1001-00001 · Ardent Capital Partners · Antitrust Analysis

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Contract analysis Extract to table

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, New York 10022

MEMORANDUM

February 9, 2024

Matter No.: 1001-00001

To: Howard Bellamy, Partner, Antitrust & Competition Practice Group

From: Monica Reyes, Associate, Antitrust & Competition Practice Group

Re: Vertical Relationships Analysis — Marlowe Asset Management Rehabilitation Holdings LLC / Pinnacle Health Systems, Inc.

Subject: Hart-Scott-Rodino Premerger Notification — Ardent Capital Partners III LP Acquisition of Pinnacle Health Systems, Inc.

I. Executive Summary

This memorandum analyzes the vertical relationship between Marlowe Asset Management Rehabilitation Holdings LLC ("Marlowe Asset Management Rehab" or "Marlowe Asset Management"), a portfolio company of Ardent Capital Partners III LP ("Ardent Capital" or the "Fund"), and Pinnacle Health Systems, Inc. ("Pinnacle" or "PHS"), the target of Ardent Capital's proposed acquisition of 100% of Pinnacle's outstanding equity at an enterprise value of approximately $952 million. This analysis is prepared in connection with the Hart-Scott-Rodino ("HSR") premerger notification filing and the voluntary submission white paper to be filed with the Federal Trade Commission ("FTC") Bureau of Competition.

The core finding of this memorandum is that the only identified vertical nexus between Marlowe Asset Management Rehab and Pinnacle involves post-surgical patient referral patterns between Marlowe Asset Management Rehab's outpatient physical therapy ("PT") clinics and Pinnacle's ambulatory surgical centers ("ASCs") in three states — Texas, Florida, and Georgia. Of Marlowe Asset Management Rehab's 74 outpatient physical therapy clinic locations across those three states, 12 clinics are co-located with or geographically adjacent to Pinnacle ASCs. No other vertical relationship — whether involving supply of equipment, pharmaceuticals, diagnostic services, staffing, information technology, or any other input — has been identified between any Ardent Capital portfolio company and Pinnacle.

The vertical referral relationship between Marlowe Asset Management Rehab and Pinnacle is competitively insignificant. Based on patient referral data for calendar year 2023 provided by management of both entities, Marlowe Asset Management Rehab's PT referrals account for less than 2% of Pinnacle's total ASC case volume in the affected metropolitan statistical areas ("MSAs"). Post-surgical PT referrals from Pinnacle ASCs to Marlowe Asset Management clinics are not exclusive and are not foreclosing of rival PT providers. Referring physicians — who are independent practitioners exercising independent clinical judgment — retain full discretion over post-surgical rehabilitation referral destinations, and patients themselves exercise choice among available PT providers in each market.

No vertical theory of competitive harm is supported by the facts developed in this analysis. There is no basis for concern regarding input foreclosure (foreclosure of rival ASC operators from patient referrals), customer foreclosure (foreclosure of rival PT providers from post-surgical referral volume), access to competitively sensitive information, or facilitation of coordinated behavior. The merged firm would lack both the ability and the incentive to pursue any foreclosure strategy, and the market conditions in each affected MSA — including the highly fragmented nature of both the ASC and outpatient PT markets — would render any such strategy ineffective.

This analysis supports the conclusion that the proposed transaction presents no material antitrust risk on vertical grounds. The findings herein are consistent with the preliminary antitrust risk assessment memorandum and the separate Portfolio Company Overlap Analysis Memorandum dated February 8, 2024, and further support the request for early termination of the HSR waiting period.

II. Background

A. The Transaction

Ardent Capital Partners III LP, a Delaware limited partnership managed by Ardent Capital Management LLC (a Delaware limited liability company, SEC File No. 801-119247), is acquiring 100% of the outstanding equity of Pinnacle Health Systems, Inc. pursuant to an Equity Purchase Agreement dated January 31, 2024 (the "Purchase Agreement"). The transaction values Pinnacle at an enterprise value of approximately $952 million. The equity value is approximately $534 million, comprising $505.5 million in cash consideration plus approximately $28.5 million in rollover equity contributed by certain members of Pinnacle's senior management team, including Chief Executive Officer Dr. Marcus Ellsworth, who will continue in his role following the closing.

Ardent Capital Partners III LP ("Fund III") had its final close in November 2021 with approximately $4.8 billion in committed capital. Fund III is managed by Ardent Capital Management LLC, with Julian Desmond and Priya Chandrasekar serving as Managing Partners. Ardent Capital is a middle-market private equity firm with a primary investment focus on healthcare services, business services, and specialty industrials. Across all funds, Ardent Capital has completed 23 platform acquisitions and over 60 add-on acquisitions.

The selling sponsor is Veltrano Equity Holdings LLC, acting through Veltrano Equity Partners Fund V LP, a $3.2 billion fund. Veltrano initially acquired Pinnacle in 2017 at an enterprise value of approximately $340 million. During its approximately seven-year ownership period, Veltrano funded 19 add-on acquisitions that significantly expanded Pinnacle's geographic footprint and ASC portfolio, growing Pinnacle from 14 ASCs operating in four states to the current 42-ASC platform operating across nine states. The proposed transaction represents a return of approximately 2.8x invested capital for Veltrano on an equity basis, net of management rollover.

The Purchase Agreement contemplates a simultaneous signing and announcement, with closing targeted within 45 to 60 days following execution, subject to customary closing conditions including the expiration or early termination of the HSR waiting period. The HSR notification was filed on February 5, 2024.

B. Pinnacle Health Systems, Inc.

Pinnacle Health Systems, Inc. is a Delaware corporation with its principal office located at 2200 Lakeshore Boulevard, Suite 500, Charlotte, North Carolina 28202. Pinnacle operates a multi-specialty ambulatory surgical center platform consisting of 42 ASCs and 31 affiliated physician practice management entities across nine states: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas.

Pinnacle's ASC operations are classified under NAICS Code 621493 (Freestanding Ambulatory Surgical and Emergency Centers), while its physician practice management activities fall under NAICS Code 621111 (Offices of Physicians, Except Mental Health Specialists). Pinnacle's ASCs are multi-specialty facilities offering surgical procedures across orthopedics, gastroenterology, ophthalmology, pain management, and other surgical specialties, with orthopedics and gastroenterology representing the two largest service lines by case volume.

For fiscal year 2023, Pinnacle reported total revenue of $637.4 million and EBITDA of $98.2 million, as reflected in the quality of earnings report prepared by Apex Advisory Group LLC in connection with the transaction. Pinnacle employs approximately 4,700 individuals, including clinical and administrative staff across its ASC and physician practice management operations.

Pinnacle's operational model is characterized by a hub-and-spoke arrangement in which regional clusters of ASCs share centralized management, administrative, and billing infrastructure. Pinnacle's largest market concentration is in the Charlotte, North Carolina MSA, where it operates 14 ASCs. Additional significant market concentrations exist in the Nashville, Tennessee MSA (6 ASCs); the Tampa-St. Petersburg-Clearwater, Florida MSA (5 ASCs); the Atlanta-Sandy Springs-Alpharetta, Georgia MSA (4 ASCs); and the Dallas-Fort Worth-Arlington, Texas MSA (3 ASCs). The remaining 10 ASCs are distributed across the other four states in Pinnacle's footprint.

C. Marlowe Asset Management Rehabilitation Holdings LLC

Marlowe Asset Management Rehabilitation Holdings LLC is a Delaware limited liability company with its headquarters at 8950 Westheimer Road, Suite 600, Houston, Texas 77063. Marlowe Asset Management Rehab is a controlled portfolio company of Ardent Capital Partners III LP, having been acquired by Fund III as a platform investment in March 2022. Since the initial acquisition, Marlowe Asset Management Rehab has completed four tuck-in acquisitions of smaller PT practice groups in Texas and Florida, expanding its clinic footprint from 48 locations at the time of acquisition to 74 locations as of the date of this memorandum.

Marlowe Asset Management Rehab operates 74 outpatient physical therapy clinic locations across three states — Texas (39 locations), Florida (22 locations), and Georgia (13 locations). The company's service offering encompasses post-surgical rehabilitation, sports medicine physical therapy, orthopedic rehabilitation, general outpatient physical therapy, and related ancillary services such as dry needling and manual therapy. Marlowe Asset Management Rehab employs approximately 580 licensed physical therapists and physical therapist assistants across its clinic network.

For purposes of this analysis, the relevant product market for Marlowe Asset Management Rehab's operations is outpatient physical therapy services — a market that is distinct from ambulatory surgical center services. The distinction between these two product markets is addressed in detail in the separate Portfolio Company Overlap Analysis Memorandum dated February 8, 2024, which analyzes potential horizontal overlaps between Ardent Capital portfolio companies and Pinnacle. That memorandum confirms that Marlowe Asset Management Rehab and Pinnacle do not compete in any relevant antitrust product market.

D. Clearpath Diagnostics Inc. — No Vertical Nexus

In the course of conducting the portfolio company screening required for the HSR filing, we also analyzed the operations of Clearpath Diagnostics Inc., a Delaware corporation with its headquarters at 1700 Market Street, Suite 3400, Philadelphia, Pennsylvania 19103. Clearpath Diagnostics is an Ardent Capital portfolio company (acquired by Fund II in 2019 and currently held by Fund III following a secondary transaction in 2022) that provides independent clinical laboratory services — including routine clinical chemistry, hematology, toxicology, and molecular diagnostics — in Pennsylvania, New Jersey, and New York. Clearpath Diagnostics generated revenue of approximately $218 million in fiscal year 2023.

Clearpath Diagnostics operates exclusively in Pennsylvania, New Jersey, and New York. Pinnacle's nine-state operational footprint (North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas) has no geographic overlap with Clearpath's three-state service area. Accordingly, there is no vertical relationship between Clearpath Diagnostics and Pinnacle to analyze. The possibility that Clearpath could theoretically supply laboratory services to Pinnacle's ASCs is purely hypothetical; there is no existing commercial relationship, no geographic proximity, and no planned integration of these businesses. We do not address Clearpath Diagnostics further in this memorandum.

III. Identification of the Vertical Relationship

A. Nature of the Vertical Nexus

The vertical relationship between Marlowe Asset Management Rehab and Pinnacle arises from the natural clinical pathway in which patients who undergo surgical procedures at an ambulatory surgical center are subsequently referred for outpatient physical therapy rehabilitation. This referral pathway is a well-established feature of the post-surgical care continuum, particularly in orthopedic surgery, where physical therapy rehabilitation is a standard component of the post-operative treatment protocol. The clinical referral pathway creates a complementary, rather than substitutive, relationship between ASC services and outpatient PT services.

The referral flow operates in two directions:

1. upstream Referrals (Marlowe Asset Management PT Clinics → Pinnacle ASCs): Marlowe Asset Management PT clinics may identify patients undergoing physical therapy who require surgical intervention — for example, a PT patient whose conservative rehabilitation is unsuccessful and who requires arthroscopic knee surgery. In such cases, the treating physical therapist or the patient's primary care physician may refer the patient to a surgeon who performs procedures at a Pinnacle ASC. This upstream referral pathway is indirect and typically involves the intermediation of a referring physician.

2. Downstream Referrals (Pinnacle ASCs → Marlowe Asset Management PT Clinics): Patients who undergo surgical procedures at Pinnacle ASCs — particularly orthopedic procedures such as total joint replacement, rotator cuff repair, ACL reconstruction, and spinal surgery — are routinely referred for post-surgical physical therapy rehabilitation. In co-located or geographically proximate settings, the operating surgeon or the ASC's discharge coordinator may refer such patients to a Marlowe Asset Management Rehab PT clinic for post-surgical rehabilitation.

These referral patterns establish a vertical, complementary relationship between Marlowe Asset Management Rehab's outpatient PT services (the downstream market) and Pinnacle's ASC surgical services (the upstream market). The two entities do not compete in any relevant antitrust product market, and their services are consumed sequentially by patients moving through the surgical care continuum, not as alternatives to one another.

