Adeptus Health IPO Powered by Revenue Growth, Obamacare Reforms

Tickers in this article: ADPT HCA

NEW YORK (TheStreet) -- Adeptus Health (ADPT) a fast-growing operator of free standing emergency rooms, believes it can profit from the changing landscape for health care. So do investors, after shares of the private equity-backed company surged in their first day of trading on the New York Stock Exchange.

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Adeptus Health sold 4.9 million shares at $22 a share apiece in its initial public offering on the NYSE, raising $93 million in IPO proceeds, after deducting underwriting fees, be used to repay debt and for general corporate purposes.

Shares in Adeptus Health surged over 21% in early Wednesday trading at $26.65, indicating strong investor interest in the 12-year old company.

The Lewisville, Texas-based emergency room operator may benefit from an ambitious plan to grow its facilities in coming years. Freestanding emergency room facilities, the niche where Adeptus Health operates in and is a market leader, has also gained prominence amid a nationwide policy focus on health care. Meanwhile, an apparent overburdening of hospital emergency rooms has created an opportunity for niche players like Adeptus Health.

Thomas S. Hall, CEO of Adeptus Health, said in an interview with TheStreet he believes there could be 5,000-to-10,000 free standing emergency rooms across the U.S. in coming years, as emergency room demand continues to grow while the total number of hospitals remains stagnant. Adeptus Health operates First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States.

Perhaps, Adeptus Health can also improve the performance of emergency rooms. Emergency rooms in states where the company operates were given grades of either D- or F by the American College of Emergency Care in its 2014 Report Card.

In 2014, Adeptus health is on track to more than double overall number of facilities. The company entered 2014 with 26 facilities and said in its IPO prospectus it expects to operate 53 facilities by the end of the year.

Hall, the Adeptus Health CEO, said in a phone interview the company has an about 50 facility backlog and expects to open about 24 new facilities a year. Hall also said that new Adeptus Health emergency rooms reach breakeven quickly after being opened, indicating that the company, which operated at a small loss in 2013 and the first quarter, could soon turn to profitability.