Physician staffing giant TeamHealth is taking steps to heal its struggling IPC division, an effort that under Blackstone ownership can be best undertaken outside the glare of public equity markets, TeamHealth said.
In answer to questions posed to new TeamHealth CEO Leif Murphy, the company said in a statement that management has created a separate leadership structure to grow its presence in post-acute medicine.
And IPC, since its $1.6 billion acquisition a year ago, has been fully integrated into TeamHealth.
That includes the integration of core systems such as information technology, recruiting, contracting and sales so that IPC, whose physicians serve in 2,000 post-acute facilities, can cross-sell services with TeamHealth's traditional business of contracting physicians to acute-care hospitals.
“We have achieved multimillion dollar synergies in both revenue and cost with the integration of IPC,” the company said.
The difficult melding of IPC into TeamHealth took a toll on TeamHealth earnings and stock price over the past year, eventually leading to an activist incursion of TeamHealth's board of directors this spring and the retirement of long-time CEO Michael Snow in September.
Now, the Knoxville, Tenn.-based company, the nation's largest physician staffing player, is being sold to Blackstone and taken private. The $6.1 billion deal was announced Monday.
Blackstone, one of the world's largest private-equity companies, is a sophisticated financier willing to take a longer view of the company's growth potential, TeamHealth said in its statement. Blackstone is paying $43.50 per share for TeamHealth.
“The board and management team determined that we could better focus at this time on our mission as the leading provider of hospital and post-acute physician services by leaving the public markets with the distractions and short term focus they have,” the company said.
Blackstone is the majority owner of Change Healthcare, a healthcare IT company in Nashville that is merging with McKesson's IT business to create a healthcare services giant with annual revenue of about $3.4 billion.
When the deal is completed, expected sometime next year, Blackstone will receive a $1.75 billion special dividend for the assets. It is contributing that amount to the venture.
Fixing IPC was one of Murphy's top priorities in leaving his CFO post at hospital chain LifePoint Health to become TeamHealth's CEO in September.
Asked about Murphy's future with TeamHealth under Blackstone ownership, TeamHealth said the transaction was just announced and many major decisions have yet to be made.
“But generally private-equity firms consider the strength and experience of the management team before making any investment,” TeamHealth said in its statement.
Addressing analysts at the Wells Fargo Securities Healthcare Conference in September, TeamHealth CFO David Jones pointed to cultural issues that TeamHealth was having integrating IPC into TeamHealth.
Jones said IPC's post-acute doctors have higher turnover rates than TeamHealth's emergency room physicians, hospitalists and anesthesiologists because they can more readily return to private practice. He said their salary structure also is different.
For example, Jones said, IPC physicians prior to joining TeamHealth had a smaller percentage of their overall compensation in base salary than did TeamHealth physicians, but they tended to be paid in bonuses and other performance-based compensation.
Jones said TeamHealth is trying to bring the two models closer together, in part, to improve physician recruitment at IPC. IPC and hospitalists generally tend to have turnover in the 10% to 15% range. In contrast, emergency room doctors and anesthesiologists, which represent a good portion of TeamHealth's physician workforce, churn at rates of about 5% to 6%, he said.
The trouble TeamHealth had integrating IPC reflected in depressed earnings and a stock price that fell from $59.71 on Nov. 10, 2015, to $33.56 per share by Feb. 9.
That collapse drew in bargain-hunting hedge fund Jana Partners. The company demanded three board seats to right the course of TeamHealth's “missteps” by the board and management.
Jana ultimately got the seats and worked to replace Snow in September with Murphy.
Now Jana is selling at a profit its 8% TeamHealth stake to Blackstone.