For a second time, PhyCor has agreed to sell a clinic to a hospital system at the request of the clinic physicians-this time inking a deal to transfer the Burns Clinic in Petoskey, Mich.
The buyer is Healthshare Group, the parent company of 299-bed Northern Michigan Hospital.
But Healthshare does not intend to employ the physicians long-term. Instead, it will establish a management services organization to help doctors run their own practices. The 69-year-old clinic will cease to exist.
"We're moving fundamentally from a multispecialty group practice to a collection of single-specialty groups," Healthshare President and Chief Executive Officer Jeffrey Wendling said.
Wendling said the hospital system doesn't want to take "a financial bath," referring to the fact that most hospital-owned physician practices lose money.
Financial terms of the sale of the clinic's assets were not disclosed. The deal was announced last week as PhyCor revealed $85.6 million of asset revaluation and restructuring charges (See chart).
In January, PhyCor agreed to sell its Holt-Krock Clinic in Fort Smith, Ark., to Sparks Regional Medical Center in Fort Smith. Both clinic sales are expected to close by the end of April.
PhyCor will release Burns physicians from long-term contracts. Healthshare, which owns the only hospital in Emmet County, in the northwest corner of Michigan's Lower Peninsula, has agreed to employ the doctors for up to two years.
The clinic employs about 80 physicians, down from a peak of 110 in early 1997. It has six offices.
Wendling said the transaction is meant to stabilize the medical community. Several physicians have left the clinic, and a few left the community after their incomes declined, Wendling said.
PhyCor CEO Joseph Hutts said the area has an oversupply of doctors and low reimbursement rates.
Last week, PhyCor said it is asking its affiliated groups to take steps to enhance productivity and it would divest those that weren't willing to change. Hutts downplayed expectations for future earnings, saying the company is "committing virtually all of our energy and resources" to enhancing existing clinics and independent practice associations.
For 1998, PhyCor incurred a net loss of $111.4 million, or $1.55 per share, on revenues of $1.5 billion, compared with 1997 earnings of $3.2 million, or 5 cents per share, on revenues of $1.1 billion.