MONTHLY HEALTHCARE M&A UPDATE SECTOR SPOTLIGHT: PHYSICIAN SERVICES. September 2016 COKER CAPITAL ADVISORS SEPTEMBER 2016

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1 MONTHLY HEALTHCARE M&A UPDATE SECTOR SPOTLIGHT: PHYSICIAN SERVICES SEPTEMBER 2016

2 Physician Services: M&A Market Update Over the past five years, physician services has become one of the most active sectors for healthcare investment. Historically active hospital-based specialties (e.g., Hospitalists, Anesthesiology, Emergency Care, etc.) have been joined by non-hospitalbased specialties, most notably Dermatology, in generating unprecedented levels of transaction activity. For example, within Dermatology broad sponsor enthusiasm for the sector has resulted in a significant increase in platform investments by financial investors as well as increased add-on acquisition activity by existing platforms. Moreover, Dermatology has entered the next stage of its investment life cycle as several early private equity backed practices have recently sold to their second private equity owner at premium valuations. Recent examples include Varsity Healthcare Partners sale of Forefront Dermatology to OMERS Private Equity in February 2016, Audax Group s sale of Advanced Dermatology and Cosmetic Surgery to Harvest Partners in May 2016, and Candescent Partners sale of Tyler Dermatology to ABRY Partners in May We covered several of the key factors driving investment in the Dermatology sector in our 2015 Dermatology Sector Report Newsletter. These characteristics, which are not limited to Dermatology, are generating investor interest in evaluating and pursuing investments within a variety of other physician specialties. Key factors include: Regulatory and compliance burdens that are making it increasingly difficult for smaller physician practices to remain competitive and profitable. Moreover, increasing reimbursement complexity and demands to more proactively and individually manage patient care have put new, complex and expensive IT burdens on practices. As these costs of daily business continue to rise, economic challenges are increasing for smaller practices who are unable to spread the increased burden across a larger provider base. These dynamics are becoming increasingly untenable and are a driving motivation behind physician practices raising outside capital from financial investors to help positon themselves for success in the market. New forms of reimbursement (e.g. value based reimbursement [VBR]) will require practices to build economies of scale and to expand their scope in order to remain competitive. These new systems will require deft patient management and thoughtful provision of care, attributes that many practices struggle with in the current fee-for-service environment. Other forms of future reimbursement, such as bundled payments, will require practices to better integrate services through developing sophisticated IT capabilities and implementing care management / population health protocols in order to create robust platforms capable of providing patients with comprehensive, integrated care. A widening generational gap also exists among physicians in many practices. In general, newly trained physicians are not as intent as physicians in prior generations to take on the risk of building their own practice. Understanding the sometimes unique differences and motivations between younger and older physicians is often a critical consideration for practices considering raising capital from a financial investor. While these are several of the issues confronting practices in today s market, it is important to remember that physician practice M&A is not a new concept. Practices in specialties such as Gastroenterology (GI), Orthopedics, Cardiology, and Primary Care have been targets of hospitals for many years. Activity in these specialties has been driven largely by their ability to generate significant revenue or to serve some other interest of the hospital. Dermatology is different in that dermatologists are office based and generally do not serve patients in a hospital setting. As a result, Dermatology has not been a focus of hospital M&A efforts and remains highly fragmented. Other specialties that share some of the same characteristics as Dermatology and have seen investors recently increase their efforts to identify platforms that can be used to drive consolidation include Ophthalmology (i.e. eye care), Otolaryngology (ENT), Gastroenterology (GI), Radiology, Women s Health (OB/GYN) and Primary Care. Investor interest in eye care has historically focused on retail players (optometry, eye glasses, etc.). However, in recent years several transactions in Ophthalmology have been completed by leading private equity investors including Katzen Eye (Varsity Healthcare Partners