B. Geographic Overlap of Facilities

Of Marlowe Asset Management Rehab's 74 outpatient physical therapy clinic locations, 12 are co-located with or geographically adjacent to Pinnacle ASCs. For purposes of this analysis, we define "co-located or geographically adjacent" as facilities within a five-mile radius of one another, consistent with standard geographic proximity metrics used in healthcare referral pattern analysis. The 12 overlapping locations are distributed across three MSAs in three states, as follows:

Texas — Dallas-Fort Worth-Arlington MSA: Pinnacle operates 3 ASCs in the Dallas-Fort Worth-Arlington, TX MSA (CBSA Code 19100). Of Marlowe Asset Management Rehab's 39 Texas clinic locations, 5 clinics are co-located with or geographically adjacent to these 3 Pinnacle ASCs. Specifically, 2 Marlowe Asset Management clinics are located within a five-mile radius of the Pinnacle ASC in Plano, Texas; 2 Marlowe Asset Management clinics are within a five-mile radius of the Pinnacle ASC in Arlington, Texas; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Frisco, Texas. A detailed facility-by-facility map is set forth in Appendix A.

Florida — Tampa-St. Petersburg-Clearwater MSA: Pinnacle operates 5 ASCs in the Tampa-St. Petersburg-Clearwater, FL MSA (CBSA Code 45300). Of Marlowe Asset Management Rehab's 22 Florida clinic locations, 4 clinics are co-located with or geographically adjacent to Pinnacle ASCs in this MSA. Specifically, 2 Marlowe Asset Management clinics are within a five-mile radius of the Pinnacle ASC in Tampa, Florida; 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Brandon, Florida; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Clearwater, Florida. The remaining Pinnacle ASC in this MSA (located in Largo, Florida) has no Marlowe Asset Management clinic within a five-mile radius. Additional detail is provided in Appendix A.

Georgia — Atlanta-Sandy Springs-Alpharetta MSA: Pinnacle operates 4 ASCs in the Atlanta-Sandy Springs-Alpharetta, GA MSA (CBSA Code 12060). Of Marlowe Asset Management Rehab's 13 Georgia clinic locations, 3 clinics are co-located with or geographically adjacent to Pinnacle ASCs in this MSA. Specifically, 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Sandy Springs, Georgia; 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Marietta, Georgia; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Alpharetta, Georgia. The fourth Pinnacle ASC in this MSA (located in Decatur, Georgia) has no Marlowe Asset Management clinic within a five-mile radius. A facility-by-facility listing is set forth in Appendix A.

It is important to note that the vertical nexus is limited to these three MSAs. Pinnacle operates ASCs in six additional states — North Carolina, South Carolina, Virginia, Tennessee, Alabama, and Ohio — where Marlowe Asset Management Rehab has no clinic presence whatsoever. This means that the vertical relationship exists with respect to only 12 of Pinnacle's 42 ASCs (approximately 29%) and only 12 of Marlowe Asset Management Rehab's 74 PT clinic locations (approximately 16%). The majority of each entity's operations is entirely unaffected by the vertical nexus.

C. Relevant Markets for Vertical Analysis

For purposes of the vertical competitive effects analysis, we define the following relevant markets:

upstream Market: Ambulatory surgical center services (multi-specialty). This product market definition is consistent with the market definition adopted in the Market Definition & Competitive Analysis Memorandum dated February 10, 2024, prepared in connection with the horizontal competitive analysis of the transaction. ASC services constitute a distinct relevant product market from hospital-based outpatient surgical services, although hospital outpatient departments ("HOPDs") provide a degree of competitive constraint on freestanding ASCs, as discussed in the Market Definition memorandum.

Downstream Market: Outpatient physical therapy services. This product market encompasses all forms of outpatient physical therapy, including post-surgical rehabilitation, sports medicine PT, orthopedic rehabilitation, and general outpatient PT. The downstream market includes services provided by independent PT clinics, hospital-based outpatient rehabilitation programs, physician-owned PT practices, and national PT chains.

Geographic Markets: The three MSAs in which the vertical facility co-location has been identified — (1) the Dallas-Fort Worth-Arlington, TX MSA; (2) the Tampa-St. Petersburg-Clearwater, FL MSA; and (3) the Atlanta-Sandy Springs-Alpharetta, GA MSA. These MSA-level geographic markets are consistent with the geographic market definitions employed by the FTC and DOJ in prior healthcare services merger investigations, which have generally defined geographic markets for outpatient healthcare services at the MSA level or, in some cases, at narrower sub-MSA levels.

IV. Analysis of Referral Patterns

A. Methodology

To assess the significance of the vertical referral relationship, we analyzed patient referral data provided by Pinnacle management and Marlowe Asset Management Rehab management for the most recent full 12-month period, calendar year 2023 (January 1, 2023 through December 31, 2023).

Pinnacle's referral data was provided by Sandra Trevino, Chief Financial Officer of Pinnacle Health Systems, Inc., in response to our document and data request dated February 2, 2024. The data set includes case-level records for all surgical procedures performed at Pinnacle ASCs in the three affected MSAs during calendar year 2023, including the identity of the referring source (categorized by referring physician, practice group, and facility type) and, where available, the post-surgical rehabilitation referral destination for each case. Marlowe Asset Management Rehab's referral data was provided by Marlowe Asset Management's Vice President of Operations, Jason Keller, and includes patient intake records identifying the source of referral for all new patient evaluations at the 12 co-located Marlowe Asset Management PT clinics during the same period.

We employed two principal metrics in our analysis:

(a) The number and percentage of Marlowe Asset Management PT patients referred to Pinnacle ASCs for surgical procedures (Upstream referrals), expressed as a share of total Pinnacle ASC case volume in each affected MSA; and

(b) The number and percentage of Pinnacle ASC patients referred to Marlowe Asset Management PT clinics for post-surgical rehabilitation (downstream referrals), expressed as a share of total post-surgical PT referrals generated by Pinnacle ASCs in each affected MSA and as a share of total patient volume at the 12 co-located Marlowe Asset Management PT clinics.

Detailed referral volume data is set forth in Appendix B. The discussion below summarizes the key findings.

B. Upstream Referrals: Marlowe Asset Management PT Clinics → Pinnacle ASCs

During calendar year 2023, the 12 co-located Marlowe Asset Management PT clinics generated a total of 347 patient referrals to Pinnacle ASCs across the three affected MSAs. This referral volume is broken down by MSA as follows:

As the data demonstrates, Marlowe Asset Management Rehab's upstream PT referrals represent less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs, and less than 2% in the aggregate. This finding is consistent with the broader industry reality that the vast majority of ASC surgical referrals originate from physician offices, specialist practices, and hospital systems — not from physical therapy clinics. PT-to-surgery referral pathways are inherently indirect; they typically involve a physical therapist communicating with the patient's primary care physician or orthopedic specialist, who then makes the surgical referral determination. The PT clinic itself is rarely the proximate source of an ASC surgical case.

Moreover, the 347 upstream referrals attributed to the 12 co-located Marlowe Asset Management clinics represent only a portion of those clinics' total patient volumes. The 12 co-located clinics treated approximately 14,200 unique patients during calendar year 2023, meaning that only approximately 2.4% of Marlowe Asset Management's patients at the co-located clinics were referred for surgical procedures at any ASC, and only a subset of those referrals were directed to Pinnacle ASCs specifically. The predominant service at Marlowe Asset Management PT clinics is conservative, non-surgical rehabilitation, and the vast majority of Marlowe Asset Management's patients do not require surgical intervention.

C. Downstream Referrals: Pinnacle ASCs → Marlowe Asset Management PT Clinics

During calendar year 2023, Pinnacle ASCs in the three affected MSAs referred a total of 486 post-surgical patients to the 12 co-located Marlowe Asset Management PT clinics for post-surgical rehabilitation. The breakdown by MSA is as follows:

These data demonstrate that the downstream referral volume from Pinnacle ASCs to Marlowe Asset Management PT clinics represents less than 5% of the total post-surgical PT referrals generated by Pinnacle ASCs in the three affected MSAs. The majority of Pinnacle's post-surgical patients — approximately 95% — are referred to other post-surgical rehabilitation providers, including other independent PT clinics, hospital-based outpatient rehabilitation programs, PT clinics affiliated with the operating surgeon's practice, and national PT chains.

Critically, the post-surgical PT referrals from Pinnacle ASCs to Marlowe Asset Management clinics are not the product of any exclusive referral arrangement, contractual commitment, or administrative directive. Referring physicians — that is, the surgeons who perform procedures at Pinnacle ASCs — retain full discretion over the choice of post-surgical rehabilitation provider. These surgeons are overwhelmingly independent practitioners who maintain their own practice affiliations and referral networks. Pinnacle does not employ these surgeons, does not control their referral decisions, and has no contractual mechanism to mandate that post-surgical patients be directed to any particular PT provider.

Furthermore, patients themselves exercise choice among available PT providers. Under applicable insurance plan designs, patients are generally free to select any in-network PT provider for their post-surgical rehabilitation, and many patients choose PT providers based on geographic convenience, prior relationships, or personal preference rather than on the basis of a surgeon's referral. There is no exclusivity mechanism — whether contractual, administrative, or economic — that ties Pinnacle's post-surgical referral volume to Marlowe Asset Management or to any other single PT provider.

D. Aggregate Significance Assessment

Taken together, the upstream and downstream referral data confirm that the vertical referral relationship between Marlowe Asset Management Rehab and Pinnacle is de minimis relative to both entities' total patient volumes in each of the three affected MSAs. In the aggregate across all three MSAs, Marlowe Asset Management's upstream referrals represent approximately 1.54% of Pinnacle's total ASC case volume, and Pinnacle's downstream referrals to Marlowe Asset Management represent approximately 4.79% of Pinnacle's total post-surgical PT referral volume.

These referral volumes are unremarkable. The referral relationship between Marlowe Asset Management PT clinics and Pinnacle ASCs is no different in character, magnitude, or competitive significance from the thousands of routine clinical referral patterns that exist across the healthcare services sector between adjacent providers of complementary services. Outpatient PT clinics and ASCs routinely generate referrals to one another as a natural consequence of geographic proximity and the sequential nature of surgical and rehabilitative care. There is nothing about the existing referral relationship between Marlowe Asset Management and Pinnacle that is exclusive, preferential, or anticompetitive in nature.

V. Competitive Effects Analysis

A. Applicable Legal and Analytical Framework

The competitive effects analysis of vertical mergers is governed by the framework set forth in the U.S. Department of Justice and Federal Trade Commission 2023 Merger Guidelines (the "Merger Guidelines"), which superseded the prior Vertical Merger Guidelines issued in 2020 (subsequently withdrawn by the FTC in 2021). The 2023 Merger Guidelines address vertical theories of harm primarily in Guideline 6 ("Vertical Mergers Can Entrench or Extend a Dominant Position") and in the general discussion of foreclosure and raising rivals' costs.

Under the Merger Guidelines, vertical mergers may raise competitive concerns when (1) the merged firm would have the ability and incentive to foreclose rivals from access to a critical input or customer base, thereby raising rivals' costs or reducing rivals' revenues; (2) the merger would provide the merged firm with access to competitively sensitive information about rivals that could be used to disadvantage those rivals; or (3) the merger would facilitate coordinated behavior in either the upstream or downstream market. The analytical framework requires an assessment of both the ability and the incentive of the merged firm to engage in the relevant anticompetitive conduct. A merger does not raise a cognizable vertical concern if the merged firm would lack either the ability or the incentive to engage in foreclosure or other anticompetitive conduct, or if the effects of such conduct would be competitively insignificant.

We analyze each potential theory of vertical competitive harm below.

B. Input Foreclosure Analysis (Foreclosure of Rival ASCs)

Theory: Post-acquisition, Ardent Capital could cause Marlowe Asset Management PT clinics to steer patients exclusively to Pinnacle ASCs, thereby depriving rival ASC operators of patient referrals and raising their costs of acquiring surgical volume. This theory posits that Marlowe Asset Management PT clinics represent a significant source of patient referrals for ASCs in the affected MSAs, such that diversion of those referrals to Pinnacle would materially disadvantage rival ASC operators.

Assessment: This theory is not supported by the facts and does not give rise to any meaningful foreclosure concern, for several independent and reinforcing reasons.

First, Marlowe Asset Management PT clinics are not a significant source of surgical referrals for ASCs. As demonstrated in Section IV.B above, Marlowe Asset Management Rehab's upstream PT referrals represent less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs. If Marlowe Asset Management's referrals to Pinnacle represent less than 2% of Pinnacle's own case volume, they necessarily represent an even smaller share of total ASC case volume across all ASC operators in each MSA. The notion that diversion of this trivial referral volume would materially affect the competitive position of any rival ASC operator is not credible.

