Adeptus Health, the Lewisville-based operator of First Choice emergency rooms with 15 free-standing facilities in North Texas, went public Wednesday and enjoyed a healthy 17 percent gain on its first day of trading.
After pricing its shares on the New York Stock Exchange at $22, the top end of its estimated range, Adeptus (ticker: ADPT) saw its stock close at $25.75, up $3.75, as 6 million shares changed hands.
The company sold 4.9 million shares, raising about $93 million after expenses. It said it will use the cash to pay down debt. Sterling Partners, a private equity fund that bought a 75 percent stake in First Choice in 2011, planned to sell additional shares if demand warranted.
Adeptus has been growing rapidly, with 37 ERs in Texas and Colorado and plans to operate 53 by the end of the year, according to regulatory filings. Last year, it reported a $3 million loss on $115 million in revenue.
CEO Tom Hall, who rang the opening bell on the New York Stock Exchange on Wednesday morning, said in a telephone interview that the company fills a need in markets where “emergency rooms are just overrun with patients, the waiting times are so long.”
He said that the average wait at a First Choice ER is four minutes and that the facilities are staffed round-the-clock by at least one emergency care physician.
The company’s model is not without critics, who maintain that too often patients who could have been treated at an urgent-care center or other lower-intensity facility instead incur the higher costs of an ER.
As a 24/7 facility, First Choice generally receives higher reimbursements from insurers but is not eligible for Medicare or Medicaid.
In 2013, Adeptus facilities saw 77,044 patients, according to its Securities and Exchange Commission disclosure. That amounts to an average of about $1,500 per patient, about 98 percent of which comes from third-party payers like insurers.
According to a 2012 report by the Urgent Care Association of America, free-standing ERs averaged 35 to 40 patients a day, compared with 100 to 150 at hospital ERs, and realized about three times as much net revenue per patient as an urgent-care center.
Hall said First Choice treats appropriate patients at its ERs and has an agreement with Concentra, an urgent-care chain owned by health insurer Humana, to refer patients who don’t need the level of service offered by an ER. First Choice also signed an agreement last year with the HCA hospital chain to refer patients needing hospitalization to HCA facilities.
About 3 to 5 percent of patients seen by First Choice require hospitalization, Hall said.
Free-standing ERs are a trend. HCA, Texas Health Resources and Baylor Scott & White, the largest hospital networks in North Texas, have built stand-alone ERs, typically in growing suburban areas that might not require a full-service hospital.