MedPartners is considering spinning off some of its practices to create a new orthopedic physician practice management company with HealthSouth Corp. as a possible investor.
The new company would join at least four other orthopedic specialty companies that manage a combined total of about 370 doctors, according to Gwynedd, Pa.-based Sherlock Co., which tracks the PPM industry.
Birmingham, Ala.-based MedPartners, which focuses on multispecialty practices, manages 450 orthopedists throughout the country.
An orthopedic spinoff has been under consideration since before the PhyCor-MedPartners merger was announced last October.
The merger was terminated last month, but a spinoff remains a possibility, MedPartners' acting Chairman and Chief Executive Officer Richard Scrushy told MODERN HEALTHCARE.
"Certainly that is something that might make some sense, but we have not made any decisions," he said.
MedPartners would have a controlling interest. Birmingham-based HealthSouth, of which Scrushy is chairman and CEO, might be an investor, Scrushy said.
He said the spinoff would be "more aggressive" in orthopedics than MedPartners, which has a multispecialty bent.
Scrushy told MODERN HEALTHCARE last month that he would not consider selling any part of MedPartners, which has encountered problems in integrating its diverse and rapidly acquired empire. But Scrushy did not rule out spinoffs (Jan. 26, p. 12).
Meanwhile, Scrushy has strongly denied speculation that MedPartners and HealthSouth are headed for a merger (See Outliers, p. 60).
Piper Jaffray analyst Brooks O'Neil said MedPartners feasibly could split its operations into five companies -- one pharmacy benefit manager and four PPMs.
An orthopedic spinoff makes sense because more than 80% of the nation's orthopedists practice in single-specialty settings.
Such a move also could create value for MedPartners shareholders. The two public orthopedic management firms, Lakewood, Colo.-based Specialty Care Network and Houston-based Integrated Orthopaedics, trade at slight price-to-earnings premiums, noted analyst Doug Sherlock of Sherlock Co. A third company, Boca Raton, Fla.-based BMJ Medical Management, plans a $40 million initial public offering this week.
"Plainly, muskuloskeletal has gotten a warm reception," Sherlock said.