Second, PT clinics are not a meaningful patient referral channel for ASCs in the ordinary course. The primary sources of surgical case referrals for ASCs are physician offices and specialist practices — orthopedic surgeons, gastroenterologists, ophthalmologists, and other surgical specialists who maintain privileges at and direct their surgical volumes to particular ASCs. These physician referral relationships are the fundamental driver of ASC case volume. Physical therapy clinics play at most a peripheral role in the surgical referral chain, and that role is typically indirect, involving communication with a referring physician rather than a direct referral to an ASC.

Third, even under the extreme assumption that all Marlowe Asset Management PT referrals were diverted exclusively to Pinnacle ASCs — which they effectively already are in co-located settings where geographic proximity naturally drives referral patterns toward the nearest ASC — the impact on rival ASC operators' case volumes would be negligible. In the Dallas-Fort Worth-Arlington MSA alone, there are approximately 87 freestanding ASCs (according to the Texas Health and Human Services Commission licensing data as of December 2023), and Marlowe Asset Management's 163 upstream referrals represent a vanishingly small share of total ASC case volume in that market.

Fourth, numerous alternative PT providers exist in each MSA that could serve as referral sources for rival ASCs. The outpatient PT market in each of the three affected MSAs is highly fragmented, with scores of independent PT clinics, hospital-based rehabilitation programs, national PT chains, and physician-owned PT practices. Rival ASC operators have access to a broad array of PT providers from which they may receive referrals, and the loss of any referral volume from Marlowe Asset Management PT clinics would have no material effect on the competitive position of any rival ASC.

For all of these reasons, input foreclosure — that is, foreclosure of rival ASC operators from patient referrals — is not a cognizable theory of competitive harm in connection with this transaction.

C. Customer Foreclosure Analysis (Foreclosure of Rival PT Providers)

Theory: Post-acquisition, Ardent Capital could cause Pinnacle ASCs to refer post-surgical patients exclusively to Marlowe Asset Management PT clinics, thereby depriving rival PT providers of post-surgical referral volume and raising their costs of acquiring patients. This theory posits that Pinnacle ASCs represent a significant source of post-surgical PT referrals in the affected MSAs, such that exclusive channeling of those referrals to Marlowe Asset Management would materially disadvantage rival PT providers.

Assessment: This theory is not supported by the facts and does not give rise to any meaningful foreclosure concern, for several independent and reinforcing reasons.

First, post-surgical PT referrals are made by the operating surgeon, not by the ASC as an institution. Surgeons who perform procedures at Pinnacle ASCs are independent physicians — many of whom maintain their own practice affiliations, hospital privileges, and established referral networks. These surgeons exercise independent clinical judgment in determining the most appropriate post-surgical rehabilitation provider for each patient based on factors including the surgeon's professional relationships, the patient's geographic location, the patient's insurance network, and the patient's personal preference. Pinnacle, as the ASC operator, does not and cannot direct surgeons' PT referral decisions.

Second, Pinnacle has no contractual mechanism to mandate PT referral destinations, and implementing such a mandate would be both impractical and legally problematic. Any attempt by Pinnacle to require that surgeons practicing at its ASCs direct post-surgical PT referrals exclusively to Marlowe Asset Management clinics would contravene well-established norms of physician autonomy and clinical independence. Moreover, such a mandate could implicate the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), which prohibits the payment or receipt of remuneration in exchange for the referral of patients for services reimbursable under federal healthcare programs, and the Stark Law (42 U.S.C. § 1395nn), which restricts physician self-referral arrangements. The legal and regulatory risks associated with any exclusive referral arrangement would serve as a powerful deterrent against any such conduct, independent of the antitrust analysis.

Third, the post-surgical PT referral volume from Pinnacle ASCs represents a small share of total PT demand in each affected MSA. The outpatient PT market in each MSA is large, serving a diverse patient population that includes not only post-surgical rehabilitation patients but also patients with musculoskeletal injuries, chronic pain conditions, sports injuries, workplace injuries, and other conditions requiring physical therapy. Post-surgical referrals from ASCs — and specifically from Pinnacle ASCs — represent only one of many sources of patient demand for outpatient PT services. Even if Pinnacle's post-surgical referrals were diverted entirely to Marlowe Asset Management (which, as noted, is both impractical and legally constrained), the impact on rival PT providers' total patient volumes would be minimal.

Fourth, the outpatient PT market in each of the three affected MSAs features numerous competitors, including hospital-based outpatient rehabilitation programs (operated by major health systems such as Pinnacle Industries, Westvale Corporation, and Emory Healthcare), national PT chains (including Kestrel Enterprises, Sterling Reach Corporation, and Tidewater Corporation), independent PT practices, and physician-owned PT clinics. A summary of the competitive landscape in each MSA is set forth in Appendix C. This highly fragmented competitive environment ensures that rival PT providers have access to ample alternative sources of patient demand and are not dependent on any single ASC operator's referral volume.

For all of these reasons, customer foreclosure — that is, foreclosure of rival PT providers from post-surgical referral volume — is not a cognizable theory of competitive harm in connection with this transaction.

D. Access to Competitively Sensitive Information

Theory: The combination of Marlowe Asset Management Rehab and Pinnacle under common ownership by Ardent Capital could provide the merged entity with access to competitively sensitive information about rival ASC operators or rival PT providers, which could be used to disadvantage those rivals — for example, by using knowledge of competitor pricing or strategic plans to undercut rivals or to coordinate behavior.

Assessment: This theory is not supported by the facts. Neither Pinnacle ASCs nor Marlowe Asset Management PT clinics serve as information intermediaries for competitor data. The clinical referral relationship between PT clinics and ASCs does not involve the exchange of competitor pricing, volume data, contract terms, strategic plans, or other competitively sensitive information. Patient referral records contain clinical information pertinent to individual patient care — such as diagnosis, treatment history, and surgical indications — but do not contain information about the operations, pricing, or strategy of competing ASC or PT providers.

Moreover, neither Pinnacle nor Marlowe Asset Management occupies a position in the value chain that would give it access to competitor information. Pinnacle does not aggregate or process data on rival ASC operators' pricing, volumes, or payer contracts, and Marlowe Asset Management does not aggregate or process data on rival PT providers' pricing, volumes, or strategic plans. The vertical relationship does not create any new channel through which competitively sensitive information about rivals would flow to the merged entity.

Accordingly, there is no basis for concern regarding access to competitively sensitive information.

E. Facilitation of Coordination

Theory: The vertical integration of Marlowe Asset Management Rehab and Pinnacle under Ardent Capital's common ownership could facilitate coordinated behavior — that is, tacit or explicit collusion — in either the ASC market or the outpatient PT market in the affected MSAs.

Assessment: This theory is not supported by the facts or the market conditions in any of the affected MSAs. Both the ASC market and the outpatient PT market in each of the three affected MSAs are characterized by fragmented competitive structures with numerous independent operators. In the Dallas-Fort Worth-Arlington MSA, for example, there are approximately 87 freestanding ASCs and well over 200 outpatient PT provider locations. The Tampa-St. Petersburg-Clearwater and Atlanta-Sandy Springs-Alpharetta MSAs exhibit similarly fragmented competitive conditions. These market structures are not conducive to coordinated behavior, as the large number of independent competitors makes it difficult to reach and maintain any coordinated outcome.

The modest vertical relationship between Marlowe Asset Management and Pinnacle does not change the competitive dynamics in either market or create any mechanism through which coordination could be facilitated. The merged entity would not gain any new ability to monitor, punish, or influence the competitive behavior of rival ASC operators or rival PT providers as a result of the vertical relationship. The referral volume between the two entities is too small to serve as a credible tool for punishment or reward in any coordination scheme, and the merged entity would lack the market position in either the ASC or PT market to serve as a maverick or focal point for coordinated behavior.

Accordingly, there is no basis for concern regarding facilitation of coordination.

VI. Comparison to Merger Guidelines Thresholds

The 2023 Merger Guidelines identify certain thresholds and indicators that the agencies use to screen vertical mergers for potential competitive concern. While the Guidelines do not establish a formal numerical safe harbor for vertical mergers in the same manner as the structural presumption for horizontal mergers, the Guidelines indicate that vertical concerns are more likely to arise when the merged firm would have a significant share of the relevant upstream or downstream market and when the vertical relationship involves a substantial volume of transactions between the merging parties or their competitors.

In this case, the merged entity's market shares in both the upstream ASC market and the downstream PT market in the three affected MSAs are well below levels that would trigger concern under any standard vertical merger screen.

In the Charlotte, NC MSA — Pinnacle's largest and most concentrated market — Pinnacle holds an approximately 20.9% facility share (operating 14 of approximately 67 freestanding ASCs in the MSA) and an approximately 18.3% share of net patient revenue. However, Marlowe Asset Management Rehab has zero presence in the Charlotte MSA, meaning that no vertical nexus exists there. The Charlotte MSA is therefore irrelevant to the vertical analysis.

In the three MSAs where the vertical co-location exists, Pinnacle's ASC market shares are materially lower than its Charlotte share:

Marlowe Asset Management Rehab's share of the outpatient PT market in each of these MSAs is similarly modest. The outpatient PT market is highly fragmented in each MSA, with hundreds of individual provider locations operated by a diverse mix of national chains, regional groups, hospital-based programs, physician-owned practices, and independent clinics. We estimate Marlowe Asset Management Rehab's share of the outpatient PT market (measured by clinic count) at approximately 2.1% in the Dallas-Fort Worth MSA, approximately 3.6% in the Tampa MSA, and approximately 2.8% in the Atlanta MSA. These shares are well below any threshold that would suggest vertical market power or the ability to foreclose rivals.

The combination of modest upstream market shares (Pinnacle's ASC shares in the 3–9% range) and modest downstream market shares (Marlowe Asset Management's PT shares in the 2–4% range) in the three affected MSAs, together with the de minimis referral volumes documented in Section IV, conclusively establish that the vertical relationship does not approach any level of competitive significance that would warrant agency scrutiny.

VII. Conclusion

Based on the foregoing analysis, we reach the following conclusions:

1. The vertical relationship between Marlowe Asset Management Rehabilitation Holdings LLC and Pinnacle Health Systems, Inc. is limited to clinical referral patterns at 12 co-located or geographically adjacent facilities across three states (Texas, Florida, and Georgia), within three MSAs (Dallas-Fort Worth-Arlington, TX; Tampa-St. Petersburg-Clearwater, FL; and Atlanta-Sandy Springs-Alpharetta, GA).

2. Marlowe Asset Management Rehab's upstream PT referrals account for less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs, and less than 2% in the aggregate.

3. Pinnacle's downstream post-surgical PT referrals to Marlowe Asset Management clinics represent less than 5% of Pinnacle's total post-surgical PT referral volume in the affected MSAs. These referrals are not exclusive and are not foreclosing of rival PT providers. Referring physicians retain full discretion over PT referral destinations, and patients exercise independent choice among available providers.

4. No vertical theory of competitive harm — whether input foreclosure, customer foreclosure, access to competitively sensitive information, or facilitation of coordination — is supported by the facts. The merged firm would lack both the ability and the incentive to engage in any anticompetitive vertical conduct, and the market conditions in each affected MSA (including the highly fragmented nature of both the ASC and outpatient PT markets) would render any such conduct ineffective.

5. The vertical relationship is competitively insignificant and does not give rise to any substantive antitrust concern under the 2023 Merger Guidelines or any other applicable analytical framework.

6. This analysis supports the firm's overall conclusion that the proposed acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP presents no material antitrust risk on vertical grounds. This conclusion is consistent with the preliminary antitrust risk assessment memorandum and the Portfolio Company Overlap Analysis Memorandum dated February 8, 2024.

7. The findings of this memorandum will be incorporated into the voluntary submission white paper to be filed with the FTC Bureau of Competition on February 16, 2024, in support of the request for early termination of the HSR waiting period.

Please do not hesitate to contact me if you have any questions or wish to discuss any aspect of this analysis.

Respectfully submitted,

Monica Reyes Associate, Antitrust & Competition Practice Group Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Tel: (212) 555-4100 mreyes@calderwoodharkness.com

VIII. Appendices

Appendix A: Map of 12 Co-Located / Adjacent Marlowe Asset Management and Pinnacle Facilities

The following table identifies each of the 12 Marlowe Asset Management Rehabilitation Holdings LLC outpatient physical therapy clinic locations that are co-located with or geographically adjacent to (within a five-mile radius of) a Pinnacle Health Systems, Inc. ambulatory surgical center, organized by MSA and state.

