The Advisory Board - 11/3/15). Consolidation Among Health-Insurers Increases, Following Similar HC Provider Consolidation Sparked largely by the Affordable Care Act, the HC provider niche has seen a surge of consolidation in recent years now health insurers are following suit. And the pace of consolidation is accelerating. Recently, large insurers announced acquisitions that plan to consolidate the five largest healthcare insurers into three, with Aetna Inc. announcing plans to acquire Humana Inc., and Anthem Inc. planning to acquire Cigna Corp. As providers have consolidated, payers have been finding they re getting pushed by providers who are telling the payers Take my rates or you ll have no network these [insurer consolidation deals] aim to help balance the power. These planned mergers/acquisitions, in turn, have resulted in concern from healthcare providers and regulators, drawing increased scrutiny from Government officials. (Anna Wilde Mathews, The Wall Street Journal - 9/21/15). NFP Hospital Financial Metrics Improve, according to Moody s and S&P During the week of September 7 th, two major credit ratings agencies (Moody s & S&P) released reports showing that operating margins improved for NFP hospitals and health systems. These improved performance metrics have led both ratings agencies to upgrade the outlook for the NFP healthcare sector, to stable from negative. Median trends overall were favorable in 2014 and they really provided us with evidence of stability in the sector. Overall, we expect the [improving] trends for 2014 to continue through 2015 (Jennifer Soule, S&P). The ratings agencies also noted that the current environment continues to favor larger providers and hospital systems vs. standalone hospitals, as well as a reemergence of a credit gap between larger and smaller provider systems. (Beth Kutscher, Modern Healthcare - 9/11/2015). (Continued) 4 MOSS ADAMS CAPITAL LLC

5 Industry Update (cont.) Skepticism Grows Around the Medicare Readmissions Program Medicare is four years into its drive to reduce the number of patients who are readmitted to hospitals within a few weeks of being discharged. Significantly, according to a review of data provided by the Government, 2,665 hospitals will have their federal reimbursements reduced by Medicare in fiscal year 2016 (Modern Healthcare). This is an increase as compared to the same data provided for the 2015 fiscal year. Further, according to the report, only 799 hospitals will not be penalized, while 514 hospitals will face a penalty of 1% or more, and 38 hospitals will face the maximum 3% penalty. As a reminder, the payment reductions are part of the third phase of the Hospital Readmissions Reductions Program ( HRRP ), which was launched in October 2012 with the goal of reducing healthcare costs, by curbing hospital readmission rates. (Sabriya Rice, Modern Healthcare - 8/8/2015) CMS Announces 0.9% Hospital Payment Increase for 2016 The Centers for Medicare & Medicaid Services ( CMS ) lowered its final increase for hospital rates in 2016 to just 0.9%, down from the 1.1% increase proposed in April. The move will heighten pressure on the nation s 3,400 acute case hospitals to rein in costs and reduce unnecessary spending. CMS posted a final rule on July 31 st, 2015, that said long-term care hospitals can expect to see a decrease in payments by $250 million next year. CMS 2,100+ page ruling/announcement also outlines new quality reporting requirements for acute care hospitals and long-term care facilities, as well as for cancer hospitals that are exempt from the prospective payment system. (Sabriya Rice, Modern Healthcare - 7/31/15). 5 MOSS ADAMS CAPITAL LLC

6 Market Performance HC Providers & Facilities Valuations Vary Across Industry Niche The overall outlook for the HC Providers industry group remains positive, with the rate of revenue growth (note graph on right, below) for all HC niches expected to outpace the general S&P 500 index over the next 12 months. EV/EBITDA multiples have generally increased, in line with the S&P 500 index. Valuations vary by industry niche, with Senior/Assisted Living at the high end, at 13.1x, and Acute Care Hospitals lagging, at 7.8x. vs. S&P The Senior/Assisted Living HC niche, as tracked by MAC, had a significant, temporary, increase in valuation, due to a decline in Brookdale Senior Living s EBITDA, as a result of merger-related expenses. Revenue growth in the Post-acute Care/Rehab niche is now expected to outpace the Senior/Assisted Living HC niche, with 21.9% revenue growth expected over the next 12 months. Next 12 Months: Estimated Sales Growth 25.0x 23.0x 21.0x 19.0x 17.0x 15.0x 13.0x 11.0x 9.0x 7.0x 5.0x Senior / Assisted Living 13.3x Healthcare Distributors 12.0x Home Care / Home Health / Hospice 12.0x Healthcare Services 11.2x S&P x Post-Acute Care / Rehab 9.8x Acute Care Hospitals 7.8x Note: As of 10/26/2015. Note: The indices are composed of the public companies included on pages Estimated growth is based on the median estimates of Wall Street analysts. Source: S&P Capital IQ, WSJ. 6 MOSS ADAMS CAPITAL LLC