3 investment in 2014) and Claris Vision (Candescent Partners investment in 2012). In contrast, ENT has experienced very little activity to date, though, given the specialty s dynamics, we expect investment activity to accelerate in the coming years. GI is another specialty generating significant interest given its overall size, growth prospects and opportunities for revenue expansion through the addition of ancillary services. Audax announced an investment in Miami, FL based Gastro Health in March 2016 and we believe that this may begin a more active period of M&A for GI practices. Woman s Health is another specialty that is generating the interest of investors. While there have been several fertility focused transactions in the sector by leading private equity firms including LLR s investment in Vivere in 2010, Sagard Capital s investment in IntegraMed in 2012 and TA Associates investment in Colorado Center for Reproductive Medicine in 2015, other Women s Health care business models have also generated recent interest from investors, including Ares investment in Unified Physician Management. Radiology is another specialty that has been highly active in recent years. Investors in radiology practices include both well capitalized and highly acquisitive public companies (e.g. Amsurg/Sheridan, Team Health, Mednax) as well as financial investors. One example of a successful private equity backed platform that remains highly acquisitive is Radiology Partners, an NEA portfolio company since its founding in We expect that practices in the Radiology specialty will to continue to generate significant interest form strategic and financial investors in the coming years given its favorable attributes, including size, growth and fragmentation. Finally, while Primary Care practices have been the leading target specialty for hospitals in past years, this trend has begun to decelerate. Pressures on Primary Care physicians have increased as they are on the front line of new reimbursement models such as VBR and other forms of risk based reimbursement. Primary Care practices require significant size and scale to sufficiently take on risk. While taking on risk can be highly profitable, a shift from treating sick patients episodically to proactively managing the care of patients requires unique a skillset. The result has been a dramatic increase innovative financial investor backed models that are poised to capitalize on the access and cost pressures impacting the delivery of care. Companies such as One Medical, MDVIP, Qliance, MedLion and Iora Health are examples of relatively new businesses and we expect innovation to continue to rapidly develop in this area of healthcare.

4 Overview of Select Physician Specialties

5 Physician Services: Summary While physician practice M&A is not a new theme in healthcare, we have seen a significant acceleration in investment activity in practices across specialties in recent years. Practices are operating in an environment where hospitals and payors are aggressively gaining market strength through consolidation and expansion into new service lines. Moreover, the reimbursement and operating complexities of competing in a value based reimbursement environment require new investments in IT, care management protocols, management talent and marketing/patient targeting that further add to the challenges of managing a successful practice. These and other dynamics have forced practices to develop business plans and identify strategies that will help them succeed in this new healthcare paradigm. Raising capital and building scale through M&A has been an effective means for practices across certain specialties to position themselves for success in this environment. While the six specialties highlighted above are illustrative of some of the more active specialties, they do not represent all of the opportunities that exist in today s market. Rather, they represent a range of specialties that have received meaningful investor interest to date and that we believe will continue to be a focus of investors in the coming years. Other specialties such as orthopedics, urology, and podiatry also share some of the same characteristics as the specialties highlighted above and should also experience increasing investor interest and a meaningful increase in activity in the coming years.

6 Enterprise Value /2016P EBITDA Transaction Volume Transaction Value September 2016 Middle Market Healthcare M&A Activity Middle market healthcare transaction activity remains robust. Strategic acquirors continue to put cash reserves built up during the recession to work via acquisitions, and financial buyers continue to seek opportunities to put uninvested capital to work. Friendly credit conditions and leverage levels continue to drive valuations for both buyer types. Within the healthcare industry, the services sector, including provider services and clinical support, remains the sector with the most transaction activity for strategic and financial investors alike. This is due to the fragmented nature of many services subsectors and the impact of legislative actions, both positive and negative, that are driving continued deal activity. Middle Market Healthcare M&A Volume by Deal Size Middle Market Healthcare M&A Value by Deal Size $40.0 $30.0 $20.0 $25.8 $36.3 $29.3 $23.4 $32.4 $32.6 $ $ YTD $25-150m $ m $ m $ YTD $25-150m $ m $ m Healthcare Public Equity Markets Update Public equity market valuations remain strong for most healthcare subsectors. Publicly Traded Healthcare Sector Valuations 18.0x 16.7x 16.0x 15.4x 14.6x 14.5x 14.0x 12.8x 12.5x 12.0x 12.0x 10.0x 8.0x 6.0x 10.4x 10.3x 10.1x 10.0x 9.4x 9.1x 8.9x 8.8x 8.8x 8.6x 7.4x 7.4x 7.2x 6.5x 5.8x 4.0x 2.0x 0.0x

