Mullikin Medical to Merge With MedPartners : Health care: The new firm will have revenue of $1 billion and employ 800 physicians. MedPartners shares add $4.25.
To strengthen its position as competition intensifies in the health care industry, Mullikin Medical Enterprises, California’s second-largest doctor network, said Tuesday that it has agreed to merge with Alabama-based MedPartners Inc.
The merged company, to be called MedPartners-Mullikin Inc., will be a physician-practice management firm with projected 1996 revenue of about $1 billion. It will employ 800 physicians directly and contract with another 2,600.
The merger will catapult the public company ahead of its competition, observers said.
Mullikin, based in Long Beach, is one of the nation’s largest privately held physician groups and provides care to more than 360,000 prepaid health maintenance organization members through 58 medical centers. Mullikin will receive about $360 million in MedPartners stock.
Officials from both companies Tuesday proclaimed the merger a perfect marriage. “It completes the toolbox for what physicians need in their practices,” said Mark Wagar, chief operating officer at Mullikin.
MedPartners, based in Birmingham, Ala., will gain from Mullikin an expertise in delivering health care to patients on a prepaid basis, said Montgomery Securities analyst Ken Laudan.
MedPartners will lend Mullikin’s operations technological advances in computer systems to link Mullikin medical centers and eliminate the administrative redundancies, Laudan said.
The MedPartners-Mullikin officials say they plan to continue aggressive geographic expansion and eventually meet in the middle of the country. Mullikin’s operations are concentrated in California, Oregon and Washington. MedPartners operates in 10 states, mainly in the Southeast but including Texas, Pennsylvania and Ohio.
The merger is the latest evidence of health care providers gasping under the pressure of HMO success.
“It’s another indication of the provider community trying to align with the pressures they’re facing from the HMO marketplace. The provider community is trying to find the right organizational structure and economies of scale to position itself in the managed-care marketplace,” said Chuck Hartwig, a principal at the consulting group William M. Mercer Inc.
Dr. Albert Barnett, chief executive of Friendly Hills Healthcare Network in Buena Park, which itself was acquired by Caremark Enterprises last August, said new sources of capital are essential for health care providers in Southern California.
“What’s happening in Southern California is that HMOs are doing very well, but the provider community is being choked down and in some cases having difficulty providing quality care because of constant pressure from HMOs to get lower and lower premiums. Providers are having difficulty meeting financial obligations.”
The merger is expected to close in the fourth quarter and has been approved by both companies’ boards.
MedPartners shares jumped $4.25 to close at $25.625 on the Nasdaq. Earlier in the day, the shares touched a high of $27, surpassing their previous high of $25.75, set March 29.
Larry R. House, chairman, president and chief executive of MedPartners, will continue to hold those positions in the merged company.