Source: Facility address data provided by Marlowe Asset Management Rehab management (J. Keller) and Pinnacle management (S. Trevino). Distances calculated using straight-line measurement methodology.

Appendix B: Referral Volume Data Summary

The following tables summarize upstream and downstream referral volumes between Marlowe Asset Management Rehabilitation Holdings LLC and Pinnacle Health Systems, Inc. for calendar year 2023 (January 1, 2023 through December 31, 2023), broken out by MSA.

Table B-1: Upstream Referrals (Marlowe Asset Management PT Clinics → Pinnacle ASCs)

Table B-2: Downstream Referrals (Pinnacle ASCs → Marlowe Asset Management PT Clinics)

Source: Patient referral records provided by Pinnacle management (S. Trevino, CFO) and Marlowe Asset Management Rehab management (J. Keller, VP Operations) for calendar year 2023. Data validated by Calderwood & Harkness antitrust team.

Appendix C: Outpatient PT Market Competitor Overview in Affected MSAs

The following tables summarize the major outpatient physical therapy providers in each of the three affected MSAs, illustrating the highly fragmented competitive landscape and the availability of numerous alternative PT providers.

Table C-1: Dallas-Fort Worth-Arlington, TX MSA — Major Outpatient PT Providers

Table C-2: Tampa-St. Petersburg-Clearwater, FL MSA — Major Outpatient PT Providers

Table C-3: Atlanta-Sandy Springs-Alpharetta, GA MSA — Major Outpatient PT Providers

Source: Provider location data compiled from CMS provider enrollment databases, state licensure records, provider websites, and third-party healthcare facility databases (Definitive Healthcare, December 2023). Location counts are estimates and may not reflect all provider sites in each MSA.

This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It was prepared at the direction of counsel in anticipation of litigation and in connection with the provision of legal advice. It is not intended for distribution to any person or entity other than the named recipient without the prior written consent of Calderwood & Harkness LLP.

MSA	Marlowe Asset Management → Pinnacle Referrals (CY 2023)	Pinnacle Total ASC Cases in MSA (CY 2023)	Marlowe Asset Management Referrals as % of Pinnacle ASC Cases
Dallas-Fort Worth-Arlington, TX	163	9,412	1.73%
Tampa-St. Petersburg-Clearwater, FL	112	7,836	1.43%
Atlanta-Sandy Springs-Alpharetta, GA	72	5,291	1.36%
Total (3 MSAs)	347	22,539	1.54%
MSA	Pinnacle → Marlowe Asset Management PT Referrals (CY 2023)	Total Post-Surgical PT Referrals from Pinnacle ASCs in MSA (CY 2023)	Marlowe Asset Management Referrals as % of Total Pinnacle Post-Surgical PT Referrals
Dallas-Fort Worth-Arlington, TX	208	4,147	5.01%
Tampa-St. Petersburg-Clearwater, FL	167	3,592	4.65%
Atlanta-Sandy Springs-Alpharetta, GA	111	2,403	4.62%
Total (3 MSAs)	486	10,142	4.79%
MSA	Pinnacle ASCs	Estimated Total ASCs in MSA	Pinnacle Facility Share	Estimated Pinnacle Revenue Share
Dallas-Fort Worth-Arlington, TX	3	~87	~3.4%	~3.1%
Tampa-St. Petersburg-Clearwater, FL	5	~54	~9.3%	~8.7%
Atlanta-Sandy Springs-Alpharetta, GA	4	~61	~6.6%	~5.9%
No.	Marlowe Asset Management PT Clinic Location	Marlowe Asset Management Address	Corresponding Pinnacle ASC	Pinnacle ASC Address	MSA	State	Approx. Distance
1	Marlowe Asset Management Rehab — Plano West	4501 W. Park Blvd., Suite 120, Plano, TX 75093	Pinnacle Surgery Center — Plano	5800 W. Plano Pkwy., Suite 100, Plano, TX 75093	Dallas-Fort Worth-Arlington	TX	2.3 mi
2	Marlowe Asset Management Rehab — Plano East	3100 Independence Pkwy., Suite 210, Plano, TX 75075	Pinnacle Surgery Center — Plano	5800 W. Plano Pkwy., Suite 100, Plano, TX 75093	Dallas-Fort Worth-Arlington	TX	4.1 mi
3	Marlowe Asset Management Rehab — Arlington North	1500 N. Collins St., Suite 400, Arlington, TX 76011	Pinnacle Surgical Partners — Arlington	810 W. Randol Mill Rd., Suite 200, Arlington, TX 76012	Dallas-Fort Worth-Arlington	TX	1.8 mi
4	Marlowe Asset Management Rehab — Arlington South	4200 S. Cooper St., Suite 105, Arlington, TX 76015	Pinnacle Surgical Partners — Arlington	810 W. Randol Mill Rd., Suite 200, Arlington, TX 76012	Dallas-Fort Worth-Arlington	TX	3.7 mi
5	Marlowe Asset Management Rehab — Frisco	8600 Gaylord Pkwy., Suite 130, Frisco, TX 75034	Pinnacle Surgery Center — Frisco	5575 Warren Pkwy., Suite 300, Frisco, TX 75034	Dallas-Fort Worth-Arlington	TX	2.9 mi
6	Marlowe Asset Management Rehab — Tampa Westshore	4902 Eisenhower Blvd., Suite 200, Tampa, FL 33634	Pinnacle ASC — Tampa	5010 W. Kennedy Blvd., Suite 110, Tampa, FL 33609	Tampa-St. Petersburg-Clearwater	FL	3.4 mi
7	Marlowe Asset Management Rehab — South Tampa	3615 W. Swann Ave., Suite 100, Tampa, FL 33609	Pinnacle ASC — Tampa	5010 W. Kennedy Blvd., Suite 110, Tampa, FL 33609	Tampa-St. Petersburg-Clearwater	FL	1.6 mi
8	Marlowe Asset Management Rehab — Brandon	1920 W. Brandon Blvd., Suite 140, Brandon, FL 33511	Pinnacle Surgery Center — Brandon	403 Vonderburg Dr., Suite 300, Brandon, FL 33511	Tampa-St. Petersburg-Clearwater	FL	2.2 mi
9	Marlowe Asset Management Rehab — Clearwater	2560 Gulf-to-Bay Blvd., Suite 100, Clearwater, FL 33765	Pinnacle ASC — Clearwater	1285 S. Missouri Ave., Suite 200, Clearwater, FL 33756	Tampa-St. Petersburg-Clearwater	FL	4.5 mi
10	Marlowe Asset Management Rehab — Sandy Springs	6100 Lake Forrest Dr., Suite 310, Sandy Springs, GA 30328	Pinnacle Surgical Center — Sandy Springs	5670 Peachtree Dunwoody Rd., Suite 400, Sandy Springs, GA 30342	Atlanta-Sandy Springs-Alpharetta	GA	3.1 mi

11	Marlowe Asset Management Rehab — Marietta	2550 Windy Hill Rd., Suite 120, Marietta, GA 30067	Pinnacle ASC — Marietta	790 Church St., Suite 350, Marietta, GA 30060	Atlanta-Sandy Springs-Alpharetta	GA	4.8 mi
12	Marlowe Asset Management Rehab — Alpharetta	11770 Haynes Bridge Rd., Suite 205, Alpharetta, GA 30009	Pinnacle Surgery Center — Alpharetta	3400 Old Milton Pkwy., Suite 500, Alpharetta, GA 30005	Atlanta-Sandy Springs-Alpharetta	GA	3.6 mi
MSA	No. of Co-Located Marlowe Asset Management Clinics	Total Marlowe Asset Management Patients at Co-Located Clinics (CY 2023)	Marlowe Asset Management Referrals to Pinnacle ASCs (CY 2023)	Total Pinnacle ASC Cases in MSA (CY 2023)	Marlowe Asset Management Referrals as % of Marlowe Asset Management Patient Volume	Marlowe Asset Management Referrals as % of Pinnacle ASC Cases
Dallas-Fort Worth-Arlington, TX	5	6,240	163	9,412	2.61%	1.73%
Tampa-St. Petersburg-Clearwater, FL	4	4,870	112	7,836	2.30%	1.43%
Atlanta-Sandy Springs-Alpharetta, GA	3	3,090	72	5,291	2.33%	1.36%
Total	12	14,200	347	22,539	2.44%	1.54%
MSA	No. of Co-Located Marlowe Asset Management Clinics	Total Post-Surgical PT Referrals from Pinnacle ASCs (CY 2023)	Pinnacle Referrals to Marlowe Asset Management PT (CY 2023)	Pinnacle Referrals to Other PT Providers (CY 2023)	Marlowe Asset Management as % of Total Pinnacle Post-Surgical PT Referrals
Dallas-Fort Worth-Arlington, TX	5	4,147	208	3,939	5.01%
Tampa-St. Petersburg-Clearwater, FL	4	3,592	167	3,425	4.65%
Atlanta-Sandy Springs-Alpharetta, GA	3	2,403	111	2,292	4.62%
Total	12	10,142	486	9,656	4.79%
Provider	Type	Estimated No. of Locations in MSA	Notes
Kestrel Enterprises	National chain	28	Publicly traded (NYSE: ATIP); largest national PT chain
Tidewater Corporation (Drayton Enterprises)	National chain	19	Subsidiary of Northgate Partners LLC (NYSE: SEM)
Texas Physical Therapy Specialists	Regional group	14	Physician-owned group; strong orthopedic focus
Baylor Scott & White Rehabilitation	Hospital-based	12	Affiliated with Brightwater Holdings system
Thackeray Enterprises	National chain	9	Private equity-backed; Southeast focus
Sterling Reach Corporation	National chain	7	Chicago-based; expanding into TX market
UT Southwestern Rehabilitation	Hospital-based	6	Academic medical center program
Marlowe Asset Management Rehabilitation Holdings	Regional group	5 (co-located)	Subject of this analysis
Independent PT practices (estimated)	Independent	~120+	Numerous small, independent PT practices
Estimated total PT provider locations	~240+
Provider	Type	Estimated No. of Locations in MSA	Notes
Kestrel Enterprises	National chain	16	Publicly traded (NYSE: ATIP)

Westvale Enterprises Rehabilitation	Hospital-based	11	Major Tampa Bay area health system
Tidewater Corporation (Drayton Enterprises)	National chain	10	Subsidiary of Northgate Partners LLC
Advent Health Rehabilitation	Hospital-based	8	Affiliated with Northgate Holdings system
Thackeray Enterprises	National chain	7	Southeast-focused; strong FL presence
Camberwell Group	National chain	5	Nashville-based; expanding into FL
Marlowe Asset Management Rehabilitation Holdings	Regional group	4 (co-located)	Subject of this analysis
Independent PT practices (estimated)	Independent	~85+	Numerous small, independent PT practices
Estimated total PT provider locations	~155+
Provider	Type	Estimated No. of Locations in MSA	Notes
Kestrel Enterprises	National chain	21	Publicly traded (NYSE: ATIP)
Emory Healthcare Rehabilitation	Hospital-based	14	Major academic health system
Tidewater Corporation (Drayton Enterprises)	National chain	12	Subsidiary of Northgate Partners LLC
Crestline Partners LLC Rehabilitation	Hospital-based	9	Major GA health system
Thackeray Enterprises	National chain	8	Southeast-focused; strong GA presence
Sterling Reach Corporation	National chain	6	Chicago-based; expanding into Southeast
Marlowe Asset Management Rehabilitation Holdings	Regional group	3 (co-located)	Subject of this analysis
Halcyon & Co. Rehabilitation	Hospital-based	7	Major GA health system
Independent PT practices (estimated)	Independent	~95+	Numerous small, independent PT practices
Estimated total PT provider locations	~185+

