PhyCor said last week that it will sell 13 clinics over the next 12 months, reducing its total number of clinics to 31.
Considered the nation's leading physician practice management company, Nashville-based PhyCor owned 53 clinics near its peak two years ago.
"The decision will generate cash and result in a smaller company with clinics that are stable, have the ability to grow and are committed to our mutual success," Chief Executive Officer Joseph Hutts said in a written statement.
In an interview, Hutts declined to identify clinics that will be put on the block. The company said total assets of those clinics, plus four others that have been or will be sold during the fourth quarter, are $156.1 million.
It has completed the sale of clinic assets in Sayre, Pa., and in two unidentified markets since Oct. 1. PhyCor expected to close on the sale of the Lexington (Ky.) Clinic this month.
The firm's pretax earnings will be reduced by about $2 million per quarter as a result of a restructuring of service agreements with existing clinics, Hutts said.
PhyCor reported a net loss of $435.7 million, or $5.75 cents per share, for the third quarter ended Sept. 30, compared with a net loss of $50.8 million, or 66 cents per share, in the year-ago quarter. Revenues fell 9.1% to $371.2 million. The results include $393.4 million in asset revaluation, clinic restructuring and merger charges.
For the nine months, the company posted a net loss of $433 million, or $5.69 per share, compared with a net loss of $43 million, or 61 cents per share, for the year-earlier period. Revenues increased 7.2% to $1.18 billion.
Separately, Rockford (Ill.) Health System has become the first hospital organization to ink a deal with PhyCor.
PhyCor will manage the system's 180-physician Rockford Clinic and provide services to Rockford Health Plans, a 56,000-member HMO. Unlike PhyCor's previous management agreements, which involved independent clinics, the Rockford deal does not call for the company to own clinic assets.
Hutts said PhyCor will be paid a flat fee.
The deal coincides with the creation of separate management teams for the clinic and 341-bed Rockford Memorial Hospital, which merged in 1994. The system reported a net loss of $18.9 million and revenues of $360 million in 1998.
System spokeswoman Helen Brooks acknowledged last week that the clinic has been losing money.
"The new management teams recognize that the operational needs of a hospital are very different from those of a large multispecialty physician clinic," system President F. Taylor Carlin said in a written statement.
PhyCor's vice president of operations, Mike McClintock, will serve as clinic executive director until a permanent executive director is hired. Previously, Kate Wong was named hospital president and chief operating officer.