7 Market Performance HC Providers & Facilities Recent Stock Performance As noted in the table below, over the past three years, shares of publicly traded companies in three of the six HC industry niches, tracked by MAC, have significantly outperformed the overall S&P 500 index. At the same time, publicly traded shares in three of the HC niches have underperformed the overall S&P 500 index, The three HC industry segments that have outperformed the S&P 500 index s performance (of +46.7%) are Home Care/Hospice (+125.8%), Acute Care Hospitals (+119.6%), and Healthcare Distributors (+100.4%). 3-Year Indexed Stock Price Performance 250% 200% Percent (%) Change: Oct 12 - Present 150% Home / Hospice Care % Acute Care Hospitals % 100% Healthcare Distributors % 50% 0% S&P 500 Index % Post-Acute Care / Rehab % Healthcare Services % Senior / Assisted Living - (6.7% ) -50% Note: The indices are composed of the public companies included on pages Source: Moss Adams Capital, S&P Capital IQ. 7 MOSS ADAMS CAPITAL LLC

8 Valuation Metrics: Acute & Post-Acute Care ($US in millions, except per share amounts) Company Name Acute Care Hospitals 11/5/15 TTM Data NTM Est. Growth EV Multiple Share 52 Week Market Enterprise EBITDA TTM TTM NTM Price High - Low Cap Value Sales EBITDA Margin Sales EBITDA Sales EBITDA Sales NTM EBITDA HCA Holdings, Inc. $68.59 $ $43.91 $27,962 $58,743 $39,065 $7, % 5.0% 4.1% 1.5x 7.6x 1.4x 7.3x Universal Health Services Inc ,171 15,747 8,765 1, % 16.3% 6.3% 1.8x 9.5x 1.5x 9.0x Community Health Systems, Inc ,551 20,843 19,557 2, % 2.7% 7.0% 1.1x 7.4x 1.0x 6.9x Tenet Healthcare Corp ,351 19,611 18,085 2, % 13.5% 7.8% 1.1x 8.6x 1.0x 8.0x Acadia Healthcare Company, Inc ,204 7,043 1, % 29.1% 38.4% 4.4x 20.6x 3.4x 14.9x LifePoint Health, Inc ,079 5,129 5, % 12.4% 15.8% 1.0x 7.9x 0.9x 6.8x Median $17,679 $13,425 $1, % 13.0% 7.4% 1.3x 8.3x 1.2x 7.7x Average $21,186 $15,362 $2, % 13.2% 13.2% 1.8x 10.3x 1.5x 8.8x Post-acute Care/Rehab HEALTHSOUTH Corp. $35.18 $ $33.00 $3,217 $5,567 $2,857 $ % 22.9% 18.3% 1.9x 8.5x 1.6x 7.2x Select Medical Holdings Corporation ,595 4,253 3, % 21.9% 32.5% 1.2x 11.7x 1.0x 8.8x Kindred Healthcare Inc ,350 6, % 15.2% 68.0% 0.7x 10.6x 0.6x 6.3x The Ensign Group, Inc ,241 1,279 1, % 22.3% 50.7% 1.0x 12.2x 0.8x 8.1x AAC Holdings, Inc % 41.5% 43.7% 3.7x 19.9x 2.6x 13.8x Civitas Solutions, Inc ,609 1, % 4.3% 10.1% 1.2x 11.3x 1.1x 10.2x US Physical Therapy Inc % 9.9% (2.1%) 2.2x 13.1x 2.0x 13.4x Median $1,609 $1,343 $ % 21.9% 32.5% 1.2x 11.7x 1.1x 8.8x Average $2,629 $2,271 $ % 19.7% 31.6% 1.7x 12.5x 1.4x 9.7x Note: Not meaningful (NM) if EV/Revenue is greater than 5x, or EV/EBITDA is greater than 20x. NA if denominator is 0, for percentages and multiples, or if estimates are not available.. NTM figures are based on the median estimate of Wall St. analysts. Sources: S&P, Capital IQ, Wall Street Journal. 8 MOSS ADAMS CAPITAL LLC