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 600 Lexington Avenue New York, New York 10022
MEMORANDUM
February 9, 2024
Matter No.: 1001-00001
To: Howard Bellamy, Partner, Antitrust & Competition Practice Group
From: Monica Reyes, Associate, Antitrust & Competition Practice Group
Re: Vertical Relationships Analysis — Marlowe Asset Management Rehabilitation Holdings LLC / Pinnacle Health Systems, Inc.
Subject: Hart-Scott-Rodino Premerger Notification — Ardent Capital Partners III LP Acquisition of Pinnacle Health Systems, Inc.
I. Executive Summary
This memorandum analyzes the vertical relationship between Marlowe Asset Management Rehabilitation Holdings LLC ("Marlowe Asset Management Rehab" or "Marlowe Asset Management"), a portfolio company of Ardent Capital Partners III LP ("Ardent Capital" or the "Fund"), and Pinnacle Health Systems, Inc. ("Pinnacle" or "PHS"), the target of Ardent Capital's proposed acquisition of 100% of Pinnacle's outstanding equity at an enterprise value of approximately $952 million. This analysis is prepared in connection with the Hart-Scott-Rodino ("HSR") premerger notification filing and the voluntary submission white paper to be filed with the Federal Trade Commission ("FTC") Bureau of Competition.
The core finding of this memorandum is that the only identified vertical nexus between Marlowe Asset Management Rehab and Pinnacle involves post-surgical patient referral patterns between Marlowe Asset Management Rehab's outpatient physical therapy ("PT") clinics and Pinnacle's ambulatory surgical centers ("ASCs") in three states — Texas, Florida, and Georgia. Of Marlowe Asset Management Rehab's 74 outpatient physical therapy clinic locations across those three states, 12 clinics are co-located with or geographically adjacent to Pinnacle ASCs. No other vertical relationship — whether involving supply of equipment, pharmaceuticals, diagnostic services, staffing, information technology, or any other input — has been identified between any Ardent Capital portfolio company and Pinnacle.
The vertical referral relationship between Marlowe Asset Management Rehab and Pinnacle is competitively insignificant. Based on patient referral data for calendar year 2023 provided by management of both entities, Marlowe Asset Management Rehab's PT referrals account for less than 2% of Pinnacle's total ASC case volume in the affected metropolitan statistical areas ("MSAs"). Post-surgical PT referrals from Pinnacle ASCs to Marlowe Asset Management clinics are not exclusive and are not foreclosing of rival PT providers. Referring physicians — who are independent practitioners exercising independent clinical judgment — retain full discretion over post-surgical rehabilitation referral destinations, and patients themselves exercise choice among available PT providers in each market.
No vertical theory of competitive harm is supported by the facts developed in this analysis. There is no basis for concern regarding input foreclosure (foreclosure of rival ASC operators from patient referrals), customer foreclosure (foreclosure of rival PT providers from post-surgical referral volume), access to competitively sensitive information, or facilitation of coordinated behavior. The merged firm would lack both the ability and the incentive to pursue any foreclosure strategy, and the market conditions in each affected MSA — including the highly fragmented nature of both the ASC and outpatient PT markets — would render any such strategy ineffective.
This analysis supports the conclusion that the proposed transaction presents no material antitrust risk on vertical grounds. The findings herein are consistent with the preliminary antitrust risk assessment memorandum and the separate Portfolio Company Overlap Analysis Memorandum dated February 8, 2024, and further support the request for early termination of the HSR waiting period.
II. Background
A. The Transaction
Ardent Capital Partners III LP, a Delaware limited partnership managed by Ardent Capital Management LLC (a Delaware limited liability company, SEC File No. 801-119247), is acquiring 100% of the outstanding equity of Pinnacle Health Systems, Inc. pursuant to an Equity Purchase Agreement dated January 31, 2024 (the "Purchase Agreement"). The transaction values Pinnacle at an enterprise value of approximately $952 million. The equity value is approximately $534 million, comprising $505.5 million in cash consideration plus approximately $28.5 million in rollover equity contributed by certain members of Pinnacle's senior management team, including Chief Executive Officer Dr. Marcus Ellsworth, who will continue in his role following the closing.
Ardent Capital Partners III LP ("Fund III") had its final close in November 2021 with approximately $4.8 billion in committed capital. Fund III is managed by Ardent Capital Management LLC, with Julian Desmond and Priya Chandrasekar serving as Managing Partners. Ardent Capital is a middle-market private equity firm with a primary investment focus on healthcare services, business services, and specialty industrials. Across all funds, Ardent Capital has completed 23 platform acquisitions and over 60 add-on acquisitions.
The selling sponsor is Veltrano Equity Holdings LLC, acting through Veltrano Equity Partners Fund V LP, a $3.2 billion fund. Veltrano initially acquired Pinnacle in 2017 at an enterprise value of approximately $340 million. During its approximately seven-year ownership period, Veltrano funded 19 add-on acquisitions that significantly expanded Pinnacle's geographic footprint and ASC portfolio, growing Pinnacle from 14 ASCs operating in four states to the current 42-ASC platform operating across nine states. The proposed transaction represents a return of approximately 2.8x invested capital for Veltrano on an equity basis, net of management rollover.
The Purchase Agreement contemplates a simultaneous signing and announcement, with closing targeted within 45 to 60 days following execution, subject to customary closing conditions including the expiration or early termination of the HSR waiting period. The HSR notification was filed on February 5, 2024.
B. Pinnacle Health Systems, Inc.
Pinnacle Health Systems, Inc. is a Delaware corporation with its principal office located at 2200 Lakeshore Boulevard, Suite 500, Charlotte, North Carolina 28202. Pinnacle operates a multi-specialty ambulatory surgical center platform consisting of 42 ASCs and 31 affiliated physician practice management entities across nine states: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas.
Pinnacle's ASC operations are classified under NAICS Code 621493 (Freestanding Ambulatory Surgical and Emergency Centers), while its physician practice management activities fall under NAICS Code 621111 (Offices of Physicians, Except Mental Health Specialists). Pinnacle's ASCs are multi-specialty facilities offering surgical procedures across orthopedics, gastroenterology, ophthalmology, pain management, and other surgical specialties, with orthopedics and gastroenterology representing the two largest service lines by case volume.
For fiscal year 2023, Pinnacle reported total revenue of $637.4 million and EBITDA of $98.2 million, as reflected in the quality of earnings report prepared by Apex Advisory Group LLC in connection with the transaction. Pinnacle employs approximately 4,700 individuals, including clinical and administrative staff across its ASC and physician practice management operations.
Pinnacle's operational model is characterized by a hub-and-spoke arrangement in which regional clusters of ASCs share centralized management, administrative, and billing infrastructure. Pinnacle's largest market concentration is in the Charlotte, North Carolina MSA, where it operates 14 ASCs. Additional significant market concentrations exist in the Nashville, Tennessee MSA (6 ASCs); the Tampa-St. Petersburg-Clearwater, Florida MSA (5 ASCs); the Atlanta-Sandy Springs-Alpharetta, Georgia MSA (4 ASCs); and the Dallas-Fort Worth-Arlington, Texas MSA (3 ASCs). The remaining 10 ASCs are distributed across the other four states in Pinnacle's footprint.
C. Marlowe Asset Management Rehabilitation Holdings LLC
Marlowe Asset Management Rehabilitation Holdings LLC is a Delaware limited liability company with its headquarters at 8950 Westheimer Road, Suite 600, Houston, Texas 77063. Marlowe Asset Management Rehab is a controlled portfolio company of Ardent Capital Partners III LP, having been acquired by Fund III as a platform investment in March 2022. Since the initial acquisition, Marlowe Asset Management Rehab has completed four tuck-in acquisitions of smaller PT practice groups in Texas and Florida, expanding its clinic footprint from 48 locations at the time of acquisition to 74 locations as of the date of this memorandum.
Marlowe Asset Management Rehab operates 74 outpatient physical therapy clinic locations across three states — Texas (39 locations), Florida (22 locations), and Georgia (13 locations). The company's service offering encompasses post-surgical rehabilitation, sports medicine physical therapy, orthopedic rehabilitation, general outpatient physical therapy, and related ancillary services such as dry needling and manual therapy. Marlowe Asset Management Rehab employs approximately 580 licensed physical therapists and physical therapist assistants across its clinic network.
For purposes of this analysis, the relevant product market for Marlowe Asset Management Rehab's operations is outpatient physical therapy services — a market that is distinct from ambulatory surgical center services. The distinction between these two product markets is addressed in detail in the separate Portfolio Company Overlap Analysis Memorandum dated February 8, 2024, which analyzes potential horizontal overlaps between Ardent Capital portfolio companies and Pinnacle. That memorandum confirms that Marlowe Asset Management Rehab and Pinnacle do not compete in any relevant antitrust product market.
D. Clearpath Diagnostics Inc. — No Vertical Nexus
In the course of conducting the portfolio company screening required for the HSR filing, we also analyzed the operations of Clearpath Diagnostics Inc., a Delaware corporation with its headquarters at 1700 Market Street, Suite 3400, Philadelphia, Pennsylvania 19103. Clearpath Diagnostics is an Ardent Capital portfolio company (acquired by Fund II in 2019 and currently held by Fund III following a secondary transaction in 2022) that provides independent clinical laboratory services — including routine clinical chemistry, hematology, toxicology, and molecular diagnostics — in Pennsylvania, New Jersey, and New York. Clearpath Diagnostics generated revenue of approximately $218 million in fiscal year 2023.
Clearpath Diagnostics operates exclusively in Pennsylvania, New Jersey, and New York. Pinnacle's nine-state operational footprint (North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas) has no geographic overlap with Clearpath's three-state service area. Accordingly, there is no vertical relationship between Clearpath Diagnostics and Pinnacle to analyze. The possibility that Clearpath could theoretically supply laboratory services to Pinnacle's ASCs is purely hypothetical; there is no existing commercial relationship, no geographic proximity, and no planned integration of these businesses. We do not address Clearpath Diagnostics further in this memorandum.
III. Identification of the Vertical Relationship
A. Nature of the Vertical Nexus
The vertical relationship between Marlowe Asset Management Rehab and Pinnacle arises from the natural clinical pathway in which patients who undergo surgical procedures at an ambulatory surgical center are subsequently referred for outpatient physical therapy rehabilitation. This referral pathway is a well-established feature of the post-surgical care continuum, particularly in orthopedic surgery, where physical therapy rehabilitation is a standard component of the post-operative treatment protocol. The clinical referral pathway creates a complementary, rather than substitutive, relationship between ASC services and outpatient PT services.
The referral flow operates in two directions:
1.  upstream Referrals (Marlowe Asset Management PT Clinics → Pinnacle ASCs): Marlowe Asset Management PT clinics may identify patients undergoing physical therapy who require surgical intervention — for example, a PT patient whose conservative rehabilitation is unsuccessful and who requires arthroscopic knee surgery. In such cases, the treating physical therapist or the patient's primary care physician may refer the patient to a surgeon who performs procedures at a Pinnacle ASC. This upstream referral pathway is indirect and typically involves the intermediation of a referring physician.
2.  Downstream Referrals (Pinnacle ASCs → Marlowe Asset Management PT Clinics): Patients who undergo surgical procedures at Pinnacle ASCs — particularly orthopedic procedures such as total joint replacement, rotator cuff repair, ACL reconstruction, and spinal surgery — are routinely referred for post-surgical physical therapy rehabilitation. In co-located or geographically proximate settings, the operating surgeon or the ASC's discharge coordinator may refer such patients to a Marlowe Asset Management Rehab PT clinic for post-surgical rehabilitation.
These referral patterns establish a vertical, complementary relationship between Marlowe Asset Management Rehab's outpatient PT services (the downstream market) and Pinnacle's ASC surgical services (the upstream market). The two entities do not compete in any relevant antitrust product market, and their services are consumed sequentially by patients moving through the surgical care continuum, not as alternatives to one another.
