Disappointing Debut for Team Health IPO

| About: Team Health (TMH)

Team Health Holdings (NYSE:TMH), a provider of outsourced emergency room physician staffing, priced its IPO today below range at $12.00 per share. The company had expected a range of $14-$16 per share.

Business Overview (from prospectus)

We believe we are one of the largest suppliers of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers in the United States, based upon revenues and patient visits. We serve approximately 550 hospital clients and their affiliated clinics in 46 states with a team of approximately 6,100 healthcare professionals, including physicians, physician assistants and nurse practitioners. We recruit and contract with healthcare professionals who then provide professional services within third-party healthcare facilities. We are a physician-founded organization with physician leadership throughout our business and since our inception in 1979, we have provided outsourced services in hospital emergency departments, or EDs. We also provide comprehensive programs for hospital medicine (hospitalist), radiology, pediatrics and other healthcare services. For the year ended December 31, 2008, we generated net revenues less provision for uncollectibles of $1.33 billion and net earnings of $44.7 million. EDs and hospital medicine (hospitalist) represented approximately 79% of our 2008 net revenues less provision for uncollectibles, with locum tenens, radiology, pediatrics, military and other healthcare services representing approximately the remaining 21%.

Offering: 13.3 million shares at $12.00 per share. Net proceeds of approximately $146.1 million will be used to repay debt.

Lead Underwriters: BofA Merrill Lynch (NYSE:BAC), Goldman Sachs (NYSE:GS)
Barclays Capital (NYSE:BCS)

Financial Highlights:

Net revenue in the nine months ended September 30, 2009 increased $147.2 million, or 8.6%, to $1.9 billion from $1.7 billion in the nine months ended September 30, 2008... The provision for uncollectibles was $793.3 million in the nine months ended September 30, 2009 compared to $721.0 million in the corresponding period in 2008, an increase of $72.4 million, or 10.0%. The provision for uncollectibles as a percentage of net revenue was 42.5% in 2009 compared with 41.9% in 2008... Net earnings were $55.2 million in the nine months ended September 30, 2009 compared to $50.1 million in the nine months ended September 30, 2008.


The market for outsourced ED staffing and management services is highly fragmented. There are approximately 4,500 community hospitals with EDs in the United States. We believe that approximately 33% of hospitals with EDs choose to employ the emergency physician group. The remaining approximate 67% outsource to a national, regional or local emergency physician group. Of these hospitals that outsource, we believe approximately 52% contract with a local provider, approximately 23% contract with a regional provider and approximately 25% contract with a national provider.

We believe Emergency Medical Services Corporation has one of the largest shares of the ED services market based upon revenues. There are several smaller companies that provide outsourced ED services and that operate in multiple states.

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