9 Valuation Metrics: Senior / Assisted Living & Homecare / Hospice ($US in millions, except per share amounts) Company Name Senior/Assisted Living 11/5/15 TTM Data NTM Est. Growth EV Multiple Share 52 Week Market Enterprise EBITDA TTM TTM NTM Price High - Low Cap Value Sales EBITDA Margin Sales EBITDA Sales EBITDA Sales NTM EBITDA Brookdale Senior Living Inc. $22.98 $ $20.27 $4,240 $10,336 $4,240 $ % 22.1% 18.7% 2.4x 13.5x 2.0x 11.4x Genesis Healthcare, Inc ,666 5, % 15.1% (34.7%) 1.1x 12.9x 1.0x 19.8x Capital Senior Living Corp , % 8.0% 27.4% 3.5x 19.8x 3.3x 15.5x Five Star Quality Care Inc , % 26.1% 126.8% 0.2x 11.6x 0.1x 5.1x Median $3,543 $2,678 $ % 18.6% 23.0% 1.8x 13.2x 1.5x 13.5x Average $4,405 $2,704 $ % 17.8% 34.5% 1.8x 14.5x 1.6x 13.0x Homecare/Home Health/Hospice Chemed Corp. $ $ $ $2,675 $2,773 $1,524 $ % 4.4% 9.6% 1.8x 12.7x 1.7x 11.6x Amedisys Inc ,477 1,407 1, % 3.7% 15.8% 1.1x 14.1x 1.1x 12.2x The Ensign Group, Inc ,241 1,279 1, % 22.3% 50.7% 1.0x 12.2x 0.8x 8.1x LHC Group, Inc % 6.7% 3.1% 1.1x 11.3x 1.1x 11.0x Almost Family Inc % 18.2% 26.7% 1.0x 13.5x 0.8x 10.6x Addus HomeCare Corporation % 10.4% 18.4% 0.7x 9.7x 0.6x 8.2x Median $1,077 $1,001 $89 8.3% 8.6% 17.1% 1.1x 12.5x 0.9x 10.8x Average $1,178 $936 $94 9.2% 11.0% 20.7% 1.1x 12.2x 1.0x 10.3x Note: Not meaningful (NM) if EV/Revenue is greater than 5x, or EV/EBITDA is greater than 20x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Sources: S&P, Capital IQ. Wall street Journal. 9 MOSS ADAMS CAPITAL LLC

10 Valuation Metrics: Healthcare Services & Distributors ($US in millions, except per share amounts) Company Name Healthcare Services 11/5/15 TTM Data NTM Est. Growth EV Multiple Share 52 Week Market Enterprise EBITDA TTM TTM NTM Price High - Low Cap Value Sales EBITDA Margin Sales EBITDA Sales EBITDA Sales NTM EBITDA Laboratory Corp. of America Holdings $ $ ,339 18,440 7,774 1, % 16.9% 21.3% 2.4x 11.8x 2.0x 9.7x Quest Diagnostics Inc. $ $9,841 $13,617 $7,527 $1, % 0.1% 4.2% 1.8x 9.1x 1.8x 8.8x Team Health Holdings, Inc ,264 4,893 3, % 12.2% 24.2% 1.4x 14.5x 1.3x 11.7x IPC Healthcare, Inc ,392 1, % 9.4% 9.1% 2.1x 22.8x 1.9x 20.9x Healthways Inc % (0.2%) 21.5% 0.9x 13.1x 0.9x 10.8x Median $4,893 $3,408 $ % 9.4% 21.3% 1.8x 13.1x 1.8x 10.8x Average $7,829 $4,044 $ % 7.7% 16.1% 1.7x 14.2x 1.6x 12.4x Healthcare Distributors McKesson Corporation $ $ $ $42,786 $47,381 $187,716 $4, % 4.3% 28.5% 0.3x 11.2x 0.2x 8.7x Cardinal Health, Inc ,016 31, ,516 2, % 12.5% 16.0% 0.3x 11.0x 0.3x 9.5x AmerisourceBergen Corporation ,164 22, ,962 1, % 9.1% 50.8% 0.2x 13.9x 0.2x 9.2x Henry Schein, Inc ,788 14,172 10, % 6.4% 8.1% 1.4x 15.5x 1.3x 14.3x Patterson Companies, Inc ,849 6,336 4, % 22.9% 8.3% 1.4x 14.4x 1.1x 13.3x Owens & Minor Inc ,292 2,729 9, % 1.4% 8.2% 0.3x 10.1x 0.3x 9.4x PharMerica Corporation ,265 2, % (0.1%) 3.7% 0.6x 9.5x 0.6x 9.1x Median $14,172 $10,481 $ % 6.4% 8.3% 0.3x 11.2x 0.3x 9.4x Average $17,926 $65,290 $1, % 8.1% 17.6% 0.6x 12.2x 0.6x 10.5x Note: Not meaningful (NM) if EV/Revenue is greater than 5x, or EV/EBITDA is greater than 20x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Sources: S&P, Capital IQ, Wall Street Journal. 10 MOSS ADAMS CAPITAL LLC