B. Geographic Overlap of Facilities
Of Marlowe Asset Management Rehab's 74 outpatient physical therapy clinic locations, 12 are co-located with or geographically adjacent to Pinnacle ASCs. For purposes of this analysis, we define "co-located or geographically adjacent" as facilities within a five-mile radius of one another, consistent with standard geographic proximity metrics used in healthcare referral pattern analysis. The 12 overlapping locations are distributed across three MSAs in three states, as follows:
Texas — Dallas-Fort Worth-Arlington MSA: Pinnacle operates 3 ASCs in the Dallas-Fort Worth-Arlington, TX MSA (CBSA Code 19100). Of Marlowe Asset Management Rehab's 39 Texas clinic locations, 5 clinics are co-located with or geographically adjacent to these 3 Pinnacle ASCs. Specifically, 2 Marlowe Asset Management clinics are located within a five-mile radius of the Pinnacle ASC in Plano, Texas; 2 Marlowe Asset Management clinics are within a five-mile radius of the Pinnacle ASC in Arlington, Texas; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Frisco, Texas. A detailed facility-by-facility map is set forth in Appendix A.
Florida — Tampa-St. Petersburg-Clearwater MSA: Pinnacle operates 5 ASCs in the Tampa-St. Petersburg-Clearwater, FL MSA (CBSA Code 45300). Of Marlowe Asset Management Rehab's 22 Florida clinic locations, 4 clinics are co-located with or geographically adjacent to Pinnacle ASCs in this MSA. Specifically, 2 Marlowe Asset Management clinics are within a five-mile radius of the Pinnacle ASC in Tampa, Florida; 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Brandon, Florida; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Clearwater, Florida. The remaining Pinnacle ASC in this MSA (located in Largo, Florida) has no Marlowe Asset Management clinic within a five-mile radius. Additional detail is provided in Appendix A.
Georgia — Atlanta-Sandy Springs-Alpharetta MSA: Pinnacle operates 4 ASCs in the Atlanta-Sandy Springs-Alpharetta, GA MSA (CBSA Code 12060). Of Marlowe Asset Management Rehab's 13 Georgia clinic locations, 3 clinics are co-located with or geographically adjacent to Pinnacle ASCs in this MSA. Specifically, 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Sandy Springs, Georgia; 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Marietta, Georgia; and 1 Marlowe Asset Management clinic is within a five-mile radius of the Pinnacle ASC in Alpharetta, Georgia. The fourth Pinnacle ASC in this MSA (located in Decatur, Georgia) has no Marlowe Asset Management clinic within a five-mile radius. A facility-by-facility listing is set forth in Appendix A.
It is important to note that the vertical nexus is limited to these three MSAs. Pinnacle operates ASCs in six additional states — North Carolina, South Carolina, Virginia, Tennessee, Alabama, and Ohio — where Marlowe Asset Management Rehab has no clinic presence whatsoever. This means that the vertical relationship exists with respect to only 12 of Pinnacle's 42 ASCs (approximately 29%) and only 12 of Marlowe Asset Management Rehab's 74 PT clinic locations (approximately 16%). The majority of each entity's operations is entirely unaffected by the vertical nexus.
C. Relevant Markets for Vertical Analysis
For purposes of the vertical competitive effects analysis, we define the following relevant markets:
upstream Market: Ambulatory surgical center services (multi-specialty). This product market definition is consistent with the market definition adopted in the Market Definition & Competitive Analysis Memorandum dated February 10, 2024, prepared in connection with the horizontal competitive analysis of the transaction. ASC services constitute a distinct relevant product market from hospital-based outpatient surgical services, although hospital outpatient departments ("HOPDs") provide a degree of competitive constraint on freestanding ASCs, as discussed in the Market Definition memorandum.
Downstream Market: Outpatient physical therapy services. This product market encompasses all forms of outpatient physical therapy, including post-surgical rehabilitation, sports medicine PT, orthopedic rehabilitation, and general outpatient PT. The downstream market includes services provided by independent PT clinics, hospital-based outpatient rehabilitation programs, physician-owned PT practices, and national PT chains.
Geographic Markets: The three MSAs in which the vertical facility co-location has been identified — (1) the Dallas-Fort Worth-Arlington, TX MSA; (2) the Tampa-St. Petersburg-Clearwater, FL MSA; and (3) the Atlanta-Sandy Springs-Alpharetta, GA MSA. These MSA-level geographic markets are consistent with the geographic market definitions employed by the FTC and DOJ in prior healthcare services merger investigations, which have generally defined geographic markets for outpatient healthcare services at the MSA level or, in some cases, at narrower sub-MSA levels.
IV. Analysis of Referral Patterns
A. Methodology
To assess the significance of the vertical referral relationship, we analyzed patient referral data provided by Pinnacle management and Marlowe Asset Management Rehab management for the most recent full 12-month period, calendar year 2023 (January 1, 2023 through December 31, 2023).
Pinnacle's referral data was provided by Sandra Trevino, Chief Financial Officer of Pinnacle Health Systems, Inc., in response to our document and data request dated February 2, 2024. The data set includes case-level records for all surgical procedures performed at Pinnacle ASCs in the three affected MSAs during calendar year 2023, including the identity of the referring source (categorized by referring physician, practice group, and facility type) and, where available, the post-surgical rehabilitation referral destination for each case. Marlowe Asset Management Rehab's referral data was provided by Marlowe Asset Management's Vice President of Operations, Jason Keller, and includes patient intake records identifying the source of referral for all new patient evaluations at the 12 co-located Marlowe Asset Management PT clinics during the same period.
We employed two principal metrics in our analysis:
(a) The number and percentage of Marlowe Asset Management PT patients referred to Pinnacle ASCs for surgical procedures (Upstream referrals), expressed as a share of total Pinnacle ASC case volume in each affected MSA; and
(b) The number and percentage of Pinnacle ASC patients referred to Marlowe Asset Management PT clinics for post-surgical rehabilitation (downstream referrals), expressed as a share of total post-surgical PT referrals generated by Pinnacle ASCs in each affected MSA and as a share of total patient volume at the 12 co-located Marlowe Asset Management PT clinics.
Detailed referral volume data is set forth in Appendix B. The discussion below summarizes the key findings.
B. Upstream Referrals: Marlowe Asset Management PT Clinics → Pinnacle ASCs
During calendar year 2023, the 12 co-located Marlowe Asset Management PT clinics generated a total of 347 patient referrals to Pinnacle ASCs across the three affected MSAs. This referral volume is broken down by MSA as follows:
As the data demonstrates, Marlowe Asset Management Rehab's upstream PT referrals represent less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs, and less than 2% in the aggregate. This finding is consistent with the broader industry reality that the vast majority of ASC surgical referrals originate from physician offices, specialist practices, and hospital systems — not from physical therapy clinics. PT-to-surgery referral pathways are inherently indirect; they typically involve a physical therapist communicating with the patient's primary care physician or orthopedic specialist, who then makes the surgical referral determination. The PT clinic itself is rarely the proximate source of an ASC surgical case.
Moreover, the 347 upstream referrals attributed to the 12 co-located Marlowe Asset Management clinics represent only a portion of those clinics' total patient volumes. The 12 co-located clinics treated approximately 14,200 unique patients during calendar year 2023, meaning that only approximately 2.4% of Marlowe Asset Management's patients at the co-located clinics were referred for surgical procedures at any ASC, and only a subset of those referrals were directed to Pinnacle ASCs specifically. The predominant service at Marlowe Asset Management PT clinics is conservative, non-surgical rehabilitation, and the vast majority of Marlowe Asset Management's patients do not require surgical intervention.
C. Downstream Referrals: Pinnacle ASCs → Marlowe Asset Management PT Clinics
During calendar year 2023, Pinnacle ASCs in the three affected MSAs referred a total of 486 post-surgical patients to the 12 co-located Marlowe Asset Management PT clinics for post-surgical rehabilitation. The breakdown by MSA is as follows:
These data demonstrate that the downstream referral volume from Pinnacle ASCs to Marlowe Asset Management PT clinics represents less than 5% of the total post-surgical PT referrals generated by Pinnacle ASCs in the three affected MSAs. The majority of Pinnacle's post-surgical patients — approximately 95% — are referred to other post-surgical rehabilitation providers, including other independent PT clinics, hospital-based outpatient rehabilitation programs, PT clinics affiliated with the operating surgeon's practice, and national PT chains.
Critically, the post-surgical PT referrals from Pinnacle ASCs to Marlowe Asset Management clinics are not the product of any exclusive referral arrangement, contractual commitment, or administrative directive. Referring physicians — that is, the surgeons who perform procedures at Pinnacle ASCs — retain full discretion over the choice of post-surgical rehabilitation provider. These surgeons are overwhelmingly independent practitioners who maintain their own practice affiliations and referral networks. Pinnacle does not employ these surgeons, does not control their referral decisions, and has no contractual mechanism to mandate that post-surgical patients be directed to any particular PT provider.
Furthermore, patients themselves exercise choice among available PT providers. Under applicable insurance plan designs, patients are generally free to select any in-network PT provider for their post-surgical rehabilitation, and many patients choose PT providers based on geographic convenience, prior relationships, or personal preference rather than on the basis of a surgeon's referral. There is no exclusivity mechanism — whether contractual, administrative, or economic — that ties Pinnacle's post-surgical referral volume to Marlowe Asset Management or to any other single PT provider.
D. Aggregate Significance Assessment
Taken together, the upstream and downstream referral data confirm that the vertical referral relationship between Marlowe Asset Management Rehab and Pinnacle is de minimis relative to both entities' total patient volumes in each of the three affected MSAs. In the aggregate across all three MSAs, Marlowe Asset Management's upstream referrals represent approximately 1.54% of Pinnacle's total ASC case volume, and Pinnacle's downstream referrals to Marlowe Asset Management represent approximately 4.79% of Pinnacle's total post-surgical PT referral volume.
These referral volumes are unremarkable. The referral relationship between Marlowe Asset Management PT clinics and Pinnacle ASCs is no different in character, magnitude, or competitive significance from the thousands of routine clinical referral patterns that exist across the healthcare services sector between adjacent providers of complementary services. Outpatient PT clinics and ASCs routinely generate referrals to one another as a natural consequence of geographic proximity and the sequential nature of surgical and rehabilitative care. There is nothing about the existing referral relationship between Marlowe Asset Management and Pinnacle that is exclusive, preferential, or anticompetitive in nature.
V. Competitive Effects Analysis
A. Applicable Legal and Analytical Framework
The competitive effects analysis of vertical mergers is governed by the framework set forth in the U.S. Department of Justice and Federal Trade Commission 2023 Merger Guidelines (the "Merger Guidelines"), which superseded the prior Vertical Merger Guidelines issued in 2020 (subsequently withdrawn by the FTC in 2021). The 2023 Merger Guidelines address vertical theories of harm primarily in Guideline 6 ("Vertical Mergers Can Entrench or Extend a Dominant Position") and in the general discussion of foreclosure and raising rivals' costs.
Under the Merger Guidelines, vertical mergers may raise competitive concerns when (1) the merged firm would have the ability and incentive to foreclose rivals from access to a critical input or customer base, thereby raising rivals' costs or reducing rivals' revenues; (2) the merger would provide the merged firm with access to competitively sensitive information about rivals that could be used to disadvantage those rivals; or (3) the merger would facilitate coordinated behavior in either the upstream or downstream market. The analytical framework requires an assessment of both the ability and the incentive of the merged firm to engage in the relevant anticompetitive conduct. A merger does not raise a cognizable vertical concern if the merged firm would lack either the ability or the incentive to engage in foreclosure or other anticompetitive conduct, or if the effects of such conduct would be competitively insignificant.
