America's largest oncology practice management firms hope their pending merger will create a cancer-care powerhouse, especially in the growing field of clinical trials.
American Oncology Resources and Physician Reliance Network say the result of their $715 million stock swap, announced last week, will be a company that manages 11% of U.S. oncologists and treats 13% of new cancer cases. They operate a total of 306 sites in 24 states.
Their closest competitors, which include Memphis, Tenn.-based Response Oncology and San Bruno, Calif.-based OnCare, do a fraction of the business of either company.
"It's clear we will be the undisputed leader in cancer management," said AOR Chairman and Chief Executive Officer Dale Ross, who will retain his titles in the new, unnamed company.
The deal is expected to close in April, subject to shareholder, Securities and Exchange Commission and federal antitrust approval.
The companies' stock has slumped amid turmoil in the physician practice management industry. But unlike many PPMs, both companies boast well-regarded management teams and relatively strong relationships with doctors.
Specialty firms have "survived the problems that all the others have had this year," said Chris Denby, a practice manager at the Washington-based Advisory Board Co.
Both companies are shifting their emphasis to outpatient care and clinical trials, areas in which they can take business away from hospitals.
Each projects 100% growth in clinical research for 1999, and together they expect to enroll more than 6,000 patients in clinical research activity next year, Ross said. He said the deal offers an opportunity "to create the premier oncology research platform in the country."
Such scale will attract pharmaceutical companies, which want to speed up clinical trials, Denby said.
AOR recently unveiled a database that automatically identifies clinical trials for which a patient might be eligible, Denby said. Meanwhile, academic medical centers have attempted to facilitate clinical trials for pharmaceutical companies by assembling their own provider networks.
Lee Schacter, M.D., associate director for clinical trials at Yale Cancer Center in New Haven, Conn., said he doesn't see the firms as a competitive threat.
"There's always going to be a role for academic centers," Schacter said. "If they (AOR and PRN) can do a better job of recruiting patients into industrial trials . . . that's great."
The firms also expect to shift more care to outpatient settings. AOR doctors have begun performing stem-cell transplants at ambulatory centers rather than in hospitals, a practice that will spread to PRN practices, Ross said.
In 1999, the companies are slated to open 16 outpatient cancer centers. Forty-four are already in operation.
The firms plan to add a total of 100 physicians in 1999. Their merger would reduce choice for oncology practices looking for capital partners, but company executives said they don't expect to lower acquisition prices for practices.
"We've always had a goal of treating our physicians in an equitable way," said John Casey, chairman and CEO of PRN, based in Dallas.
The new company will be headquartered in Houston, AOR's home base. AOR and PRN shareholders will each own half of the merged firm, with 50-50 board representation.
The new firm will also have a respected Washington advocate in its fold. PRN's national medical director, Joseph Bailes, M.D., will assume the role of executive vice president in charge of legislative advocacy and integrating physician leadership. Bailes is president-elect of the American Society of Clinical Oncology.
Both companies operate in the Albany, N.Y., and San Antonio markets, but Ross said they expect no antitrust challenge.