PhyCor will assume the management of Straub Clinic and Hospital in Honolulu, which includes a 200-physician multispecialty group and a 159-bed hospital, under an agreement reached last week.
The value of the transaction, a stock swap, was not disclosed. It marks the first time the Nashville, Tenn.-based physician practice management company has agreed to assume control of a hospital.
"It doesn't mean we're going into the hospital business; we're not," said Joseph Hutts, PhyCor's chief executive officer.
The finances and management of the 75-year-old clinic and hospital are so integrated that separating them would have been almost impossible, Hutts said. The hospital is "part of the fabric of that organization," he said. "We won't spin that off."
Straub President and CEO Blake E. Waterhouse, M.D., who will retain his position, said Straub has a greater need for a capital partner than most multispecialty groups because it owns a hospital.
PhyCor, which is publicly traded, will allow Straub to tap into state-of-the-art information and business systems. "We feel that a bridge to a very outstanding physician organization on the mainland would be very helpful to us long term," Waterhouse said.
Straub is owned by 150 physician stockholders, who have yet to vote on the stock-for-stock transaction.
Straub physicians will continue to own the land and buildings and hold the hospital license, while PhyCor will acquire supplies and equipment. PhyCor also will assume certain liabilities. Straub had net income of $5.5 million on net revenues of $201 million in 1995.
As of last week, PhyCor entered an administrative services agreement with the Straub physicians. The company also will manage Doctor Clinic, a 40-physician multispecialty group on Guam that is 50% owned by Straub.
The deal is expected to be complete by the end of January 1997.
Straub, with more than 2,000 staff members, is the seventh-largest employer in Hawaii. It had more than 550,000 outpatient visits in 1995.