11 Selected Recent M&A Transactions - 9/15- Present (a) $ in millions Transaction Announced Acquirer/Investor Target Target Description Value 10/22/15 Berkshire Partners LLC Affordable Care, Inc. Provides denture and dental care services in the United States. - 10/20/15 Prime Healthcare Services, Inc. River Valley Health Partners Provider of healthcare services. - 10/16/15 BayCare Health System, Inc. Bartow HMA, LLC Operates an acute care medical facility that serves patients in South Lakeland, Bartow, Ft. - 10/16/15 CPF Senior Living Acquisitions LLC Dirigo Pines Retirement Community, LLC Operates retirement communities. - 10/15/15 Addiction Research and Treatment, Inc. MedMark Services, Inc. Provides addiction treatment and primary healthcare services in the United States. - 10/13/15 Vision Group Holdings, LLC Global Laser Vision San Diego Lasik Center Operates a laser eye surgery facility in California. - 10/12/15 Prospect Medical Holdings, Inc. Crozer-Keystone Health System Inc. Operates a chain of hospitals. - 10/08/15 MyLife Recovery Centers, Inc. Start Fresh Private Management, Inc. Provides drug and alcohol addiction treatment services for patients. - 10/07/15 Hospice Compassus, Inc. Hospice Advantage, Inc. Provides end-of-life care services in the Midwest and South United States. - 10/09/15 Global Medical REIT, Inc. Lancaster Regional Hospital, L.P. Owns and operates an acute care general hospital in Lancaster, Texas. $ /07/15 Physiotherapy Corporation The Hammonds Centre, LLC Provides physical therapy services to patients. - 10/06/15 Jefferson Health System, Inc. Aria Health System Operates acute care hospitals, and a network of outpatient centers. - 09/30/15 Epic Health Services, Inc. HomeFirst Healthcare Services, LLC Provides homecare, personal care, private duty nursing, and pediatric care services. - 09/30/15 Meadville Medical Center Titusville Area Hospital Owns and operates an acute care hospital. - 09/23/15 Nobilis Health Corp. Freedom Pain Hospital Operates a hospital that offers treatment for chronic pain. $2.4 Livonia Woods Nursing and Rehabilitation 09/22/15 Lutheran Homes of Michigan, Inc. Owns and operates a care center to provide short term rehabilitation and long term care. - Center A multi-specialty physician group that provides healthcare to patients in Snohomish County, 09/21/15 DaVita HealthCare Partners, Inc. (NYSE:DVA) The Everett Clinic - WA. 09/21/15 Prime Healthcare Services, Inc. Lehigh HMA, LLC Operates a hospital in Lehigh Acres. - 09/21/15 ER Holdings ER Centers of America, Inc. Provides medical care for emergency and urgent medical conditions in Texas. - 09/18/15 Universal Health Services Inc. Foundations Recovery Network, LLC Provides an integrated treatment for co-occurring mental health and substance use disorders. $ /15/15 U.S. Healthworks, Inc. PRO MED Medical Care Centers Provides urgent care services to patients in Austin. - 09/15/15 NorthStar Healthcare Income, Inc.; Griffin-American Trilogy Healthcare Investors REIT III, LLC Inc.; Northstar Asset Management Owns Group and Inc. operates purpose-built integrated senior healthcare campuses. $1, /10/15 Orthology, Inc. NYSportsMed Operates a sports medicine, physical therapy, and athlete performance improvement clinic. - 09/10/15 Riceland HealthCare, L.P. Physician's Link Home Care, PLLC Offers specialty care services for health and wellness at home. - 09/04/15 Vision Group Holdings, LLC Advanced Laser Center of Oklahoma, LLC Operates eye care centers in Oklahoma. - 09/03/15 LHC Group, Inc. Halcyon Home Health, LLC Provides hospice and home health services. $58.5 Sources: S&P, Capital IQ. (a) Public Companies in bold. 11 MOSS ADAMS CAPITAL LLC

