The rate of growth for physician group acquisitions slowed in 1997, and the big deals weren't quite as big as the previous year.
Still, 1997 was a busy year. Companies disclosed 275 physician group and physician practice management acquisitions, up 13.6% from 242 in 1996, according to healthcare investment firm Irving Levin & Associates. The growth from 1995 to 1996 was 92%.
The 1997 deals involved an estimated 26,700 physicians, 33.8% more than the previous year's 19,950, according to Irving Levin. The total purchase price was $4.45 billion, slightly down from the $4.5 billion in 1996. The 1997 total would have been much greater had there not been the flameout of PhyCor's proposed $8 billion acquisition of MedPartners (page 6).
Without that merger, the largest deal of 1997 was MedPartners' $442 million purchase of Fort Lauderdale, Fla.-based InPhyNet Medical Management, which brought in 1,878 physicians. As in 1996, Birmingham, Ala.-based MedPartners, the nation's largest PPM in terms of revenue, led all PPMs with four deals among the top 10, according to the New Canaan, Conn.-based research firm.
MedPartners' four purchases totaled $756 million, compared with $2.65 billion for its four 1996 deals. MedPartners' $2.5 billion purchase of Northbrook, Ill.-based Caremark International in 1996 skewed that year's numbers.
San Diego-based FPA Medical Management, the third-largest PPM in terms of revenue, also maintained its 1996 top-10 pace with three of the largest purchases of 1997. Its three buys in 1997 totaled $291.4 million, down from $475.9 million in 1996.
Overall, the top 10 deals amounted to $1.7 billion, down 72% from 1996's total of $3.4 billion. The collapse of the PhyCor-MedPartners merger meant no billion-dollar deals closed in 1997. Four deals of more than $100 million closed in 1997, compared with five in 1996.
Nashville-based PhyCor's purchase of MedPartners would have been not only the largest physician-group deal, but it also would have been by far the largest healthcare deal overall in 1997. Instead, Philadelphia-based Cigna Corp.'s $1.7 billion acquisition of Hookset, N.H.-based HMO Healthsource tops the list. MedPartners' InPhyNet acquisition is 15th.