At 5: 40 on a recent Monday afternoon, the reception room at Professional Sports Care Management's midtown Manhattan clinic was starkly empty. But if 4-year-old PSCM's diagnosis is correct, the waiting room will soon be packed.
Harrison, N.Y.-based PSCM runs a chain of 30 New York-area outpatient physical therapy clinics. Its strategy: What worked for selling hamburgers can work for tennis elbow and runner's knee.
Late in 1993, PSCM began aggressively building an empire of rehabilitation clinics. Quicker than it takes to mend a torn hamstring, PSCM was the area's largest chain of physical and occupational therapy centers, with a 5% share of the $400 million tri-state market for outpatient rehabilitation. Some 15 patients a day, for example, now get their physical therapy at PSCM's midtown office.
The bigger PSCM gets, the lower the rates it can offer insurance companies and other payers. But PSCM isn't the only rehabilitation company playing that hunch.
Many New York physical therapy offices are owned by orthopedists. A new federal law against physician self-referrals is forcing some doctors to sell their financial interests at deep discounts. Now, consolidation is rampant.
The buyers are national chains, including AdvantageHealth, NovaCare and HealthSouth Corp. For now, PSCM's competitors have steered clear of New York.
"New York City looks complicated to most. Utilization studies from the rest of the country don't apply to Manhattan," says Deborah Lawson, an analyst with Morgan Stanley.
PSCM went public last September to raise money for acquisitions. Investors jumped at the new issue at $8 a share.
After all, sports medicine doesn't get much glitzier.
PSCM's founder is Russell F. Warren, M.D., team physician of the New York Giants and surgeon-in-chief at the Hospital for Special Surgery. Its co-founder is Ronnie P. Barnes, the Giants' head athletic trainer. Warren's brother-in-law is John Sculley, a PSCM director. The company's board includes Stephen Wiggins, chairman of Oxford Health Plans, a fast-growing HMO.
The Oxford link is shrewd. Only 15% of PSCM's $25.5 million pro forma revenue in 1994 was from managed-care contracts. But like all providers, PSCM is committed to doing much more business with HMOs.
"Wiggins gives them a wonderful insight into how to deal with HMOs on a contract basis. It's always nice to know what the other side thinks," said Robert Spencer, chief financial officer of AdvantageHealth.
PSCM's niche also looked good to investors. The company siphons off the patients that are easiest to treat-15- to 40-year-olds with an athletic bent. Such patients breeze through physical therapy quickly and efficiently. Other clinics, however, often focus on less lucrative practices, such as geriatric therapy. Hampered with wheelchairs and various medical complications, the elderly can take twice as long to treat.
PSCM used its new cash hoard to snap up clinics. It bought 19, with a total price tag of $21 million, including two pending acquisitions of five clinics slated to be completed this month.
Now, less than six months after going public, PSCM is looking for more cash. Its shares are now trading at between $11 and $12, and the company is back with a secondary offering for 1.9 million shares.
But in the meantime, hospitals have awakened to the need to be far more competitive in offering outpatient services. Just last month, for example, New York University Medical Center's Rusk Institute for Rehabilitation Medicine cut an unusual deal with The New York Times.
The newspaper had used a staff therapist to treat as many as 30 patients a day for carpal tunnel syndrome. Now two Rusk therapists will make house calls at The Times.
The hospital can easily duplicate the service for other big corporate clients.
Said Matthew Lee, M.D., Rusk's medical director, "It's a trend. The question is how much. Could there be a McRusk?"-Crain News Service