One of healthcare's richest entrepreneurs, Abraham Gosman, plans to hop aboard another industry hot streak with a public offering for a physician management firm.
Gosman, a former nursing home magnate who heads the nation's largest healthcare real estate trust, Meditrust, disclosed plans for his new company to would-be investors last month at a Robinson-Humphrey healthcare conference in Atlanta.
"Putting together a company for an IPO (initial public offering) is like bringing a show to Broadway," Gosman said. "First thing you need is a good story."
Gosman, who has displayed a Midas touch for creating wealth in long-term care over the past 20 years, is now turning to physician management. By operating physician practices, his firm, Continuum Care Corp., plans to manage high-cost diseases like cancer and cardiology.
That translates into "disease management," an industry buzzword that has helped launched several other lucrative public offerings on Wall Street.
Continuum could ride that bandwagon with a November IPO. Although Gosman hasn't disclosed how much money the company hopes to raise, it's clear the equity capital will be used to buy physician practices and build medical malls filled with outpatient services.
Continuum's first mall will be a $50 million development in Palm Beach Gardens, Fla. The 175,000-square-foot complex is set to open in the fall of 1996. A 120-bed subacute facility will be built adjacent to the mall.
"We intend to develop them in other geographic areas," Gosman said, mentioning Houston and Phoenix as possible sites.
Continuum is essentially a start-up firm in the field of physician practice management. In January of this year, it was managing just four doctor practices; now it's up to 132.
However, investors are less likely to focus on that newness as on Gosman's proven track record for raising cash.
"Abe Gosman is one of the best moneymakers in healthcare," said Peter Sidoti, vice president of County NatWest, a New York-based investment banking firm. "The returns he has generated for people are second to none. I'd buy shares in his IPO without even looking at it."
Gosman's esteem for making money on Wall Street is augmented by his personal reputation for running in big-money circles in Boston and Palm Beach, Fla. In a Boston Globe profile in 1993, Gosman was noted for his $30 million mansion in Palm Beach and his 132-foot yacht, the "Octopussy."
Yet, Gosman's philanthropic bent also is well-known-earlier this year he donated $8 million to Dana-Farber Cancer Institute in Boston.
As an entrepreneur, Gosman has done what few others can brag about-sold the same company twice for a whopping profit.
Last year he sold Mediplex Group, a subacute and long-term-care company that he founded, to Sun Healthcare Group for $320 million. That was the second time.
The first time was when he sold Mediplex to New York-based Avon Products in 1986; the sale came during a diversification phase by the cosmetics giant.
However, Avon subsequently soured on the healthcare business, and Gosman and his investors bought Mediplex back for $42 million in 1990.
One year later, Gosman took Mediplex public again at $19 a share. As the value of subacute firms climbed on Wall Street, Gosman sold it to Albuquerque, N.M.-based Sun Healthcare for $33 a share, a 74% profit for shareholders. Gosman held 52% of the shares.
Mediplex previously owned Continuum, Gosman's new company. Continuum had been a private real estate development business owned by Gosman's sons when Mediplex bought it in 1993 for $7 million. Gosman bought it back when Mediplex was sold to Sun last year.
Gosman's remaining public company, Meditrust, is the nation's biggest healthcare real estate investment trust, with a market capitalization of more than $1 billion and assets of $1.7 billion. Founded 10 years ago, the Needham, Mass.-based firm has close ties to Sun Healthcare.
Sun Healthcare operates 37 Meditrust-owned properties, accounting for 22% of Meditrust's assets. As the REIT's largest operator, Sun Healthcare's recent difficulties could be a concern to Meditrust investors. The U.S. Justice Department and HHS are investigating billing practices at a Sun facility in Seattle (Sept. 4, p. 28).
However, in a recent research report, NatWest said concerns over how the investigation would affect Meditrust were "overblown." Gosman holds a 1.8% stake in Meditrust.