We analyze each potential theory of vertical competitive harm below.
B. Input Foreclosure Analysis (Foreclosure of Rival ASCs)
Theory: Post-acquisition, Ardent Capital could cause Marlowe Asset Management PT clinics to steer patients exclusively to Pinnacle ASCs, thereby depriving rival ASC operators of patient referrals and raising their costs of acquiring surgical volume. This theory posits that Marlowe Asset Management PT clinics represent a significant source of patient referrals for ASCs in the affected MSAs, such that diversion of those referrals to Pinnacle would materially disadvantage rival ASC operators.
Assessment: This theory is not supported by the facts and does not give rise to any meaningful foreclosure concern, for several independent and reinforcing reasons.
First, Marlowe Asset Management PT clinics are not a significant source of surgical referrals for ASCs. As demonstrated in Section IV.B above, Marlowe Asset Management Rehab's upstream PT referrals represent less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs. If Marlowe Asset Management's referrals to Pinnacle represent less than 2% of Pinnacle's own case volume, they necessarily represent an even smaller share of total ASC case volume across all ASC operators in each MSA. The notion that diversion of this trivial referral volume would materially affect the competitive position of any rival ASC operator is not credible.
Second, PT clinics are not a meaningful patient referral channel for ASCs in the ordinary course. The primary sources of surgical case referrals for ASCs are physician offices and specialist practices — orthopedic surgeons, gastroenterologists, ophthalmologists, and other surgical specialists who maintain privileges at and direct their surgical volumes to particular ASCs. These physician referral relationships are the fundamental driver of ASC case volume. Physical therapy clinics play at most a peripheral role in the surgical referral chain, and that role is typically indirect, involving communication with a referring physician rather than a direct referral to an ASC.
Third, even under the extreme assumption that all Marlowe Asset Management PT referrals were diverted exclusively to Pinnacle ASCs — which they effectively already are in co-located settings where geographic proximity naturally drives referral patterns toward the nearest ASC — the impact on rival ASC operators' case volumes would be negligible. In the Dallas-Fort Worth-Arlington MSA alone, there are approximately 87 freestanding ASCs (according to the Texas Health and Human Services Commission licensing data as of December 2023), and Marlowe Asset Management's 163 upstream referrals represent a vanishingly small share of total ASC case volume in that market.
Fourth, numerous alternative PT providers exist in each MSA that could serve as referral sources for rival ASCs. The outpatient PT market in each of the three affected MSAs is highly fragmented, with scores of independent PT clinics, hospital-based rehabilitation programs, national PT chains, and physician-owned PT practices. Rival ASC operators have access to a broad array of PT providers from which they may receive referrals, and the loss of any referral volume from Marlowe Asset Management PT clinics would have no material effect on the competitive position of any rival ASC.
For all of these reasons, input foreclosure — that is, foreclosure of rival ASC operators from patient referrals — is not a cognizable theory of competitive harm in connection with this transaction.
C. Customer Foreclosure Analysis (Foreclosure of Rival PT Providers)
Theory: Post-acquisition, Ardent Capital could cause Pinnacle ASCs to refer post-surgical patients exclusively to Marlowe Asset Management PT clinics, thereby depriving rival PT providers of post-surgical referral volume and raising their costs of acquiring patients. This theory posits that Pinnacle ASCs represent a significant source of post-surgical PT referrals in the affected MSAs, such that exclusive channeling of those referrals to Marlowe Asset Management would materially disadvantage rival PT providers.
Assessment: This theory is not supported by the facts and does not give rise to any meaningful foreclosure concern, for several independent and reinforcing reasons.
First, post-surgical PT referrals are made by the operating surgeon, not by the ASC as an institution. Surgeons who perform procedures at Pinnacle ASCs are independent physicians — many of whom maintain their own practice affiliations, hospital privileges, and established referral networks. These surgeons exercise independent clinical judgment in determining the most appropriate post-surgical rehabilitation provider for each patient based on factors including the surgeon's professional relationships, the patient's geographic location, the patient's insurance network, and the patient's personal preference. Pinnacle, as the ASC operator, does not and cannot direct surgeons' PT referral decisions.
Second, Pinnacle has no contractual mechanism to mandate PT referral destinations, and implementing such a mandate would be both impractical and legally problematic. Any attempt by Pinnacle to require that surgeons practicing at its ASCs direct post-surgical PT referrals exclusively to Marlowe Asset Management clinics would contravene well-established norms of physician autonomy and clinical independence. Moreover, such a mandate could implicate the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), which prohibits the payment or receipt of remuneration in exchange for the referral of patients for services reimbursable under federal healthcare programs, and the Stark Law (42 U.S.C. § 1395nn), which restricts physician self-referral arrangements. The legal and regulatory risks associated with any exclusive referral arrangement would serve as a powerful deterrent against any such conduct, independent of the antitrust analysis.
Third, the post-surgical PT referral volume from Pinnacle ASCs represents a small share of total PT demand in each affected MSA. The outpatient PT market in each MSA is large, serving a diverse patient population that includes not only post-surgical rehabilitation patients but also patients with musculoskeletal injuries, chronic pain conditions, sports injuries, workplace injuries, and other conditions requiring physical therapy. Post-surgical referrals from ASCs — and specifically from Pinnacle ASCs — represent only one of many sources of patient demand for outpatient PT services. Even if Pinnacle's post-surgical referrals were diverted entirely to Marlowe Asset Management (which, as noted, is both impractical and legally constrained), the impact on rival PT providers' total patient volumes would be minimal.
Fourth, the outpatient PT market in each of the three affected MSAs features numerous competitors, including hospital-based outpatient rehabilitation programs (operated by major health systems such as Pinnacle Industries, Westvale Corporation, and Emory Healthcare), national PT chains (including Kestrel Enterprises, Sterling Reach Corporation, and Tidewater Corporation), independent PT practices, and physician-owned PT clinics. A summary of the competitive landscape in each MSA is set forth in Appendix C. This highly fragmented competitive environment ensures that rival PT providers have access to ample alternative sources of patient demand and are not dependent on any single ASC operator's referral volume.
For all of these reasons, customer foreclosure — that is, foreclosure of rival PT providers from post-surgical referral volume — is not a cognizable theory of competitive harm in connection with this transaction.
D. Access to Competitively Sensitive Information
Theory: The combination of Marlowe Asset Management Rehab and Pinnacle under common ownership by Ardent Capital could provide the merged entity with access to competitively sensitive information about rival ASC operators or rival PT providers, which could be used to disadvantage those rivals — for example, by using knowledge of competitor pricing or strategic plans to undercut rivals or to coordinate behavior.
Assessment: This theory is not supported by the facts. Neither Pinnacle ASCs nor Marlowe Asset Management PT clinics serve as information intermediaries for competitor data. The clinical referral relationship between PT clinics and ASCs does not involve the exchange of competitor pricing, volume data, contract terms, strategic plans, or other competitively sensitive information. Patient referral records contain clinical information pertinent to individual patient care — such as diagnosis, treatment history, and surgical indications — but do not contain information about the operations, pricing, or strategy of competing ASC or PT providers.
Moreover, neither Pinnacle nor Marlowe Asset Management occupies a position in the value chain that would give it access to competitor information. Pinnacle does not aggregate or process data on rival ASC operators' pricing, volumes, or payer contracts, and Marlowe Asset Management does not aggregate or process data on rival PT providers' pricing, volumes, or strategic plans. The vertical relationship does not create any new channel through which competitively sensitive information about rivals would flow to the merged entity.
Accordingly, there is no basis for concern regarding access to competitively sensitive information.
E. Facilitation of Coordination
Theory: The vertical integration of Marlowe Asset Management Rehab and Pinnacle under Ardent Capital's common ownership could facilitate coordinated behavior — that is, tacit or explicit collusion — in either the ASC market or the outpatient PT market in the affected MSAs.
Assessment: This theory is not supported by the facts or the market conditions in any of the affected MSAs. Both the ASC market and the outpatient PT market in each of the three affected MSAs are characterized by fragmented competitive structures with numerous independent operators. In the Dallas-Fort Worth-Arlington MSA, for example, there are approximately 87 freestanding ASCs and well over 200 outpatient PT provider locations. The Tampa-St. Petersburg-Clearwater and Atlanta-Sandy Springs-Alpharetta MSAs exhibit similarly fragmented competitive conditions. These market structures are not conducive to coordinated behavior, as the large number of independent competitors makes it difficult to reach and maintain any coordinated outcome.
The modest vertical relationship between Marlowe Asset Management and Pinnacle does not change the competitive dynamics in either market or create any mechanism through which coordination could be facilitated. The merged entity would not gain any new ability to monitor, punish, or influence the competitive behavior of rival ASC operators or rival PT providers as a result of the vertical relationship. The referral volume between the two entities is too small to serve as a credible tool for punishment or reward in any coordination scheme, and the merged entity would lack the market position in either the ASC or PT market to serve as a maverick or focal point for coordinated behavior.
Accordingly, there is no basis for concern regarding facilitation of coordination.
VI. Comparison to Merger Guidelines Thresholds
The 2023 Merger Guidelines identify certain thresholds and indicators that the agencies use to screen vertical mergers for potential competitive concern. While the Guidelines do not establish a formal numerical safe harbor for vertical mergers in the same manner as the structural presumption for horizontal mergers, the Guidelines indicate that vertical concerns are more likely to arise when the merged firm would have a significant share of the relevant upstream or downstream market and when the vertical relationship involves a substantial volume of transactions between the merging parties or their competitors.
In this case, the merged entity's market shares in both the upstream ASC market and the downstream PT market in the three affected MSAs are well below levels that would trigger concern under any standard vertical merger screen.
In the Charlotte, NC MSA — Pinnacle's largest and most concentrated market — Pinnacle holds an approximately 20.9% facility share (operating 14 of approximately 67 freestanding ASCs in the MSA) and an approximately 18.3% share of net patient revenue. However, Marlowe Asset Management Rehab has zero presence in the Charlotte MSA, meaning that no vertical nexus exists there. The Charlotte MSA is therefore irrelevant to the vertical analysis.
In the three MSAs where the vertical co-location exists, Pinnacle's ASC market shares are materially lower than its Charlotte share:
Marlowe Asset Management Rehab's share of the outpatient PT market in each of these MSAs is similarly modest. The outpatient PT market is highly fragmented in each MSA, with hundreds of individual provider locations operated by a diverse mix of national chains, regional groups, hospital-based programs, physician-owned practices, and independent clinics. We estimate Marlowe Asset Management Rehab's share of the outpatient PT market (measured by clinic count) at approximately 2.1% in the Dallas-Fort Worth MSA, approximately 3.6% in the Tampa MSA, and approximately 2.8% in the Atlanta MSA. These shares are well below any threshold that would suggest vertical market power or the ability to foreclose rivals.
