Investors To Get Crack At Booming New Medical Field

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If your reaction to the word “hospitalist” is, “Is that something to do with hotels?” you’re not alone. Hospitalists are doctors, but of a very new type.

The term was coined in 1996 for a doctor who works full time with hospitalized patients. Essentially they take over the role of primary care physician for the duration of the stay, referring patients to specialists and overseeing treatment.

Dr. Robert Wachter co-authored the article that first named the specialty. He told IBD that the practice is responding to the absence of primary care doctors from hospitals.

“Twenty or 30 years ago, the average primary care spent 40% of his or her time in the hospital with an average of 10 patients a round,” he said. “Today, it’s more like 5% to 10%, with one or two patients.”

This change came through a drive to make hospital stays fewer and shorter, which is also driving the rise of hospitalists. The Society of Hospital Medicine says that the improved hospital care can not only make patients happier but save hospitals time and money.

As a result, the sector is growing fast. According to the society, there are about 20,000 of them at work in the U.S., up from 1,000 in 1997. IPC The Hospitalist Company is the main pure play in the sector, and filed to go public on Aug. 31.

THE COMPANY

IPC was founded in 1995 and formally incorporated in 1998. The staff roster has grown to 470 hospitalists, working at more than 300 hospitals in 16 states. The firm estimates that its people have seen more than 5 million patients since the start of 2004.

The firm offers its services through 170 local practice groups, clustered in 11 regions run by regional directors. Although based in California, IPC draws about a quarter of its revenue from Texas. The next largest markets are Arizona, Michigan and Missouri.

IPC believes it has a competitive edge with its proprietary information management system, IPC-Link. The system lets doctors get at patients’ medical data, create surveys and instructions for specific patients, and handle billing and paperwork. IPC takes on all its hospitalists’ billing and collections itself.

While the company’s hospitalists work anywhere that they have credentials, IPC also signs contracts with many of its hospitals, with varying terms. It also has contracts with some health plans, usually on a fee-for-service basis.

RISKS/CHALLENGES

Like doctors everywhere, IPC’s hospitalists work in a cobweb of federal, state and local regulations. Laws covering privacy, kickbacks, billing, insurance, drug prescriptions and so on must be obeyed by all workers according to where they live.

Also like all other doctors, IPC workers face the risk of malpractice lawsuits. The company maintains malpractice insurance and self-insures to some degree, but it admits there has already been one suit where the insurance failed to cover all the claims.

While IPC is the largest pure play in the hospitalists business, it competes with a variety of local players as well as more conventional hospital care providers. It competes with these rivals not just for patients and contracts, but for physician employees. Recruiting good doctors is critical to the firm’s success.

Some of IPC’s revenue comes from Medicaid and Medicare reimbursements, whose outlook is uncertain. Currently, the government expects about a 10% reduction in reimbursement next year.

About three-quarters of IPC’s revenue comes from its top four states.

THE RESULTS

In the first half of the year, revenue grew 25% over the year-ago period to $89.6 million.

Net income more than doubled to $3.65 million.

USE OF PROCEEDS

Terms have not yet been set, so there’s no estimate of proceeds.

IPC will use the money to repay debt and for general corporate purposes.

THE MANAGEMENT

Adam Singer

Chairman, chief executive, chief medical officer and director

Founded the company in 1995 after a private practice in pulmonary medicine. He earned his M.D. at Rosalind Franklin University.

R. Jeffrey Taylor

President, chief operating officer and director

Joined in 2000 after working in executive roles at Mariner Post-Acute Network, American Outpatient Services and American Medical International, now Tenet Healthcare (NYSE:THC) THC. He holds a J.D. from the Utah College of Law.

Devra Shapiro

Chief financial officer

Joined in 1998. Previously she worked at EPIC Healthcare Group, American Medical International and Arthur Andersen. She holds a B.A. in accounting from the University of Houston.
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