PhyCor will gain a solid foothold in Southern California with the acquisition of PrimeCare International announced last week.
The value of the stock swap was not disclosed. Loma Linda (Calif.) University Medical Center, which bought a $30 million minority stake in Ontario, Calif.-based PrimeCare in 1996, will convert its equity to PhyCor stock.
Nashville-based PhyCor said it will assume the operations of the private physician practice manager this month.
PrimeCare serves Riverside and San Bernardino counties east of Los Angeles with 69-physician Desert Valley Medical Group; 83-bed Desert Valley Hospital; Apple Valley Surgery Center; and Inland Empire IPA Network, which comprises 10 independent practice associations with 2,200 physicians.
The company had long planned to tap the public market and began acquiring facilities in other markets, including Florida, New York and Oklahoma. However, it ruled out an initial public offering because of soft and volatile pricing in the PPM sector, said Edward Casas, M.D., PrimeCare's president and chief executive officer.
Casas said PrimeCare considered mergers with smaller companies but decided PhyCor offered strategic advantages, including a strong capital base, access to technology and national payers.
PhyCor patiently sat on the sidelines as competitors such as Birmingham, Ala.-based MedPartners and San Diego-based FPA Medical Management went on buying sprees, assembling large networks in California. But those competitors faltered operationally in recent months (See story, below), and PhyCor is the only large player still in an acquisition mode.
That could mean more deals ahead for PhyCor in the state.
"They've always said California was a significant market," Casas said. "I would expect them to look at opportunities that make sense to continue to consolidate their market position."
PrimeCare has capitated contracts covering more than 200,000 enrollees, with more than 60% of its revenues from global risk, Casas said. He said its holdings in other states have been discontinued or spun off to other firms, including holding companies controlled by PrimeCare founder and Chairman Prem Reddy, M.D.