The sizzling physician capital market gained a new competitor last week as GE Healthcare Financial Services announced it would acquire medical and dental practice financier HPSC.
It's the latest conquest for the medical equipment maker's capital unit, which also has expanded into medical office building financing and strategic alliances with health systems in the last 18 months.
GE Healthcare Financial Services will pay $72.4 million in stock, a 60% premium over HPSC's market price. The Boston-based company has about $1 billion in managed assets, which would boost GE's healthcare capital portfolio by 10%. It provides equipment and acquisition financing to about 25,000 practices, company officials said.
HPSC's salesforce will market existing GE products-including malpractice insurance, personal lines of credit, real estate financing, retirement plans and revolving credit facilities-to practices, said Jim Ambrose, global general manager of GE Healthcare Financial Services' equipment finance division. He said HPSC's management team would remain intact.
"We don't really do anything at the physician practice level in any big way. This acts as a flick of a switch for us," Ambrose said. "We're going to leverage what they do and learn from them."
Physician practices are a growing market for big-ticket medical devices as practices seek to compete with hospitals and imaging centers, GE Healthcare Financial Services' existing client base. Offering financing to practices is a "natural extension" of its equipment business, Ambrose said.
On the capital side, physicians and dentists are prized clients for regional banks. While their incomes have stagnated, practices are still considered to be low-risk borrowers, said Marty Brown, a partner with accounting and healthcare consulting firm Pershing Yoakley & Associates, Knoxville, Tenn.
Brown said physicians are seeking business leadership and financial guidance.
"The challenge is that the actual unit sales will be in smaller bits and increments (than GE Healthcare Financial Services' traditional client base)," Brown said. "You go throughout the country and find a lot of four- and five-person groups that don't have the most optimal retirement plan. By the same token, they may not be able to afford it. It really depends on what (GE's healthcare finance unit's) price point is and how they are going to go about selling this."
The deal is expected to close in January 2004, subject to federal antitrust, Securities and Exchange Commission and HPSC shareholder approvals. HPSC has about 130 employees at offices in 13 states. It reported 2002 net income of $6.5 million on revenue of $81.5 million. The GE unit, based in Chicago, employs about 700 and has managed assets of about $10 billion.