12 Recent Notable and Disclosed M&A Transactions (a) $ in millions Transaction Announced Acquirer/Investor Target Target Description Value Metric 10/16/15 RadNet (Nasdaq:RDNT) Diagnostic Imaging Group Owns and operates 17 imaging centers. $ x Rev 09/18/15 Universal Health Services (NYSE:UHS) 09/16/15 Fujian Thai Hot Investment M&A Transactions in the table above include those with EV above $5 million and with reported deal metrics. Sources: S&P, Capital IQ. (a) Public companies in bold. Foundations Recovery Network Alliance HealthCare Services (Nasdaq:AIQ) 09/15/15 Griffin-American Healthcare REIT Trilogy Investors 09/03/15 LHC Group (Nasdaq:LHCG) Halcyon Hospice Provides treatment for persons with a dual diagnosis of substance addiction and mental health disorders. $350.0 Provides outpatient diagnostic and radiation therapy services in the U.S. $ x Rev; 5.8x EBITDA Owner-operator of integrated senior healthcare campuses throughout the Midwest. Independent providers of hospice services with 16 locations across three states. $1,125.0 $ x Rev 09/03/15 Molina Healthcare (NYSE:MOH) Providence Human Services National provider of behavioral and mental health services. $ x Rev 09/02/15 BayBridge Seniors Housing Amica Mature Lifestyles (TSX:ACC) Luxury seniors residences, with 26 properties throughout Canada. $ x Rev; 27.5 EBITDA 08/31/15 Encompass Home Health CareSouth Health System Portfolio of 45 home health locations. $ x Rev 08/24/15 DaVita HealthCare Partners (NYSE:DVA) Renal Ventures Management Operates 36 dialysis clinics in 6 states. $ /04/15 Team Health (NYSE:TMH) IPC Healthcare (Nasdaq:IPCM) Acute hospitalist and post-acute provider organization. $1, x Rev; 10.7x EBITDA 07/30/15 Envision Healthcare (Nasdaq:EVHC) Rural/Metro Provider of emergency and non-emergency ambulance transportation. $ x Rev; 10.3x EBITDA 07/27/15 Medical Properties Trust (NYSE:MPW) Capella Healthcare Owns and operates acute care and specialty hospital facilities in six states. $1, x Rev; 14.3x EBITDA 07/01/15 Madison Dearborn Partners Pattersori Companies' Medical Business Provides rehabilitation, assistive, and splitting products. $ x Rev; 10.6x EBITDA 06/12/15 Quantum International Income Corp. (TSXV:QIC) Columbus Hospital LTACH LLC Operates an acute care specialty hospital for higher acute patients. $ x Rev 06/11/15 HEALTHSOUTH Corp. (NYSE:HLS) Reliant Hospital Partners, LLC Owns and operates rehabilitation hospitals in the United States. $ x Rev; 8.9x EBITDA 06/09/15 Patient Home Monitoring Sleep Management Provides home based medical services focused on patients with chronic sleep conditions, $ x Rev; 4.9x EBITDA 05/13/15 American Addiction Centers, Inc. The Oxford Centre, Inc. Operates a drug and alcohol addiction treatment center. $ x Rev; 6.3x EBITDA Deal Revenue EBITDA Size Multiple Multiple Transactions Represented High $1, x 27.5x Median $ x 10.3x Low $ x 4.9x Mean $ x 11.0x 12 MOSS ADAMS CAPITAL LLC

