Citing industry turmoil, the nation's leading multispecialty physician practice management company said last week it doesn't plan to buy any clinics through 1999.
Nashville-based PhyCor revised downward its earnings estimates for the second half of 1998. Financial targets don't include any additions to its roster of 57 clinics with about 3,890 doctors.
It's a dramatic turn for PhyCor, which typically acquires several major clinics every year.
"We think the growth in this next 12-month period is going to be very challenging," President and Chief Executive Officer Joseph Hutts told analysts during a conference call last week. Rather than predict acquisitions, "I'd rather treat them as a nice upside," he said.
The PPM industry has been plagued this year by earnings shortfalls, plummeting stock values and reports of dissatisfied physicians.
Doctors are "afraid they'll hook up with somebody that has a fundamental problem," Hutts said.
Higher capital costs are another factor, with banks expected to charge slightly higher interest rates, he said. Wall Street capital has dried up.
PhyCor has $140 million available through its credit facility, which will allow it to operate through 1999, said Chief Financial Officer John Crawford. But Crawford said finances will be tight, and the company is seeking new sources of capital.
PhyCor hosted an investors' conference in Nashville last week to try to restore confidence. At the meeting, physician leaders from several of its clinics touted the PPM's services.
The company also announced the launch of a service to manage hospital-owned physician practices. Hutts said the company would look for opportunities to get equity in practices that reach financial stability.
PhyCor said it will use some of its capital to repurchase up to $50 million of its common stock, which was priced at about $5 last week, down from $27 at year-end 1997. PhyCor stock plunged by more than 30% after the company lowered earnings estimates by 25%.
Earnings per share for the third and fourth quarters would be 15 cents and 16 cents, respectively, the company said. Analysts' projections had been 20 cents and 21 cents.
Three recent acquisitions-First Physician Care and Morgan Health Group, both in Atlanta, and Ontario, Calif.-based PrimeCare International-have not performed as expected, PhyCor said.