Physician groups changed hands at a record pace in 1997, in deals involving approximately 5% of U.S. doctors.
Announced physician group transactions numbered 306, up 16.7% from 1996, according to data released last week by Irving Levin Associates, a New Canaan, Conn.-based research and publishing firm.
Medical groups, independent practice associations and management services organizations accounted for 24.1% of all healthcare services transactions, surpassing other sectors including hospitals for the second year in a row.
Physicians whose practices, IPAs or MSOs changed hands totaled 27,862, up 37.3% from 1996.
Some 20,200 doctors linked with publicly held companies. Another 4,460 went with private firms, and 3,200 contracted with not-for-profits.
Despite the rapid dealmaking, purchase prices appear to have moderated after two years of increases, Levin said. Likely factors include tighter government scrutiny, greater physician supply and pressure for publicly traded physician practice managers to increase same-market revenues.
The average price per physician in mergers and acquisitions was $814,595, down 11% from $918,260 in 1996. However, the median price increased 3% to $623,167 from $602,229.
PPMs, which accounted for 86.7% of announced transactions, may rethink their deals, settling for less control in exchange for lower practice prices, said Sanford Steever, editor of the firm's merger and acquisition report. Nashville-based PhyCor already has said it anticipates paying less for practices (May 4, p. 17)
"I think the models are going to be less paternalistic and more collegial," Steever said.
Other buyers of physician groups in 1997 were hospitals, medical practices and rehabilitation providers.
Steever predicted a slowdown in hospital acquisitions of physician practices, although the vast majority of hospital-physician deals are not publicly announced, which makes tracking difficult.
"A lot of (hospitals) are content to contract out" for physician services, he said.
He noted that hospitals generally have not heeded a call from the American Hospital Association to be forthright in announcing acquisitions.