Emergency Medical Services Corporation (EMS) is in an acquisition spree. Recently, the company's EmCare segment acquired Florida based North Pinellas Anesthesia Associates and Northwood Anesthesia Associates, an anesthesia provider. This acquisition will increase Emergency Medical's clinician strength by 40 persons apart from providing services to two hospitals and seven ambulatory surgical centers in that area. The company expects this deal to add $ 15 million in annual net revenue.

This is the second acquisition in the anesthesia space within a span of two months. Earlier, in December 2010, Emergency Medical had decided to acquire Milford Anesthesia Associates, an anesthesia provider based in Milford. With approximately 100 clinicians the anesthesia company provides its services to 9 hospitals and 18 ambulatory surgical centers. The transaction is expected to contribute $40 million of net revenue annually. Going by Emergency Medical's statement during the third quarter call, acquisitions in the area of anesthesia was quite planned out.

Emergency Medical's EmCare segment is a leading provider of outsourced emergency department staffing and related management services in the US based on the number of contracts with hospitals and affiliated physician groups. This segment commands an 8% share of the emergency department services market and 12% of the outsourced emergency department services market. During the third quarter of fiscal 2010, this segment generated revenues of $385.0 million, up 18% from the year-ago period.

Increased focus on cost containment, especially for the emergency departments in the hospital sector, coupled with complex regulatory/compliance requirement and a shortage of physicians trained to tackle emergency, should further push outsourcing trends in favor of well-established private providers of emergency department related services. Based on these factors, we believe EmCare should be able to consolidate its share in the $13 billion emergency department market.

We are currently Neutral on the stock.