Doctors Health given green light SEC approves registration to offer stock to physicians

March 11, 1997|By M. William Salganik | M. William Salganik,SUN STAFF

Doctors Health, the largest of about half-a-dozen local doctor-owned physician groups, said yesterday that the Securities and Exchange Commission has approved its registration to offer 4.1 million shares in stock to physicians.

The SEC's approval positions Doctors Health -- which has been exchanging stock to acquire medical practices -- to continue to grow.

The registration statement does not allow Doctors Health to offer stock to the public, something it has indicated it might do later.

Before it could do a public offering, it must receive SEC approval and amend its statement, said Paul Serini, executive vice president and director of legal services.

While approval of the initial registration took a year, an amendment could probably be approved more quickly, he said.

While Doctors Health has issued 5.3 million shares through private placements -- about 60 percent to doctors and 40 percent to investors -- registration is needed to continue to grow, Serini said. He said it would allow Doctors Health to move forward in three ways:

It can offer stock to more doctors. SEC registration is required once the number of stockholders gets large enough, Serini said.

It can operate more easily outside of Maryland. It has extended its doctor network into Northern Virginia, with the purchase in November of Medtrust Medical Group there. It is also looking at the District of Columbia.

It can offer stock to a large number of doctors at one time -- for example, to another large doctor group that may want to join Doctors Health.

"That is where we think the market is going as the market consolidates," Serini said.

The large doctor groups are seeking contracts with HMOs and other managed-care insurers in which the physician groups are paid a flat fee per member per month to provide all care. Size is important, because it provides negotiating clout with insurers and creates a large pool of doctors and patients to spread risk.

While the majority of Doctors Health's 310 primary care physicians, 84 obstetrician/gynecologists and 756 specialist physicians are under contract, Serini said 272 doctor "entities" (some are multi-physician practices) own stock, accounting for nearly 500 physicians.

The new shares can be offered only to doctors; physician stockholders who want to sell must offer it to their partners or back to the corporation.

The registration permits 1 million of the 4.1 million shares to be offered as stock options.

In addition to doctor-owned groups, physician practices are being consolidated by hospitals and by investor-owned firms.

Pub Date: 3/11/97

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