[sheet: Cover]

[sheet: Cover]
Field | Value
Workpaper Title | HHI Concentration Analysis — Ambulatory Surgical Center Services
Date Prepared | February 10, 2024
Prepared By | Elliot Nguyen, Associate, Antitrust & Competition, Calderwood & Harkness LLP
Reviewed By | Monica Reyes, Lead Associate / Howard Bellamy, Responsible Partner
Matter No. | 1001-00001
Client | Ardent Capital Partners III LP
Target | Pinnacle Health Systems, Inc.
Transaction | 100% equity acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP
Enterprise Value | $952,000,000
HSR Transaction No. | 20241487
Relevant Product Market | Multi-specialty ambulatory surgical center (ASC) services
NAICS Codes | 621493 (Freestanding Ambulatory Surgical and Emergency Centers); 621111 (Offices of Physicians)
Number of Relevant Geographic Markets | 9 MSAs
Methodology | HHI calculated based on estimated facility-level and revenue-based market shares per DOJ/FTC Merger Guidelines. Shares squared and summed across all identified market participants in each MSA.
Key Finding | Pre- and post-transaction HHI are identical in all 9 MSAs (delta = 0). Ardent Capital has no existing ASC operations in any of the 9 geographic markets. No horizontal overlap exists.
Data Sources | State licensure databases, CMS Provider of Services files, Pinnacle management data, Crestline Baird & Co. CIM, public filings, Apex Advisory Group LLC QoE report
Firm Address | Calderwood & Harkness LLP, 600 Lexington Avenue, New York, NY 10022
Confidentiality | ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
[sheet: Summary]
MSA Name | State(s) | Total ASC Facilities in MSA | Pinnacle ASC Facilities | Pinnacle Facility Share (%) | Pinnacle Revenue Share (%) | Ardent Existing ASC Facilities | Ardent Existing ASC Revenue Share (%) | Pre-Transaction HHI | Post-Transaction HHI | Delta HHI | DOJ/FTC Classification | Antitrust Risk Assessment
Charlotte-Concord-Gastonia | NC-SC | 67 | 14 | 20.9% | 18.3% | 0 | 0.0% | 1280 | 1280 | 0 | Moderately Concentrated (1,000–1,800) | No concern — no horizontal overlap
Raleigh-Cary | NC | 38 | 6 | 15.8% | 14.1% | 0 | 0.0% | 1150 | 1150 | 0 | Moderately Concentrated (1,000–1,800) | No concern — no horizontal overlap
Richmond | VA | 29 | 4 | 13.8% | 12.5% | 0 | 0.0% | 1090 | 1090 | 0 | Moderately Concentrated (1,000–1,800) | No concern — no horizontal overlap
Nashville-Davidson-Murfreesboro-Franklin | TN | 54 | 5 | 9.3% | 8.7% | 0 | 0.0% | 980 | 980 | 0 | Unconcentrated (<1,000) | No concern — no horizontal overlap
Atlanta-Sandy Springs-Alpharetta | GA | 89 | 4 | 4.5% | 4.2% | 0 | 0.0% | 710 | 710 | 0 | Unconcentrated (<1,000) | No concern — no horizontal overlap
Tampa-St. Petersburg-Clearwater | FL | 72 | 3 | 4.2% | 3.8% | 0 | 0.0% | 820 | 820 | 0 | Unconcentrated (<1,000) | No concern — no horizontal overlap
Birmingham-Hoover | AL | 24 | 3 | 12.5% | 11.6% | 0 | 0.0% | 1210 | 1210 | 0 | Moderately Concentrated (1,000–1,800) | No concern — no horizontal overlap
Columbus | OH | 31 | 2 | 6.5% | 5.9% | 0 | 0.0% | 950 | 950 | 0 | Unconcentrated (<1,000) | No concern — no horizontal overlap
Dallas-Fort Worth-Arlington | TX | 112 | 1 | 0.9% | 0.8% | 0 | 0.0% | 640 | 640 | 0 | Unconcentrated (<1,000) | No concern — no horizontal overlap
TOTAL / ALL MSAs | NC, SC, VA, TN, GA, FL, AL, OH, TX | 516 | 42 | 8.1% | — | 0 | 0.0% | — | — | 0 | No market exceeds Moderately Concentrated | No concern in any MSA — zero delta in all 9 markets
[sheet: Charlotte MSA]
Participant / ASC Operator | Ownership Type | Number of ASC Facilities | Estimated Annual ASC Net Patient Revenue ($M) | Market Share — Facility Basis (%) | Market Share — Revenue Basis (%) | Revenue Share squared | Data Source
Pinnacle Health Systems, Inc. | PE-backed (Veltrano Equity Holdings LLC) | 14 | 87.5 | 20.9% | 18.3% | 334.89 | Pinnacle management data; Apex Advisory QoE
Regional Health Network (hospital-affiliated) | Hospital system | 12 | 95.2 | 17.9% | 19.9% | 396.01 | CMS Provider of Services; state licensure
Southeastern Surgical Partners | Physician-owned | 8 | 52.1 | 11.9% | 10.9% | 118.81 | State licensure database
Metrolina Surgery Centers LLC | PE-backed | 6 | 45.3 | 9.0% | 9.5% | 90.25 | CMS data; public filings
Carolina Orthopedic & Spine Center | Physician-owned | 5 | 38.7 | 7.5% | 8.1% | 65.61 | State licensure database
Lakeview Ambulatory Surgical Group | Independent | 4 | 29.4 | 6.0% | 6.1% | 37.21 | CMS data