The combination of modest upstream market shares (Pinnacle's ASC shares in the 3–9% range) and modest downstream market shares (Marlowe Asset Management's PT shares in the 2–4% range) in the three affected MSAs, together with the de minimis referral volumes documented in Section IV, conclusively establish that the vertical relationship does not approach any level of competitive significance that would warrant agency scrutiny.
VII. Conclusion
Based on the foregoing analysis, we reach the following conclusions:
1.  The vertical relationship between Marlowe Asset Management Rehabilitation Holdings LLC and Pinnacle Health Systems, Inc. is limited to clinical referral patterns at 12 co-located or geographically adjacent facilities across three states (Texas, Florida, and Georgia), within three MSAs (Dallas-Fort Worth-Arlington, TX; Tampa-St. Petersburg-Clearwater, FL; and Atlanta-Sandy Springs-Alpharetta, GA).
2.  Marlowe Asset Management Rehab's upstream PT referrals account for less than 2% of Pinnacle's total ASC case volume in each of the three affected MSAs, and less than 2% in the aggregate.
3.  Pinnacle's downstream post-surgical PT referrals to Marlowe Asset Management clinics represent less than 5% of Pinnacle's total post-surgical PT referral volume in the affected MSAs. These referrals are not exclusive and are not foreclosing of rival PT providers. Referring physicians retain full discretion over PT referral destinations, and patients exercise independent choice among available providers.
4.  No vertical theory of competitive harm — whether input foreclosure, customer foreclosure, access to competitively sensitive information, or facilitation of coordination — is supported by the facts. The merged firm would lack both the ability and the incentive to engage in any anticompetitive vertical conduct, and the market conditions in each affected MSA (including the highly fragmented nature of both the ASC and outpatient PT markets) would render any such conduct ineffective.
5.  The vertical relationship is competitively insignificant and does not give rise to any substantive antitrust concern under the 2023 Merger Guidelines or any other applicable analytical framework.
6.  This analysis supports the firm's overall conclusion that the proposed acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP presents no material antitrust risk on vertical grounds. This conclusion is consistent with the preliminary antitrust risk assessment memorandum and the Portfolio Company Overlap Analysis Memorandum dated February 8, 2024.
7.  The findings of this memorandum will be incorporated into the voluntary submission white paper to be filed with the FTC Bureau of Competition on February 16, 2024, in support of the request for early termination of the HSR waiting period.
Please do not hesitate to contact me if you have any questions or wish to discuss any aspect of this analysis.
Respectfully submitted,
Monica Reyes Associate, Antitrust & Competition Practice Group Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Tel: (212) 555-4100 mreyes@calderwoodharkness.com
VIII. Appendices
Appendix A: Map of 12 Co-Located / Adjacent Marlowe Asset Management and Pinnacle Facilities
The following table identifies each of the 12 Marlowe Asset Management Rehabilitation Holdings LLC outpatient physical therapy clinic locations that are co-located with or geographically adjacent to (within a five-mile radius of) a Pinnacle Health Systems, Inc. ambulatory surgical center, organized by MSA and state.
Source: Facility address data provided by Marlowe Asset Management Rehab management (J. Keller) and Pinnacle management (S. Trevino). Distances calculated using straight-line measurement methodology.
Appendix B: Referral Volume Data Summary
The following tables summarize upstream and downstream referral volumes between Marlowe Asset Management Rehabilitation Holdings LLC and Pinnacle Health Systems, Inc. for calendar year 2023 (January 1, 2023 through December 31, 2023), broken out by MSA.
Table B-1: Upstream Referrals (Marlowe Asset Management PT Clinics → Pinnacle ASCs)
Table B-2: Downstream Referrals (Pinnacle ASCs → Marlowe Asset Management PT Clinics)
Source: Patient referral records provided by Pinnacle management (S. Trevino, CFO) and Marlowe Asset Management Rehab management (J. Keller, VP Operations) for calendar year 2023. Data validated by Calderwood & Harkness antitrust team.
Appendix C: Outpatient PT Market Competitor Overview in Affected MSAs
The following tables summarize the major outpatient physical therapy providers in each of the three affected MSAs, illustrating the highly fragmented competitive landscape and the availability of numerous alternative PT providers.
Table C-1: Dallas-Fort Worth-Arlington, TX MSA — Major Outpatient PT Providers
Table C-2: Tampa-St. Petersburg-Clearwater, FL MSA — Major Outpatient PT Providers
Table C-3: Atlanta-Sandy Springs-Alpharetta, GA MSA — Major Outpatient PT Providers
Source: Provider location data compiled from CMS provider enrollment databases, state licensure records, provider websites, and third-party healthcare facility databases (Definitive Healthcare, December 2023). Location counts are estimates and may not reflect all provider sites in each MSA.
This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It was prepared at the direction of counsel in anticipation of litigation and in connection with the provision of legal advice. It is not intended for distribution to any person or entity other than the named recipient without the prior written consent of Calderwood & Harkness LLP.
MSA | Marlowe Asset Management → Pinnacle Referrals (CY 2023) | Pinnacle Total ASC Cases in MSA (CY 2023) | Marlowe Asset Management Referrals as % of Pinnacle ASC Cases
Dallas-Fort Worth-Arlington, TX | 163 | 9,412 | 1.73%
Tampa-St. Petersburg-Clearwater, FL | 112 | 7,836 | 1.43%
Atlanta-Sandy Springs-Alpharetta, GA | 72 | 5,291 | 1.36%
Total (3 MSAs) | 347 | 22,539 | 1.54%
MSA | Pinnacle → Marlowe Asset Management PT Referrals (CY 2023) | Total Post-Surgical PT Referrals from Pinnacle ASCs in MSA (CY 2023) | Marlowe Asset Management Referrals as % of Total Pinnacle Post-Surgical PT Referrals
Dallas-Fort Worth-Arlington, TX | 208 | 4,147 | 5.01%
Tampa-St. Petersburg-Clearwater, FL | 167 | 3,592 | 4.65%
Atlanta-Sandy Springs-Alpharetta, GA | 111 | 2,403 | 4.62%
Total (3 MSAs) | 486 | 10,142 | 4.79%
MSA | Pinnacle ASCs | Estimated Total ASCs in MSA | Pinnacle Facility Share | Estimated Pinnacle Revenue Share
Dallas-Fort Worth-Arlington, TX | 3 | ~87 | ~3.4% | ~3.1%
Tampa-St. Petersburg-Clearwater, FL | 5 | ~54 | ~9.3% | ~8.7%
Atlanta-Sandy Springs-Alpharetta, GA | 4 | ~61 | ~6.6% | ~5.9%
No. | Marlowe Asset Management PT Clinic Location | Marlowe Asset Management Address | Corresponding Pinnacle ASC | Pinnacle ASC Address | MSA | State | Approx. Distance
1 | Marlowe Asset Management Rehab — Plano West | 4501 W. Park Blvd., Suite 120, Plano, TX 75093 | Pinnacle Surgery Center — Plano | 5800 W. Plano Pkwy., Suite 100, Plano, TX 75093 | Dallas-Fort Worth-Arlington | TX | 2.3 mi
2 | Marlowe Asset Management Rehab — Plano East | 3100 Independence Pkwy., Suite 210, Plano, TX 75075 | Pinnacle Surgery Center — Plano | 5800 W. Plano Pkwy., Suite 100, Plano, TX 75093 | Dallas-Fort Worth-Arlington | TX | 4.1 mi
3 | Marlowe Asset Management Rehab — Arlington North | 1500 N. Collins St., Suite 400, Arlington, TX 76011 | Pinnacle Surgical Partners — Arlington | 810 W. Randol Mill Rd., Suite 200, Arlington, TX 76012 | Dallas-Fort Worth-Arlington | TX | 1.8 mi
4 | Marlowe Asset Management Rehab — Arlington South | 4200 S. Cooper St., Suite 105, Arlington, TX 76015 | Pinnacle Surgical Partners — Arlington | 810 W. Randol Mill Rd., Suite 200, Arlington, TX 76012 | Dallas-Fort Worth-Arlington | TX | 3.7 mi
5 | Marlowe Asset Management Rehab — Frisco | 8600 Gaylord Pkwy., Suite 130, Frisco, TX 75034 | Pinnacle Surgery Center — Frisco | 5575 Warren Pkwy., Suite 300, Frisco, TX 75034 | Dallas-Fort Worth-Arlington | TX | 2.9 mi
6 | Marlowe Asset Management Rehab — Tampa Westshore | 4902 Eisenhower Blvd., Suite 200, Tampa, FL 33634 | Pinnacle ASC — Tampa | 5010 W. Kennedy Blvd., Suite 110, Tampa, FL 33609 | Tampa-St. Petersburg-Clearwater | FL | 3.4 mi
7 | Marlowe Asset Management Rehab — South Tampa | 3615 W. Swann Ave., Suite 100, Tampa, FL 33609 | Pinnacle ASC — Tampa | 5010 W. Kennedy Blvd., Suite 110, Tampa, FL 33609 | Tampa-St. Petersburg-Clearwater | FL | 1.6 mi
8 | Marlowe Asset Management Rehab — Brandon | 1920 W. Brandon Blvd., Suite 140, Brandon, FL 33511 | Pinnacle Surgery Center — Brandon | 403 Vonderburg Dr., Suite 300, Brandon, FL 33511 | Tampa-St. Petersburg-Clearwater | FL | 2.2 mi
9 | Marlowe Asset Management Rehab — Clearwater | 2560 Gulf-to-Bay Blvd., Suite 100, Clearwater, FL 33765 | Pinnacle ASC — Clearwater | 1285 S. Missouri Ave., Suite 200, Clearwater, FL 33756 | Tampa-St. Petersburg-Clearwater | FL | 4.5 mi
10 | Marlowe Asset Management Rehab — Sandy Springs | 6100 Lake Forrest Dr., Suite 310, Sandy Springs, GA 30328 | Pinnacle Surgical Center — Sandy Springs | 5670 Peachtree Dunwoody Rd., Suite 400, Sandy Springs, GA 30342 | Atlanta-Sandy Springs-Alpharetta | GA | 3.1 mi
11 | Marlowe Asset Management Rehab — Marietta | 2550 Windy Hill Rd., Suite 120, Marietta, GA 30067 | Pinnacle ASC — Marietta | 790 Church St., Suite 350, Marietta, GA 30060 | Atlanta-Sandy Springs-Alpharetta | GA | 4.8 mi
12 | Marlowe Asset Management Rehab — Alpharetta | 11770 Haynes Bridge Rd., Suite 205, Alpharetta, GA 30009 | Pinnacle Surgery Center — Alpharetta | 3400 Old Milton Pkwy., Suite 500, Alpharetta, GA 30005 | Atlanta-Sandy Springs-Alpharetta | GA | 3.6 mi
MSA | No. of Co-Located Marlowe Asset Management Clinics | Total Marlowe Asset Management Patients at Co-Located Clinics (CY 2023) | Marlowe Asset Management Referrals to Pinnacle ASCs (CY 2023) | Total Pinnacle ASC Cases in MSA (CY 2023) | Marlowe Asset Management Referrals as % of Marlowe Asset Management Patient Volume | Marlowe Asset Management Referrals as % of Pinnacle ASC Cases
Dallas-Fort Worth-Arlington, TX | 5 | 6,240 | 163 | 9,412 | 2.61% | 1.73%
Tampa-St. Petersburg-Clearwater, FL | 4 | 4,870 | 112 | 7,836 | 2.30% | 1.43%
Atlanta-Sandy Springs-Alpharetta, GA | 3 | 3,090 | 72 | 5,291 | 2.33% | 1.36%
Total | 12 | 14,200 | 347 | 22,539 | 2.44% | 1.54%
MSA | No. of Co-Located Marlowe Asset Management Clinics | Total Post-Surgical PT Referrals from Pinnacle ASCs (CY 2023) | Pinnacle Referrals to Marlowe Asset Management PT (CY 2023) | Pinnacle Referrals to Other PT Providers (CY 2023) | Marlowe Asset Management as % of Total Pinnacle Post-Surgical PT Referrals
Dallas-Fort Worth-Arlington, TX | 5 | 4,147 | 208 | 3,939 | 5.01%
Tampa-St. Petersburg-Clearwater, FL | 4 | 3,592 | 167 | 3,425 | 4.65%
Atlanta-Sandy Springs-Alpharetta, GA | 3 | 2,403 | 111 | 2,292 | 4.62%
Total | 12 | 10,142 | 486 | 9,656 | 4.79%
Provider | Type | Estimated No. of Locations in MSA | Notes
Kestrel Enterprises | National chain | 28 | Publicly traded (NYSE: ATIP); largest national PT chain
Tidewater Corporation (Drayton Enterprises) | National chain | 19 | Subsidiary of Northgate Partners LLC (NYSE: SEM)
Texas Physical Therapy Specialists | Regional group | 14 | Physician-owned group; strong orthopedic focus
Baylor Scott & White Rehabilitation | Hospital-based | 12 | Affiliated with Brightwater Holdings system
Thackeray Enterprises | National chain | 9 | Private equity-backed; Southeast focus
Sterling Reach Corporation | National chain | 7 | Chicago-based; expanding into TX market
UT Southwestern Rehabilitation | Hospital-based | 6 | Academic medical center program
Marlowe Asset Management Rehabilitation Holdings | Regional group | 5 (co-located) | Subject of this analysis
Independent PT practices (estimated) | Independent | ~120+ | Numerous small, independent PT practices
Estimated total PT provider locations | ~240+
Provider | Type | Estimated No. of Locations in MSA | Notes
Kestrel Enterprises | National chain | 16 | Publicly traded (NYSE: ATIP)
Westvale Enterprises Rehabilitation | Hospital-based | 11 | Major Tampa Bay area health system
Tidewater Corporation (Drayton Enterprises) | National chain | 10 | Subsidiary of Northgate Partners LLC
Advent Health Rehabilitation | Hospital-based | 8 | Affiliated with Northgate Holdings system
Thackeray Enterprises | National chain | 7 | Southeast-focused; strong FL presence
Camberwell Group | National chain | 5 | Nashville-based; expanding into FL
Marlowe Asset Management Rehabilitation Holdings | Regional group | 4 (co-located) | Subject of this analysis
Independent PT practices (estimated) | Independent | ~85+ | Numerous small, independent PT practices
Estimated total PT provider locations | ~155+
Provider | Type | Estimated No. of Locations in MSA | Notes
Kestrel Enterprises | National chain | 21 | Publicly traded (NYSE: ATIP)
Emory Healthcare Rehabilitation | Hospital-based | 14 | Major academic health system
Tidewater Corporation (Drayton Enterprises) | National chain | 12 | Subsidiary of Northgate Partners LLC
Crestline Partners LLC Rehabilitation | Hospital-based | 9 | Major GA health system
Thackeray Enterprises | National chain | 8 | Southeast-focused; strong GA presence
Sterling Reach Corporation | National chain | 6 | Chicago-based; expanding into Southeast
Marlowe Asset Management Rehabilitation Holdings | Regional group | 3 (co-located) | Subject of this analysis
Halcyon & Co. Rehabilitation | Hospital-based | 7 | Major GA health system
Independent PT practices (estimated) | Independent | ~95+ | Numerous small, independent PT practices
Estimated total PT provider locations | ~185+

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