With one of the two largest hospital contract management companies ready to sell its stock to the public, its rival may not be far behind.
Portland, Ore.-based Brim is looking for additional capital on the heels of last year's skyrocketing revenues, which soared nearly $20 million to $94.8 million from $75.2 million in 1992. The company doesn't disclose its earnings.
Its chief competitor, Quorum Health Group, Nashville, Tenn., is seeking permission for an initial public offering of stock in the next two months (March 7, p. 34). Quorum, which owns 13 hospitals and manages 258, said it will file documents to get approval for the stock offering.
"We have been a quiet company, and we're going to be more assertive than we have been in the past," said Steven Taylor, Brim's president. That new aggressiveness is expected to result in a public stock offering "in the next six months," he added.
Responsible for 62 hospital management contracts and owning five rural hospitals, Brim has a five-year strategic plan to buy two hospitals a year. Earlier this year, Brim completed a $4.1 million purchase of 116-bed Ojai Valley (Calif.) Hospital (Jan. 31, p. 12).
Company executives said they are negotiating to buy a sixth hospital, but they declined to identify the facility.
Brim considered a public stock offering last summer, but it opted instead to take a $9.6 million investment from GE Capital Services of Stamford, Conn. Mr. Taylor called the investment a "private placement offering."
Company executives wouldn't elaborate on what their next step would be, but Mr. Taylor remarked that Brim is "looking at adding more financial capacity."
Analysts said they wouldn't be surprised if Brim soon followed in Quorum's footsteps."They are competing head-to-head for business, so it would be helpful to both of them to go public," said Stanley Trotman, a managing director of Kidder, Peabody & Co., the New York investment banking firm.
Typically, Brim's purchases have been hospitals the firm already has managed. Analysts say that strategy gives it an advantage over other bidders because Brim already is familiar with the hospital's finances and market potential.
With healthcare reform's emphasis on primary care, Brim executives believe they have an advantage over larger healthcare companies.
With many reform plans focusing on encouraging providers to offer more primary care, Mr. Taylor said non-urban hospitals have an edge because they already are concentrating on doing just that.
Despite the gloom with which industry observers view the future of rural healthcare, Brim executives contend there will always be a need for rural hospitals.
"There's going to be a Wal-Mart there (in rural communities), and there's going to be hospitals," Mr. Taylor said. "And they are going to be there forever more, regardless of federal and state reform."
Brim typically is interested in hospitals with annual revenues of about $20 million, Mr. Taylor said. Brim considers hospitals to be ideal if they serve markets of 15,000 to 30,000 people.
"That's not to say we wouldn't be interested in anything larger or smaller," Mr. Taylor added.
Founded in 1971 by A.E. "Gene" Brim, who remains as its chief executive officer, the company has always been privately owned.
About 45 employees and five senior managers own most of Brim's stock. It has a total of 1,200 employees.
GE Capital made its investment by purchasing additional shares of Brim stock, and it has two seats on Brim's seven-member board. Brim executives wouldn't say what kind of return GE is getting on its investment.