13 Number of Announced Transactions Overview of Selected M&A Transactions TeamHealth Holdings (NYSE:TMH) acquires IPC Healthcare (Nasdaq:IPCM) August 4, 2015 On August 4, 2015, TeamHealth, a healthcare staffing and administrative firm based out of Knoxville, TN, agreed to buy IPC Healthcare, a hospitalist services provider based out of North Hollywood, CA, for a reported $1.6 billion. The deal increased the number of TeamHealth HC professionals to 15,000, and expands post-acute care offerings to as many as 2,000 facilities across 28 states. According to TeamHealth SVP Patricia Ball, the more diverse network of services will put the company in a better position to work under a value-based payment model.this acquisition creates a wonderfully physician-focused organization. Note: At the time of announcement, analysts speculated that a significant driver of the acquisition was to make TeamHealth more marketable in a sale event: On October 20, 2015, TeamHealth announced it was being acquired by AmSurge Corp. Providers & Facilities Mid-Market M&A* Medical Properties Trust (NYSE:MPW) acquires Capella Healthcare July 27, 2015 On July 27, 2015, Medical Properties Trust, Inc. ( MPT ), a real estate investment trust (REIT) focused on developing and acquiring healthcare facilities, agreed to buy Capella Healthcare ( Capella ), a privately owned provider of healthcare services based in Franklin, TN, for $1.5 billion. Capella is one of the ten largest for-profit hospital companies in the United States. With the acquisition, MPT added seven acute care hospitals across five states to its portfolio, representing more than two million sq. f.t of space, and 1,169 beds. The acquisition was the largest in MPT s history. The acquisition of Capella, which in a single stroke accretively increases our portfolio of high quality hospital real estate by almost 20 percent, is simply the next step along our track record of creating strong double digit growth, said Edward K. Aldag, Jr., Chairman, President and CEO of MPT. Sources: Company press releases, S&P Capital IQ, Modern Healthcare YTD* YTD* * YTD figures represent total year-to-date M&A as of October 27, 2014 & Middle market M&A includes transactions with EV < $500mm, and transactions with undisclosed EV. 13 MOSS ADAMS CAPITAL LLC

14 Public Company Equity Offerings $ in millions Transaction Date Company Funding Type Target Description Value 10/01/15 Surgery Partners (SGRY) IPO Portfolio of 99 surgical facilities across 28 states. $ /31/15 PharMEDium Healthcare IPO National provider of compounded sterile preparations to acute care hospitals. $ /31/15 American Renal Associates Holdings, Inc. IPO Operates 181 dialysis clinic locations in 23 states. NA 07/31/15 Adeptus Health (ADPT) Follow-On Equity Offering Owns and operates a network of independent freestanding emergency rooms. $ /01/15 Teladoc (TDOC) Follow-on Equity Offering Provider of 24/7 tele-health consultations. $ /25/15 BioCorRx Inc. (OTCPK:BICX) PIPE Operates alcoholism rehabilitation and treatment centers in California. $ /05/15 Evolent Health (EVH) IPO Provider of population health managed services solutions. $ /21/15 Community Healthcare Trust (CHCT) IPO REIT focused on acquiring non-urban healthcare properties. $ /04/15 Acadia Healthcare Company, Inc. (NasdaqGS:ACHC) Follow-on Equity Offering Provider of inpatient behavioral health care services. $ /31/15 Convalo Health International Corp. (TSXV:CXV) PIPE Operates as an intensive outpatient treatment services company. $ /31/15 AdCare Health Systems, Inc. (AMEX:ADK) PIPE Owns and manages skilled nursing facilities and assisted living facilities. $8.5 03/13/15 Surgical Care Affiliates, Inc. (NasdaqGS:SCAI) Follow-on Equity Offering Owns and operates a network of multi-specialty ambulatory centers and surgical hospitals. $ /09/15 BioScrip, Inc. (NasdaqGS:BIOS) PIPE Provides home infusion and other home care services. $ /09/15 The Ensign Group, Inc. (NasdaqGS:ENSG) Follow-on Equity Offering Provides skilled nursing and rehabilitative care services. $ /06/15 Providence Service Corp. (NasdaqGS:PRSC) Follow-on Equity Offering Provides and manages government sponsored non-emergency transportation services. $ /17/14 Kindred Healthcare Inc. (NYSE:KND) Follow-on Equity Offering Provides healthcare services in the U.S. $ /10/14 AmSurg Corp. (NasdaqGS:AMSG) Follow-on Equity Offering Provides ambulatory and physician services. $ /19/14 The Joint Corp. (NasdaqCM:JYNT) IPO Operates as a franchisor of chiropractic clinics. $ /08/14 Brookdale Senior Living Inc. (NYSE:BKD) Follow-on Equity Offering Owns and operates senior living communities in the U.S. $ /11/14 AAC Holdings, Inc. (NYSE:AAC) IPO Provides inpatient substance abuse treatment services. $75.0 U.S. Public equity offerings of at least $5 million the last three years. Sources: S&P Capital IQ and PitchBook Data Inc. 14 MOSS ADAMS CAPITAL LLC

