Coastal Physician Group, which lost hospital clients while it tried to expand into the managed-care arena, is returning its focus to hospital-based physician contracts.
Coastal retained 83% of its annualized revenues from hospital-based contracts in 1995, compared with a historical average of about 91%, said Robert Borchert, senior vice president for corporate communications.
Coastal was the No. 2 emergency department contractor in 1994 with 358 hospital clients, behind NES Healthcare Services, which had 402, according to MODERN HEALTHCARE's Contract Management Survey (Sept. 4, 1995, p. 67).
Coastal has smaller numbers of hospital-based physicians in obstetrics, gynecology, pediatrics and anesthesiology.
Analyst Krishen Sud, managing director of healthcare at Needham & Co., said the return to basics is long overdue.
As Coastal diversified, its service to hospital clients reportedly suffered, he said.
"I think they need to divest themselves of the nonstrategic businesses, even if they take a big loss, and use whatever resources they have to build their core businesses, which are the hospital-based business and the billing and collections business," he said.
In 1993 and 1994, Coastal invested aggressively in primary-care networks, commercial HMOs and a Medicaid HMO.
But some of the deals soured, and in 1995 Coastal reported an operating loss of $46.9 million on revenues of $810.3 million. That compares with net income of $22.4 million on revenues of $748.6 million in 1994.
Coastal's physician contract services revenues were almost $384 million in 1995, down 2% from the previous year, according to a recent filing with the Securities and Exchange Commission.
Those revenues reflected 47% of the company's total net revenues, down from 58% in 1993.
First-quarter 1996 results have been delayed as company officials renegotiated debt. In late May, Coastal obtained $40 million of new credit, which will help it continue to operate through the year.
The Durham, N.C.-based company has sold an ill-fated primary-care network in southern Florida, which lost money in an exclusive capitation contract with Humana. It's considering the sale of other operations.