Physician Practice Management Case Study

In late 1980 physician practice management companies began to take off (Burns, Bradley, & Weiner, 2011). PPMs were established in an effort to assist physician practices to retain their earnings, control marginal management within these practices, and to improve contracts with emerging HMOs and PPOs. Physician practices and PPM agreements came with many promises from PPM firms to physician practices. PPM promises included infusing necessary capital, cost savings, management improvements, and increased revenues. PPMs also allowed negotiations by physicians in order for the practice to obtain improved contracts with HMOs and PPOs (Burns, Bradley, & Weiner, 2011, p. 315). Toward the end of the 1990s many PPM companies were either out of business,

increased dramatically between 1988 and 1994, at which time the company reached $240 million in revenue, “owned 22 group practices employing almost 1,200 doctors in 15 states (Burns, Bradley, & Weiner, 2011). PhyCor, Inc.’s incredible growth during this time was also recognized by Fortune and the company had set its eyes on having clinics all over the United States. Like other PPM companies, between 1997 and 1998 PhyCor, Inc. experienced a dramatic decrease in stock price. PPM firms saw a 64 percent decrease, whereas the industry’s commercial value decrease by almost half of what it was prior to that time. While PhyCor Inc. had taken a dramatic hit the company was determined to not be beaten. PhyCor Inc. saw this as an opportunity to gain the competitive advantage by purchasing larger competitors with billions in stock and debt. Continued decreases in stock prices limited their abilities to purchase certain competitors such as MedPartners, even though PhyCor, Inc. blamed the decision not to purchase MedPartners on business differences in the two companies. PhyCor was successful in purchasing other PPM companies during this time; CareWise, Inc. and Prime-Care International, Inc. PhyCor, Inc soon reached “20,000-plus physicians and 61 clinics in 29 states” (Burns, Bradley, & Weiner, 2011, p. 316). PPM companies, including PhyCor, Inc. continued to experience decreasing stock values, earnings, Medicare rates, acquisition earnings and other shortfalls and poor decisions which contributed to the dissatisfaction of physicians (Burns, Bradley, & Weiner, 2011). After a 74 percent stock value was seen by PhyCor, Inc. the company made the decision to sell many of their acquired healthcare clinics in order to generate cash in hopes of becoming a smaller, more stable company that might be able to experience growth in the future. While earning still dropped EBITDA was still showing consistency allowing PhyCor, Inc. to focus on maximizing cash flow and