15 Private Company Capital Raises $ in millions Transaction Date Company Funding Type Target Description Value 10/16/15 Healthcare Integrity LLC Venture Capital Manages a general acute care hospital. $5.0 10/08/15 PM Pediatrics Management Group Growth Capital / Private Equity Provides pediatric urgent care in New York and New Jersey. $8.4 10/07/15 Merrill Gardens, LLC Growth Capital / Private Equity Owns and operates senior living communities across 6 states. $ /30/15 Access Integrated Healthcare Venture Capital Healthcare services organization serving the workers' compensation industry. $ /22/15 Access Clinical Partners Venture Capital Owns and operates urgent care centers. $ /17/15 VillageMD Venture Capital Management services company that partners with leading healthcare providers. $ /16/15 DJ HealthUnion Systems Undisclosed Provider of digital hospital solutions. $ /08/15 Aegis Senior Communities LLC Growth Capital / Private Equity Owns and operates senior living communities in WA and CA. $ /03/15 Community Intervention Services Growth Capital / Private Equity Provider of behavioral health services that cares for more than 50,000 patients annually. $ /20/15 ZocDoc Venture Capital Online doctor appointment service. $ /20/15 Grand Rounds Venture Capital Online platform that connects patients with medical specialists. $ /20/15 Maryland Proton Treatment Center, LLC Growth Capital / Private Equity Development stage company intending to operate a cancer treatment facility. $ /31/15 Community Medical Group Growth Capital / Private Equity Operates medical centers providing Medicaid and Medicare services in Florida. $ /28/15 South Bay Mental Health Center, Inc. Growth Capital / Private Equity Provides community-based services to patients in MA. $ /22/15 Gynesonics Growth Capital / Private Equity Women's healthcare company. $ /22/15 Qliance Medical Management, Inc. Growth Capital / Private Equity Operates insurance-free direct primary care clinics. $6.0 07/21/15 ContinuumRx, Inc. Growth Capital / Private Equity Provides specialty home infusion therapies and services. $ /17/15 Daughters of Charity Health System Growth Capital / Private Equity Regional California based NFP health system. $ /29/15 Activate Healthcare Growth Capital/Private Equity Provider of workplace health clinics. NA 06/08/15 National Surgical Healthcare Growth Capital/Private Equity Owns and operates surgical hospitals and ambulatory surgery centers. $52.5 Equity capital raises of $5 million for U.S. private companies in the last six months. Sources: S&P Capital IQ and PitchBook Data Inc. 15 MOSS ADAMS CAPITAL LLC

16 Number of Transactions Overview of Selected Capital Raises Surgery Partners Inc. (Nasdaq:SGRY) (Nashville, TN) October 1, 2015 Providers & Facilities Mid-Market Cap Raises* Founded in 2004, Surgery Partners, Inc. is one of the largest and fastest-growing surgical services businesses in the U.S. The company has an outpatient delivery model focused on providing high-quality, cost-effective solutions for surgical and related ancillary care. Surgery Partners offers its services through 94 ambulatory surgery centers and five surgical hospitals, located across the U.S. Surgery Partners controlling private equity owner, H.I.G. Capital, took the company public on October 1, 2015, on the NASDAQ, Originally expected to trade within an initial price range of $22-$26/sh., the company s shares were subsequently offered at $19/sh., or slightly more than 20% below the IPO s expected midpoint. On 11/6/15 (the date of this report) SGRY s shares closed at a price of $18.81/sh Merrill Gardens, LLC (Private Company) (Seattle, WA) October 7, 2015 On October 7, 2015, Merrill Gardens, LLC ( Merrill ), announced that it would raise $100 million in a new round of financing. The company announced it would issue membership units as part of the transaction. Merrill owns and operates senior living communities in Alabama, Arizona, Washington, California, Georgia, and Nevada. It offers independent living, assisted living, Alzheimer s and dementia care, continuing care, memory care, as well as other services directed at the senior living segment. It also offer various management services. Merrill was founded in As of October, 22, 2015, the company had received $52.4 million from 66 investors in the first tranch close. Sources: Company press releases, S&P Capital IQ, SeekingAlpha YTD* YTD* * YTD figures represent total year-to-date capital raises as of October 27, 2014 & Middle market Public Offerings & Capital Raises includes transactions with < $500mm, and transactions with undisclosed values. 16 MOSS ADAMS CAPITAL LLC

