For the first time in their organization's 38-year history, Talbert Medical Group doctors won't be working for someone else.
On June 10, the 120-physician organization in Fountain Valley, Calif., announced it had paid $3.7 million to acquire Talbert's assets from MedPartners, which is shedding clinics as part of a plan to get out of the physician practice management business.
"The doctors are rejuvenated," says Talbert President Keith Wilson, M.D., an obstetrician-gynecologist. "You almost get the sense that some of them are carrying around pompoms."
Originally, Talbert was supposed to join some 700 other MedPartners physicians being acquired by Riverside, Calif.-based management company KPC Global Care, which before the acquisition had 500 doctors. But the physicians decided they had had enough of management companies, so they set up a plan to buy back their assets.
The deal will close as soon as the U.S. Bankruptcy Court in Los Angeles approves a settlement between MedPartners and the state of California in the Chapter 11 case of MedPartners Provider Network. The state took over the financially ailing contracting subsidiary in March and put it into bankruptcy.
The buyback is a bold move for Talbert, which started in Long Beach, Calif., in 1961 as the staff model for insurer FHP International. PacifiCare Health Systems, a Santa Ana, Calif.-based managed-care company, bought FHP in January 1996 and then spun off the physician group into a PPM called Talbert Medical Management.
The PPM had 252 physicians in five states when MedPartners bought it for $200 million in stock in October 1997. That was just three months before MedPartners' stock price collapsed amid a failed merger with PhyCor and massive write-offs. Last November MedPartners announced it would exit the PPM business.
More recently, MedPartners has had the state of California breathing down its neck because of financial problems there.
With 120 Talbert doctors remaining in Southern California, the group's per-physician assets in 1997 were worth $793,000 to MedPartners. However, the company received only about $31,000 per physician in selling the assets to the Talbert doctors.
Getting their assets cheap made it easier to convince physicians to put up a total of $750,000 to buy back their practices, Wilson says.
But the Talbert doctors needed more than the fire-sale mentality of MedPartners to win back their assets. First, they threatened to quit.
After a few months of talking to KPC, Talbert physicians realized life wouldn't get better under a new management company, Wilson says. The doctors wanted to let MedPartners know they didn't want KPC around.
The next step involved getting the rest of the money together.
Finally, they had to make sure their payers liked the idea.