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Financially strapped Baptist Health System of East Tennessee has allegedly garnered attention from many of the expected health care high rollers (and usual suspects) like Nashville’s HCA, Dallas-based Triad and even Memphis’ LifePoint Hospitals. But one potential purchaser with its hat officially in the ring may be the most intriguing.

Terry Douglass, former chairman and CEO of local superstar CTI Molecular Imaging, confirmed in a January report in The Knoxville News-Sentinel that he had formed ProVision Healthcare, comprised of him and more than 150 physician investors, to buy out the asset-rich hospital system. ProVision’s letter of intent was submitted earlier this year to a Baptist task force searching for debt relief solutions. While Douglass declines to comment to Business Tennessee regarding specifics, he hopes that “sometime in the near future, I will be able to discuss this exciting opportunity.” Baptist has racked up about $220 million in debt, yet it would still fetch a fair market price considering its $65 million investment in two new West Knoxville-based, cutting-edge hospitals in 2003.

While many of Tennessee’s physician-owned hospitals found in the more rural areas have yielded efficiency and high quality, the model does have its problems, says Craig Becker, president and CEO of the Tennessee Hospital Association.

“It’s sometimes difficult to keep physicians going in the same direction in a partnership. My biggest fear is that they won’t take as much TennCare/charity care,” he adds. The temptation of self-referral is also present. “I’m not a big proponent of total physician ownership. But there is something to be said for having some skin in the game,” Becker says.

ProVision’s proposal, if accepted, would make Baptist the largest physician-owned hospital in the state, albeit a minority stake of 40%.

Could an upstart like ProVision have a prayer against the buying power of the nation’s largest health care conglomerates? Maybe.

If Douglass can raise the millions needed to make Baptist an offer it can’t refuse, ProVision might be able to sell its strategy, which appears to be a whole hospital joint venture, a hybrid of physician partners and backing from powerful equity partners, says Joshua Nemzoff of Nemzoff & Co., who specializes in M&A services to acute care hospitals in the United States.

Douglass himself is not a physician, though he does hold a doctorate in engineering from U.T.-Knoxville. He has proven with the recent sale of CTI to Siemens that he’s got the business chops to take on a project of this magnitude. Only time will tell if he’s able to bid competitively against the health care behemoths, and whether he can wipe away the physician-owned stigma.

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