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TWST: Would you begin with a brief historical sketch of Prospect Medical
Holdings and a picture of the company at the present time?
Dr. Terner: Prospect Medical Holdings is a managed care management
company. We manage the medical care of approximately 185,000 enrollees
who have signed up with an HMO and have chosen one of the Prospect
Medical Group's family of IPAs to provide their medical care. IPA stands
for Independent Practice Association (an association of independent
physicians), which is a professional corporation that contracts with
primary care and the whole range of specialist physicians (each having
their own offices, their own employees and responsible for their own
overhead), providing a physician network to care for the patients
enrolled in HMOs. Some or all of the physicians have an equity interest
in any given IPA. When the Prospect Medical Group acquires an IPA, all
of the equity is transferred to the single shareholder of the Prospect
Medical Group. The HMOs delegate the entire medical care of these
enrollees to us. We organize or acquire IPAs and have developed the
systems to facilitate the efficient delivery of medical care to these
enrollees. TWST: Are there other companies competing with you in this area?
Dr. Terner: There are many. There are 150 IPAs and medical groups in
California that do roughly the same thing as we do. California is a
mature state with respect to managed care, with HMO penetration at 47%.
While there is room for all of us, internal growth is anemic, spotty and
often negative. Consquently, we have sought to grow by acquiring other
groups. Five years ago there were 300 groups in California; 150 have
disappeared due to bankruptcy, consolidation or acquisition. The
remaining IPAs tend to be profitable. Prospect Medical has made 11
acquisitions over the last eight or nine years and, more important,
consolidated them all into a single, sophisticated, state of the art IDX
IT system. We've increased our revenue from $24 million to $134 million
over that period and doubled our revenue in the last three years, having
made three major acquisitions. As we've grown larger, our financial
metrics have grown and improved, enabling us to make larger
acquisitions.
Tickers included in this excerpt: PZZ
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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