Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
Acquisition of Physician Medical Groups breaks previous records for third year in a row According to Irving Levin Associates, Inc.
(May 8, 1998-New Canaan, Connecticut) Irving Levin Associates, Inc. has just released the preliminary findings of its publication, The Physician Medical Group Acquisition Report, Third Edition, 1998. The Report details 306 publicly announced transactions relating to the merger or acquisition of physician medical groups. This record-breaking volume was up 16.8% from the 262 deals announced in 1996.
These 306 transactions targeted over 507 medical group practices, physician practice management companies (PPMs), independent practice associations (IPAs) and management service organizations (MSOs). As a result, these deals affected a combined total of more than 27,862 physicians, up 37.3% from the 20,287 reported in 1996.
“The PPM industry now accounts for nearly one-quarter of all mergers and acquisitions in the health care services industry,” stated Stephen Monroe, a partner at Irving Levin Associates. “The record number of transactions reflects the key role physicians play in determining how health care dollars are spent in this country.” Venture capital companies have responded to physicians’ concerns and invested so enthusiastically in this industry that the number of PPMs has risen to about 150.
The acquirers include hospitals, other medical practices and even rehabilitation providers, but the PPMs—the physician practice management companies—dominate the merger and acquisition market. They made 86.7% of the deals in 1997 to acquire 88.5% of the physicians. “The prices paid to acquire physician medical groups have relaxed somewhat from the record-high levels set in 1996,” observed Sanford Steever, editor of the Report. “Even so, the current pricing levels reflect strong investor confidence in this industry in general, and the merger and acquisition market in particular.”
“Preliminary figures from 1998 indicate the continuation of the merger and acquisition market at the levels established in 1996 and 1997,” said Mr. Monroe. A high degree of fragmentation in the industry, the campaign to contain health care costs and the ubiquity of managed care all contribute to the development of this robust market.
Strategically, many perceive of the PPM as a means of removing the financial and bureaucratic obstacles that stand between a physician and his patients. “The success of the PPM industry will rest on its ability to provide physicians with the managerial expertise and financial depth to enhance the delivery and quality of health care to patients,” Dr. Steever noted. “As long as it can deliver on this promise, we may expect to see further consolidation activity.”
Drawing on a database of over 900 transactions, The Physician Medical Group Acquisition Report provides statistics for the four-year period of 1994 through 1997. The analysis includes pricing and valuation issues, as well as details of geographic concentrations and medical specialties. The volume is rounded out with descriptions of the 306 individual deals transacted during 1997, and details on the 96 acquirers involved in this market.
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based research and publishing firm specializing in health care investments. The Firm has 50 years experience in the health care acquisition market. To keep abreast of this rapidly evolving market and obtain valuable information and statistics to assist you in your business and investment decisions, you may order a copy of The Physician Medical Group Acquisition Report, Third Edition, 1998 by calling (800) 248-1668.
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