17 Moss Adams at a Glance Leadership through Experience and Results Moss Adams Capital LLC Boutique investment bank and strategic advisor Dedicated industry specialists Advisory and execution Private equity Debt Mergers and acquisitions Restructuring Long-Term Industry Relationships All product types Major markets and metro areas Public and private entities Moss Adams LLP Fully integrated accounting, tax, and business advisory firm 100+ years old Dominant in western US Middle-market specialists Accounting, tax, and transaction Experience Real estate accounting best practices Senior, experienced tax specialists Leverageable transaction resources International Presence Dominance in Western US 2,200 employees in 27 offices Presence on national/global basis Praxity affiliates across US and more than 100 countries around globe 17 MOSS ADAMS CAPITAL LLC

18 Expert Teams I N D U S T R Y K N O W L E D G E M A T C H E D W I T H A N E X P E R I E N C E D T E A M Senior Level Attention Commitment to our Clients Professional Excellence Objective & Independent Advice Creating Value for Owners Global Presence & Capabilities Premier accounting and financial services advice for middle market healthcare providers and facilities companies. 18 MOSS ADAMS CAPITAL LLC

19 Moss Adams Capital Overview Full Service Mid Market Investment Bank Corporate Finance Capital Placement Equity and Debt Merger and acquisition advisory Strategic alternatives assessment Exclusive sales and divestitures Strategic planning Management buy-outs Recapitalizations Fairness opinions Restructuring and special situations advisory Comprehensive Industry Coverage Aerospace, Defense & Government Services Consumer, Retail & Apparel Automotive & Dealer Services Food, Beverage & Agriculture Business & Marketing Services Healthcare Services & Products Highlights and Accomplishments Industrials / Niche Manufacturing Infrastructure & Construction Paper, Plastics, & Packaging Completed more than 250 transactions Access to key decision-makers among institutional investor universe Coverage of relevant strategic partners Average of 20 years of investment banking experience among senior leaders Real Estate, Lodging & Leisure Technology, Communications, & Media Transportation & Logistics 19 MOSS ADAMS CAPITAL LLC

20 Global Reach Moss Adams is a founding member of Praxity, AISBL, a global alliance of independent accounting firms. In addition to its deep, direct international relationships, Praxity provides access and trusted advisory expertise worldwide. North America Canada, United States Europe Austria, Azerbaijan, Belgium, Bosnia-Herzgovina, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Jersey, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, Ukraine Asia Bangladesh, China, Indonesia, Japan, South Korea, Malaysia, Singapore, Taiwan, Thailand, Vietnam Latin America and Caribbean Argentina, Bermuda, Brazil, Cayman Islands, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Nicaragua, Panama, Peru, Puerto Rico, Uruguay, Venezuela Africa Angola, Benin, Botswana, Cameroon, Cape Verde, Djibouti, Egypt, Ghana, Ivory Coast, Kenya, Lesotho, Madagascar, Mauritius, Morocco, Namibia, Nigeria, Senegal, South Africa, Tunisia Middle East and Indian Subcontinent Bahrain, India, Israel, Jordan, Kuwait, Lebanon, Oman, Pakistan, Palestinian territories, Qatar, Saudi Arabia, Sri Lanka, Tajikistan, United Arab Emirates Australasia Australia, New Caledonia, New Zealand 20 MOSS ADAMS CAPITAL LLC

21 Global M&A Reach Through Local Relationships Local, National and Global Reach Our affiliation with CFxB consists of 150+ Corporate Finance Professionals across the U.S. and in over 25 countries. more than 25 countries 21 MOSS ADAMS CAPITAL LLC

22 Contact Us Moss Adams Capital LLC rd Avenue Suite 2800 Seattle, WA Main Street Suite 900 Irvine, CA Contributing Authors: Wiley Kitchell Managing Director (206) [email protected] Harman Wales Managing Director (206) [email protected] Robert Miranda Vice President (949) [email protected] Scott Porter Vice President (206) [email protected] Richard Anderson Managing Director (949) [email protected] Andrew Suen Vice President (949) [email protected] James Rothenberger Vice President (206) [email protected] Tyler Dale Vice President (949) [email protected] 22 MOSS ADAMS CAPITAL LLC