Hospital-based practice management companies attracting more investors

The perception that health care may be a fairly stable investment has generated a recent flurry of acquisitions of hospital-based practices.

"There's overall stock market uncertainty, and there's a lot of money looking for a place to go," said Michael Parshall, a medical practice consultant in Schwenksville, Pa. "Health care sometimes looks a bit more insulated, particularly the physician side of health care. Of all the parts that make up the puzzle of health care, the one key piece is the physician. Physicians have the ultimate control to decide where patients are going to go."

Eagle Hospital Physicians, a physician services management company based in Dallas, was purchased in September 2010 by the private equity firms Flexpoint Ford and Highlander Partners. Since then, Eagle has bought Inpatient Management in St. Louis on Aug. 9 and PrimeDoc Management Services in Asheville, N.C., on July 6. Both are hospitalist practice management companies.

Inpatient manages 13 hospitalist practices in 11 states with a total of 90 physicians. PrimeDoc has about 100 physicians in seven practices in four states. These acquisitions bring the total number of physicians employed or otherwise affiliated with Eagle to 350. Terms of these deals were not disclosed, but the company is open to purchasing more practices.

"Managing the care of the patient while they are in the hospital is becoming more and more important, and, like many health care services, this is an opportunity," said Robert Allday, Eagle's executive vice president. "I think there will be more consolidation."

Experts say these recent acquisitions indicate a maturing of the hospitalist industry. A few decades ago, the specialty barely existed, but, according to the Society of Hospital Medicine, 30,000 physicians practice as hospitalists.

"Most hospitals now have a hospitalist program," said John Nelson, MD, co-founder and past president of the society. "If a company wants to get bigger, they have to acquire existing practices."

For instance, IPC The Hospitalist Company, which has about 1,800 affiliated physicians, acquired three Florida practices in July. The acquisition of the post-acute practice of Eladio Dieguez, MD, in Ocala, Fla., represents one of the company's first forays into care provided in a nursing care facility after a hospitalization.

Terms of these transactions have not been released.

"We want to have both acute care hospitalists and post-acute care hospitalists in every market in order to improve the quality of care through the continuum until a patient is all the way home and better," said Adam Singer, MD, IPC's founder and CEO. "The post-acute setting looks like it used to in the acute setting. It's not yet at all organized, but we see a real need there."

Other companies providing hospital-based physician care also are still growing.

Mednax, which is based in Fort Lauderdale, Fla., announced on Aug. 1 the acquisition of Northwest Newborn Specialists, a group of 20 neonatal physicians in Portland, Ore., and Hill Country Maternal Fetal Medicine in Austin, Texas. The Hill practice comprises one physician and five clinical support staff. Both practices will become part of Mednax's Pediatrix Medical Group. American Anesthesiology, a Mednax subsidiary, acquired Pinnacle Anesthesia on July 26. This is a group of 15 anesthesiologists in Delray Beach, Fla.

These deals were for cash, but no further details were disclosed.

Physicians of purchased practices generally become employees of an affiliated professional organization, although this varies according to state law. Primary care or other outpatient practices are not being sought by these companies.