Laidlaw manages school bus, commuter transit and ambulance operations. "We take you to the places you don't want to go," quips company spokesman T.A.G. Watson.
Laidlaw also is becoming a major player in the business of managing the people you don't want to see--emergency-room physicians. When its $400 million acquisition of Dallas-based EmCare Holdings closes this month, Burlington, Ontario-based Laidlaw will manage almost 2,100 emergency-room physicians in the United States.
To finance its healthcare forays, Laidlaw last year sold for $1.5 billion a division that hauled and dumped the stuff you don't want to touch-solid waste.
Watson says Laidlaw is interested in physician-practice management because it "is one of those unconsolidated businesses. There's lots of room for growth."
Until recently, only companies specifically formed to manage physician practices operated PPMs. But PPMs' growth to $11 billion in market capitalization from zero about 10 years ago has enticed companies that make a living doing something else to consider the industry as the place they want to go.
Few non-PPM companies in 1997 have moved into physician practice management, but many are seriously considering it because "it's a fantastic business," says Piper Jaffray healthcare analyst Brooks O'Neil.
And not just a stand-alone business, either. Some companies that contemplate forming PPMs do so because they believe managing practices may present an entree for their products and a way to negotiate lucrative contracts with managed-care insurers and hospitals, analysts say.
For example, Laidlaw wants to negotiate capitated contracts that bundle emergency staffing, ambulance service and nurse triage services, all of which it has acquired during the past five years.
Melville, N.Y.-based Fonar Corp., a magnetic resonance imaging machine manufacturer, wants to create a ready market for its equipment by managing the radiology practices that purchase it, thereby helping Fonar compete against dominant MRI players such as General Electric and Siemens.
"It underscores the importance and influence of doctors," says Salomon Brothers healthcare analyst Lawrence Marsh. "They are making the decisions to send someone to the hospital or the pharmacy. The closer the relationship you have to the doctors, the more influence you have to get business sent to you."
However, the interest in forming PPMs also underscores a tendency for struggling businesses to try to take advantage of a fast-growing field, Marsh says.
"The bad part is (someone saying), hey, the PPM market is really hot," Marsh says. "If we call ourselves a PPM now and buy a physician group, then people will pay more attention to us and our stock (price) will go up."
So far, the companies expanding into the PPM business have either hired experienced executives or held on to the management of the companies they have acquired to ensure someone with physician management experience is running the show.
"It is possible for companies that have demonstrated success in the past on a business level to bring something to bear into the physician services market," O'Neill says. "On the other hand, managing physicians and really adding value to the practices beyond the pure business mechanics, I think, requires a special sort of knowledge and sophistication about the (physician) culture."
Laidlaw got into the healthcare business in 1992 with the acquisition of Aurora, Colo.-based MedTrans, an ambulance service company. In February 1997, Laidlaw added $1.1 billion American Medical Response (AMR), the nation's largest ambulance company. AMR's assets included its Houston-based STAT emergency department staffing division, which was comprised of 270 physicians.
The purchase of EmCare adds 1,800 physicians from 162 hospitals in 21 states. Merging STAT's operations into EmCare is expected to result in $300 million in revenue for the PPM division, Laidlaw President and Chief Executive Officer James Bullock says. Combined, the ambulance, emergency-room PPM and nurse triage services will contribute $1.5 billion to Laidlaw's projected 1997 revenue of $3 billion, Bullock says.
Laidlaw expects to negotiate capitated emergency-services contracts in Texas, Florida and California, where Laidlaw and EmCare operations are strongest, Bullock says. Those deals will help Laidlaw's healthcare operations grow at an annual rate "north of 20%," he says.
Two other companies that have entered the PPM market in 1997-Fonar and New York-based Lehigh Group-are thinly traded, financially struggling firms hoping physician management can turn their companies around.
Fonar in July announced it had acquired four New York-area radiology practices. The company, traded on Nasdaq Small Cap, paid for the practices with 2.74 million shares of stock, according to Securities and Exchange Commission filings. Fonar traded for $3 for most of the summer.
Fonar investors initially were not amused at the expansion into the PPM industry, believing the company had enough trouble making money with MRI scanners. For the first quarter of 1997, Fonar posted a loss of $4 million on revenue of $2.6 million, down from a $1.9 million gain on $3 million of revenue for the same period in 1996.
"People were caught off-guard-they were astonished," says Timothy Damadian, president and chief executive officer of Fonar's PPM subsidiary. "But after we talked to them, they were favorable.
"(Doctors) wouldn't be required to use our equipment, but in many cases we would supply ancillary services with our own equipment that are needed to service the needs of those physicians."
Fonar enjoyed one windfall this year from a federal court ruling ordering General Electric to pay Fonar $98 million for infringing on the smaller company's MRI patents. None of it is being earmarked for its PPM.
Not every company getting into the PPM business has something to do with healthcare. Before its $2 million reverse merger on July 9 with First Medical Group of Stamford, Conn., electrical supply distributor Lehigh Group had tried to staunch its financial bleeding by selling off divisions related to asbestos abatement, interior construction, precision machine castings, dredging equipment, energy recovery and power generation.
Lehigh Group had "no future" without a merger into a fast-growing industry, says Salvatore Zizza, First Medical Group's chief financial officer and Lehigh Group's former president and chief executive officer. Zizza is betting that to ensure not only survival but growth for his company, the PPM industry is the place it wants to go.