7 ($ in millions) PUBLICLY-TRADED HEALTHCARE COMPANIES Market Data Financial Information Trading Multiples Price as of: % 52wk Market Enterprise Cash and Cash Total 2016P 2016P EV (P) / 2016 Company 09/30/16 High Cap Value Equivalents Debt Revenue EBITDA Revenue EBITDA Provider Services Acute-Care Hospitals HCA $ % $28,496.9 $60,864.9 $691.0 $31,576.0 $41,724.5 $8, x 7.4x UHS % 11, , , , , x 8.9x Lifepoint Health % 2, , , , x 7.0x Tenet Healthcare % 2, , , , , x 7.7x Community Health % 1, , , , , x 7.1x Quorum Health Corporation % , , , N/A N/A Weighted Average 1.4x 7.8x Median 1.0x 7.4x Assisted Living and Long-Term Care Brookdale Capital Senior % 3, , , , x 11.0x Ensign Group % 1, , , x 7.4x National Healthcare Group % N/A N/A N/A N/A Kindred % , , , x 4.2x Capital Senior Living % , x 14.3x Five Star Quality Care % , x 3.1x Adcare Health Systems % N/A N/A N/A N/A Weighted Average 1.3x 8.0x Median 0.7x 7.4x ASC and Other Alternate Sites VCA % 5, , , , x 13.9x Amsurg % 3, , , , x 11.6x SCA % 1, , , x 16.5x Surgery Partners % , , , x 14.6x Adeptus % x 8.1x Nobilis % x 7.6x Weighted Average 2.5x 13.2x Median 2.4x 12.8x Behavioral Health UHS % 11, , , , , x 8.9x Acadia % 4, , , , x 12.2x Providence Service Corp % , , x 8.4x Civitas Solutions % , , x 8.2x AAC % x 10.3x Weighted Average 1.8x 9.7x Median 1.6x 8.9x Dialysis Fresenius % 23, , , , , x 9.5x DaVita Healthcare % 13, , , , , , x 8.6x American Renal Associates % , x 5.6x Weighted Average 1.7x 9.1x Median 1.6x 8.6x Physician Services and Management Mednax % 6, , , , x 10.9x Envision Healthcare % 4, , , , x 9.8x Heathcare Services Group % 2, , , x 21.3x Team Health % 2, , , , x 9.7x Weighted Average 1.7x 12.4x Median 1.4x 10.4x Rehabilitation Healthsouth % 3, , , , x 8.8x Select Medical % 1, , , , x 9.1x US Physical Therapy % x 15.1x The Joint Corp % x N/A Agility Health % N/A N/A N/A N/A Weighted Average 1.7x 9.6x Median 1.6x 9.1x Hospice and Home Care Chemed % 2, , , x 10.0x Amedisys % 1, , , x 14.0x LHC Group % x 9.3x Almost Family % x 10.0x Addus % x 11.1x Weighted Average 1.2x 11.2x Median 0.9x 10.0x Imaging Radnet % x 7.2x Alliance Healthcare % N/A N/A N/A N/A Weighted Average 0.9x 6.0x Median 1.1x 7.2x Source: S&P Capital IQ

8 ($ in millions) PUBLICLY-TRADED HEALTHCARE COMPANIES Market Data Financial Information Trading Multiples Price as of: % 52wk Market Enterprise Cash and Cash Total 2016P 2016P EV (P) / 2016 Company 09/30/16 High Cap Value Equivalents Debt Revenue EBITDA Revenue EBITDA Products Medical Devices and Products JNJ $ % $320,836.3 $304,523.3 $18,640.0 $26,557.0 $72,108.0 $25, x 12.1x Medtronic % 118, , , , , , x 14.5x 3M % 105, , , , , , x 13.2x Abbott % 60, , , , , , x 13.0x Danaher % 53, , , , , , x 16.2x Stryker % 43, , , , , , x 15.3x Boston Scientific % 31, , , , , x 16.2x Zimmer % 25, , , , , x 12.1x Baxter % 25, , , , , , x 13.8x CR Bard % 16, , , , , x 14.5x DENTSPLY % 13, , , , x 15.4x Hologic % 10, , , , , x 13.0x Teleflex % 7, , , , x 15.4x K2M Group % N/A 3.3x N/A Weighted Average 4.1x 13.4x Median 4.2x 14.5x Durable Medical Equipment ResMed % 9, , , , x 16.7x Hill-Rom % 3, , , , x 10.9x Invacare % , x 32.2x Weighted Average 3.9x 15.4x Median 2.2x 16.7x Distribution and Supplies McKesson % 37, , , , , , x 8.3x Cardinal Health % 24, , , , , , x 9.0x AmerisourceBergen % 19, , , , , , x 10.1x HenrySchein % 13, , , x 14.8x Patterson % 4, , , , x 11.8x VWR % 3, , , , x 11.7x Owens and Minor % 2, , , x 9.4x Weighted Average 0.4x 9.9x Median 0.3x 10.1x Information Technology and Solutions Payor Focus Cotiviti % 2, , x 15.7x Inovalon Holdings % 2, , x 12.7x Healthequity % 2, , x 32.9x HMS Holdings % 1, , x 15.1x Benefit Focus % 1, , x N/A Castlight Health % x N/A Connecture % x N/A Weighted Average 6.0x 16.1x Median 3.7x 15.4x Provider Focus Cerner % 20, , , , x 12.8x Athenahealth % 4, , , x 21.4x Allscripts Healthcare % 2, , , , x 13.5x Press Ganey % 2, , x 16.9x Advisory Board % 1, , x 12.0x Premier % 1, , , x 2.8x Evolent % 1, , x N/A Omnicell % 1, , x 14.3x Healthstream % x 20.2x Teladoc % x N/A Quality Systems % x 8.4x Vocera % x N/A National Research Corp % x 12.2x CPSI % x 8.8x Streamline % x 11.2x Weighted Average 4.0x 13.0x Median 2.8x 12.5x Other HCIT IMS Health % 10, , , , x 14.6x Veeva Systems % 5, , x 33.5x Medidata % 3, , x 29.6x WebMD % 1, , , x 8.1x Everyday Health % x 7.6x Weighted Average 6.0x 21.3x Median 4.4x 14.6x Source: S&P Capital IQ

