NationsBank has plenty of experience lending money to healthcare companies, but a new joint venture may mean it can help manage cash, too.
NationsBank, a Charlotte, N.C.-based banking giant, in May announced it has formed a joint venture with Andersen Consulting to provide electronic commerce and medical management services for physicians. Its first client, Nashville, Tenn.-based physician practice manager PhyCor, is using the service to help administer its independent practice associations.
Among the services the venture offers is on-line banking and financial management. PhyCor is not using these services, however. It is using the joint venture to link its 24,000 IPA-affiliated doctors in 35 markets so they can bid for national managed-care contracts, says Eric Thrailkill, PhyCor's chief information officer. It will be particularly useful for point-of-service deals that would be difficult to manage without such a centralized system, Thrailkill says.
The joint venture, which doesn't sell software but instead uses existing systems to create links between offices, is in a formative stage. It doesn't yet have a name or a permanent management team. But the presence of major corporations like NationsBank in such a project is an indication that big firms believe there is big money to be made in managing practices, even though few companies have been able to successfully do so.
"What used to be a single integrated process is exploding into a number of different pieces," says Bernard Lirola, who follows healthcare outsourcing companies for New York investment bank Needham & Co. "You have a number of people pursuing these segments, leveraging their own strengths."
But among even the larger companies pursuing outsourcing -- such as Kinetra, a healthcare information services alliance between Plano, Texas-based EDS and Golden, Colo.-based IMS Medacom -- none has the name recognition, healthcare contacts and financial muscle of the NationsBank and Andersen Consulting combination.
Other companies may be able to handle these skills, but as Thrailkill says, "there's no one with (equal) strength and financial stability."
Presumably, NationsBank and Andersen Consulting aren't disappearing soon.
NationsBank is increasing its assets to $570 billion with a proposed $60 billion purchase of Bank of America. Andersen Consulting is so strong it's in legal wrangling over its bid to break away from its parent, major accounting firm Andersen Worldwide.
Andersen has served as a technology consultant for numerous healthcare companies, including Blue Cross and Blue Shield plans. NationsBank has been a major lender, with billions of dollars of credit outstanding in the healthcare industry. It is part of three deals worth $1 billion or more: Richard Scrushy's two Birmingham, Ala., giants, HealthSouth Corp. and MedPartners, and Albuquerque-based long-term-care center operator Sun Healthcare Group.
NationsBank also has loans out to physician practice management companies PHP Healthcare Corp. of Reston, Va. ($80 million), Fort Worth, Texas-based ProMedCo Management Co. ($25 million) and Dallas-based Physicians Resource Group ($20 million), according to the companies' Securities and Exchange Commission filings.
Harrison Giles, NationsBank's executive vice president for strategic planning, says the bank had been interested in handling financial processing for healthcare companies, but that the company needed Andersen's experience with developing wide-range computer systems for its idea to become reality.
"This is a tremendous industry in need of help," Giles says. "The key thing here is that this administrative and financial processing is not healthcare. It's not what the doctors and the providers want to do. A driving motivation for the healthcare companies is, 'How can I get someone I can trust and work with to do this and free my focus and my capital and my people's time to be in healthcare."'
Giles says he figures the joint venture is starting with a good customer base. "A lot of companies are already our customers and Andersen's customers," he says.
One of Andersen's customers was PhyCor, which was interested enough that it helped develop the Independent Practice Association Management Solution, the joint venture's first product.
True to healthcare's desire not to have a cookie-cutter product, the services PhyCor contracted for speak more to the need for a centralized database that handles managed-care contracts. Although the joint venture plans to sell banking services, PhyCor says it had no immediate interest in them.
Instead, PhyCor figured it could save itself and its practice money by using the joint venture's administrative services to streamline contract management among its 140 IPAs. Neither party would reveal how much PhyCor is paying for the service.
"One thing that it does, is it allows our markets to enter into either regional or national discussions with managed-care organizations," Thrailkill says.
"If you think historically, we have 35 installations of a separate system. While that met our needs well, and we managed those contracts well, sometimes it was difficult to get at the data in order to process a contract that might span two or more markets. Going into one central solution can allow us to do that faster."
Thrailkill says PhyCor -- which will have the system fully installed by mid-1999 -- at some point will look at using it to handle electronic transfer of disbursements to physicians.
Currently, PhyCor collects payments for the IPAs, then distributes them to individual physicians. With the NationsBank-Andersen system, the electronic-commerce capabilities could allow those payments to be sent through the computer, which would be quicker and more accurate, Thrailkill says.
For now, the joint venture will concentrate on helping develop PhyCor's system before trying to sell it elsewhere, Giles says. The joint venture won't have a chief executive officer until this month at the earliest, so sales targets haven't been set, he says.
However, Giles says the joint venture believes there's great opportunity to be had. "We didn't spot a trend to say we're opportunistically going to make some money," Giles says. "We've been in healthcare for years. Andersen's the same way.
"But this industry is beginning to put together a payment system, a way of doing business. It ought to be the role of major banks to help with that."