NEW YORK (TheStreet) -- All those baby boomers getting their hips and knees replaced are keeping business brisk at the nation's hospitals. It's also creating competition for surgical centers seeking to expand, said Stanton Nelson, CEO of Foundation HealthCare (FDNH).
"With baby boomers coming of age, about 10,000 a day, you are starting to see the throughput rise dramatically," said Nelson, adding that Obamacare has also been a driver of volume in acute care hospitals, which differ from Foundation's surgery centers.
Oklahoma City, Okla.-based Foundation owns and operates three surgical hospitals and eight surgery centers in seven states. Foundation, which sports a $71 million market capitalization, provides additional service lines depending on the market, such as out-patient surgery, oncology, imaging, physical therapy, hyperbarics, and sleep labs.
Last month, the company reported net revenue and income from affiliates increased 36% to $30 million in its first quarter. Adjusted Ebitda increased 152% to $2.3 million for the quarter and two of its hospitals received five star quality ratings from Medicare.
Earlier this week, Foundation HealthCare announced the sale of its 20% equity position in Heritage Park Surgical Hospital located in Sherman, Texas for $9.3 million to Texas Health Venture Heritage Park, LLC, a joint enterprise of the Baylor Hospital System and privately held United Surgical Partners International. Foundation added that it will also sell its share of the real estate ownership in the hospital's main campus facility by the end of the year, netting an additional $4 million approximately.
"Now that we have cleaned up our balance sheet we would like to be acquisitive here in 2015 which we plan to do," said Nelson.
Of course, the upswing in the hospital business is causing competitors like AmSurg (AMSG) and Nobilis Health (NHC) to look for their own expansion opportunities. Stanton, however, saids the bidding for additional hospitals has not reached the point where Foundation has been priced out of the market.
"Multiples tend to range between 6 and 8 times Ebitda, and we feel like given that we have the ability now to make that next acquisition," said Nelson.
As for the option for Nelson to sell Foundation's string of hospitals to a larger competitor, he said he is not interested at this time. "We are tightly held as a company and we want to stay that way at least initially," said Stanton. "We have a very straightforward, strategic plan that we would like to enact on, so our plan is to execute on that five-year strategic plan and then see what happens after that."