Wall Street buys docs: an old story

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greg_rbmaOne of the truly satisfying things about packing up and stepping away from the office to attend a conference is partaking in the primitive ritual of passing information from person to person, with no assist from email, smart phones, or text. It’s all about the story.

For example, while attending the recent RBMA Spring Summit meeting, instead of reading about it in the WSJ or the LA Times, I heard that dialysis giant DaVita had purchased HealthPartners, the largest operator of physician groups, direct from fellow Californian and MBA, Greg Kusiak (who also shared the news that grandson Parker Searles had reached the one-year milestone).

The details: The purchase price was $3.7 billion in cash and $700 million in stock; HealthPartners serves approximately 667,000 patients through 700 employed or affiliated physicians. Berkshire Hathaway was an investor with Da Vita, and Munger, Toles & Olson was advisor for the seller. Charlie Munger is a Hathaway partner, so negotiations were friendly. Greg thought HealthPartners, which has a big presence in California, Nevada, and Florida, had profit of $448 million on $2.6 billion last year. He speculated that DaVita liked the presence in those markets.

For perspective, Greg suggested we go back to the Radiologix deal in the ‘90s, in which numerous radiology practices were rolled up into a PPM in exchange for stock in the company.

To Wall Street, it looks like this, he explains: “We will sell stock, you will get a multiple, and you will retain your employment at 80% of the former level.”

To the physician, it looks like this, he adds: “Guys who are old enough cash out and the other 80% end up working for less money, and then get screwed. The problem is, the guys on Wall Street never get screwed, they just pass it on.”

Random Encounters at the RBMA Photo Gallery