9 ($ in millions) PUBLICLY-TRADED HEALTHCARE COMPANIES Market Data Financial Information Trading Multiples Price as of: % 52wk Market Enterprise Cash and Cash Total 2016P 2016P EV (P) / 2016 Company 09/30/16 High Cap Value Equivalents Debt Revenue EBITDA Revenue EBITDA Clinical and Patient Support Services Clinical Laboratories Labcorp $ % $13,857.6 $19,288.9 $639.6 $6,055.0 $9,393.1 $1, x 9.9x Quest Diagnostics % 11, , , , , x 10.3x Sonic Healthcare % 9, , , , x 13.0x Psychemedics % N/A N/A N/A N/A Weighted Average 2.1x 10.8x Median 2.1x 10.3x Contract Research Organizations Quintiles Transnational % 9, , , , x 12.7x Pantheon % 4, , , , x 14.4x Icon % 4, , , x 11.4x Charles River % 3, , , , x 12.6x Parexel % 3, , , x 10.2x PRA Health % 3, , , x 14.3x INC Reaseach % 2, , , x 11.3x MedPace % 1, , N/A N/A N/A N/A Albany Molecular % , x 9.2x Weighted Average 2.5x 12.0x Median 2.6x 12.0x Staffing On Assignment % 1, , , x 8.8x AMN Health Services % 1, , , x 8.4x Cross Country Healthcare % x 10.2x Weighted Average 1.0x 8.8x Median 1.0x 8.8x Commercial Payors United Healthcare % 131, , , , , , x 10.4x Aetna % 40, , , , , , x 7.6x Cigna % 33, , , , , , x 8.9x Anthem % 32, , , , , , x 8.8x Humana % 26, , , , , , x 8.7x Weighted Average 0.8x 9.4x Median 0.7x 8.8x Government Payors Centene % 11, , , , , , x 7.8x Wellcare % 5, , , , , x 5.8x Molina % 3, , , , , x 4.3x Magellan Health % 1, , , x 5.7x Universal American % , x 12.2x Weighted Average 0.3x 6.8x Median 0.3x 5.8x Other Outsourced Services Magellan Healthcare % 1, , , x 5.7x Air Methods % 1, , , x 6.5x Healthways % , x 11.7x Corvel % N/A N/A N/A N/A Weighted Average 1.2x 6.3x Median 1.8x 6.5x Specialty Pharmacy Services CVS Health % 95, , , , , , x 9.4x Express Scripts % 44, , , , , , x 8.1x Diplomat Pharmacy % 1, , , x 15.2x PharMerica % , , x 9.3x BioScrip % x 16.4x Weighted Average 0.6x 9.0x Median 0.6x 9.4x Source: S&P Capital IQ

10 ABOUT OUR FIRM CONTACT US Coker Capital Advisors is a healthcare-focused investment banking firm. With offices in Atlanta, Charlotte, and New York, we provide mergers and acquisitions, capital raising, and strategic advisory services to middle market healthcare companies. Our team combines investment banking, private equity, legal, and management consulting experience within the healthcare industry. Our senior professionals average more than a decade of healthcare transaction experience and have completed over 200 transactions across a wide range of healthcare subsectors with an aggregate transaction value in excess of $25 billion. For more information on market activity throughout the healthcare industry, or to discuss how Coker Capital Advisors may be able to add value to your company, please contact any member of our team: Atlanta 2400 Lakeview Parkway, Suite 400 Alpharetta, GA (678) Charlotte 121 W. Trade Street, Suite 2175 Charlotte, NC (704) New York 125 Park Avenue, 25th Floor New York, NY (212)