MedPartners announced last week that it intends to sell its profitable Team Health hospital-based physician management business.
A sale would rid the company of a nonstrategic asset and reduce its debt load, allowing it to plow more resources into its core medical groups. MedPartners has been focusing its operations on medical groups in key major markets after recording an $840.8 million loss in the fourth quarter of 1997.
Team Health is one of the nation's largest hospital-based physician managers with annualized revenues of more than $690 million. It's affiliated with more than 2,100 emergency physicians and 140 radiologists and has at least 268 hospital-based contracts and 58 radiology services contracts in 30 states.
According to analysts' estimates, MedPartners could generate about $700 million from a sale, about equal to its outstanding credit line. Team Health has an operating margin of about 10%.
By far, it would be MedPartners' largest divestiture, representing 10% of total company revenues. It represents the bulk of MedPartners' contract medical services division, which includes prison and U.S. Defense Department work.
One potential buyer is Burlington, Ontario-based Laidlaw, a transportation company that last year acquired two hospital-based contracting companies-Dallas-based EmCare and the emergency-care unit of St. Louis-based Spectrum Healthcare Services. Laidlaw's EmCare subsidiary manages about 4,200 emergency physicians.
MedPartners acquired Team Health through its February 1996 purchase of Redlands, Calif.-based Pacific Physician Services and expanded its operations by purchasing InPhyNet Medical Management in July 1997.
In early 1997 former chief executive Larry House said he expected to gain strategic advantages by managing hospital-based physicians and affiliating with independent medical groups and physician networks in the same markets, possibly through strategic alliances with hospitals. However, significant overlap between the two businesses didn't materialize.
Last week, MedPartners President and CEO E. Mac Crawford, who replaced House earlier this year, said the sale of Team Health "will allow us to significantly reduce the company's leverage without affecting the strategic opportunities available to us in the remaining businesses."
Crawford also said last week that the company is seeing improvement in its physician practice management operations and is trying to accelerate the growth of its pharmacy benefits management division.
The Birmingham, Ala.-based company hired investment banking firm Salomon Smith Barney to look for buyers.
MedPartners has focused its strategy on managing its key markets, such as Chicago, Houston, New Jersey and Southern California.