Canadian transportation giant Laidlaw is bowing out of the U.S. healthcare industry two years after it leapt in with a promise to innovate.
Along with Vencor's bankruptcy filing, Laidlaw's action was another big reminder that the healthcare business can be tough on the unprepared.
Laidlaw said last week it will sell its U.S. healthcare operations, which consist of ambulance services provider American Medical Response, based in Aurora, Colo., and emergency physician practice manager EmCare, based in Dallas.
When it ventured into healthcare in 1997, Laidlaw said it wanted to pioneer the bundling of emergency transportation and physician services in prepaid managed care (Aug. 4, 1997, p. 17). But the company never got around to implementing one-stop shopping. Company sources said a financial downturn intervened.
In a statement last week, James Bullock, president and chief executive officer of the Burlington, Ontario-based firm, said the U.S. healthcare industry this past year has been "extremely difficult."
Laidlaw lost $227.2 million, or 69 cents per share, in its third quarter ended May 31. The loss included a $285 million after-tax restructuring charge at AMR, where Laidlaw announced it would close or sell several operating sites because of disappointing earnings. Revenues were $1.08 billion.
EmCare's profit margins dipped last year, said EmCare CEO Leonard Riggs Jr., M.D. He blamed the pressures of the 1997 Balanced Budget Act on hospitals and one-time expenses, such as those for converting its physicians from independent contractors to employees in order to meet HCFA requirements.
Laidlaw stoked EmCare's growth with several acquisitions, including St. Louis-based Spectrum Healthcare Services and regional emergency practice management firms. Under Laidlaw, EmCare's annual revenues jumped to $485 million from $260 million in two years, while patient visits increased to 5.4 million per year from 2.9 million, Riggs said.
Now EmCare claims to be the nation's largest emergency physician practice management company, with 2,300 full-time physicians providing services at approximately 350 hospitals in 35 states.
Riggs said he expects EmCare to attract investors and strategic buyers, such as other hospital-based physician practice management companies. EmCare management expects to help choose a buyer. Riggs said he hopes to find a deal that will offer equity to physicians.
The market for physician assets, however, has soured in the past 18 months. Earlier this year, MedPartners sold all but 7% of its Knoxville, Tenn.-based physician staffing firm, Team Health, for $335 million, far less than some analysts had projected (Feb. 1, 1999, p. 8).
Laidlaw said it expects to record a $1 billion loss at year-end on the sales of American Medical Response and EmCare, which have combined revenues of nearly $1.5 billion. It hired Merrill Lynch & Co. to assist the divestitures and said it will use proceeds to pay down debt and expand its core business.