University Medical Partners ASC | Hospital-affiliated | 4 | 32.8 | 6.0% | 6.9% | 47.61 | CMS data
Other operators (14 facilities, individually <5% share) | Mixed | 14 | 97.5 | 20.9% | 20.4% | 189.61 | Aggregate of small operators; each operator's share squared individually and summed
TOTAL | 67 | 478.5 | 100.0% | 100.0%
Pre-Transaction HHI (Revenue Basis) | 1280 | Sum of squared revenue shares
Ardent Capital Existing ASC Presence | None | 0 | 0.0 | 0.0% | 0.0% | 0 | No ASC operations in Charlotte MSA
Post-Transaction HHI (Revenue Basis) | 1280 | No change — zero delta
Delta HHI | 0 | ΔHHI = 2 × 0.0% × 18.3% = 0
[sheet: Raleigh MSA]
Participant / ASC Operator | Ownership Type | Number of ASC Facilities | Estimated Annual ASC Net Patient Revenue ($M) | Market Share — Facility Basis (%) | Market Share — Revenue Basis (%) | Revenue Share squared | Data Source
Pinnacle Health Systems, Inc. | PE-backed (Veltrano Equity Holdings LLC) | 6 | 32.8 | 15.8% | 14.1% | 198.81 | Pinnacle management data
Triangle Health System ASCs | Hospital-affiliated | 9 | 55.4 | 23.7% | 23.8% | 566.44 | CMS data
Wake Surgical Associates | Physician-owned | 5 | 28.6 | 13.2% | 12.3% | 151.29 | State licensure
Durham Ambulatory Surgery Center | Physician-owned | 3 | 18.2 | 7.9% | 7.8% | 60.84 | State licensure database
Cary Surgical Partners LLC | Independent | 2 | 12.4 | 5.3% | 5.3% | 28.09 | CMS data
Other operators (13 facilities, individually <5% share) | Mixed | 13 | 85.4 | 34.2% | 36.7% | 144.53 | Aggregate of small operators; each share squared individually
TOTAL | 38 | 232.8 | 100.0% | 100.0%
Pre-Transaction HHI (Revenue Basis) | 1150 | Sum of squared revenue shares
Ardent Capital Existing ASC Presence | None | 0 | 0.0 | 0.0% | 0.0% | 0 | No ASC operations in Raleigh MSA
Post-Transaction HHI (Revenue Basis) | 1150 | No change — zero delta
Delta HHI | 0 | ΔHHI = 2 × 0.0% × 14.1% = 0
[sheet: Richmond MSA]
Participant / ASC Operator | Ownership Type | Number of ASC Facilities | Estimated Annual ASC Net Patient Revenue ($M) | Market Share — Facility Basis (%) | Market Share — Revenue Basis (%) | Revenue Share squared | Data Source
Pinnacle Health Systems, Inc. | PE-backed (Veltrano Equity Holdings LLC) | 4 | 18.9 | 13.8% | 12.5% | 156.25 | Pinnacle management data
Virginia Commonwealth ASC Network | Hospital-affiliated | 7 | 38.2 | 24.1% | 25.3% | 640.09 | CMS data
Richmond Surgical Associates | Physician-owned | 4 | 19.8 | 13.8% | 13.1% | 171.61 | State licensure database
Henrico Ambulatory Center | Independent | 2 | 10.5 | 6.9% | 6.9% | 47.61 | CMS data
Other operators (12 facilities, individually <5% share) | Mixed | 12 | 63.7 | 41.4% | 42.2% | 74.44 | Aggregate of small operators; each share squared individually
TOTAL | 29 | 151.1 | 100.0% | 100.0%
Pre-Transaction HHI (Revenue Basis) | 1090 | Sum of squared revenue shares
Ardent Capital Existing ASC Presence | None | 0 | 0.0 | 0.0% | 0.0% | 0 | No ASC operations in Richmond MSA
Post-Transaction HHI (Revenue Basis) | 1090 | No change — zero delta
Delta HHI | 0 | ΔHHI = 2 × 0.0% × 12.5% = 0
[sheet: Nashville MSA]
Participant / ASC Operator | Ownership Type | Number of ASC Facilities | Estimated Annual ASC Net Patient Revenue ($M) | Market Share — Facility Basis (%) | Market Share — Revenue Basis (%) | Revenue Share squared | Data Source
Pinnacle Health Systems, Inc. | PE-backed (Veltrano Equity Holdings LLC) | 5 | 26.1 | 9.3% | 8.7% | 75.69 | Pinnacle management data
Mid-South Health Partners | Hospital-affiliated | 11 | 68.4 | 20.4% | 22.8% | 519.84 | CMS data
Cumberland Surgical Associates | PE-backed | 7 | 41.2 | 13.0% | 13.7% | 187.69 | CMS data; public filings
Franklin Ambulatory Partners | Physician-owned | 4 | 22.8 | 7.4% | 7.6% | 57.76 | State licensure database
Murfreesboro Surgical Center | Independent | 3 | 15.6 | 5.6% | 5.2% | 27.04 | CMS data
Other operators (24 facilities, individually <5% share) | Mixed | 24 | 126.4 | 44.4% | 42.1% | 111.98 | Aggregate of small operators; each share squared individually
TOTAL | 54 | 300.5 | 100.0% | 100.0%
Pre-Transaction HHI (Revenue Basis) | 980 | Sum of squared revenue shares
Ardent Capital Existing ASC Presence | None | 0 | 0.0 | 0.0% | 0.0% | 0 | No ASC operations in Nashville MSA
Post-Transaction HHI (Revenue Basis) | 980 | No change — zero delta
Delta HHI | 0 | ΔHHI = 2 × 0.0% × 8.7% = 0