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Big Merger Deal Between 2 O.C. Physician Groups Fails at 11th Hour


A merger between two doctors' groups that would have created one of the largest Orange County medical organizations was called off Wednesday.

An official for Orange Coast Managed Care Services Inc. of Orange said that more than a year's worth of merger talks with Mission Viejo-based Monarch Healthcare Inc. ended abruptly Tuesday when Monarch suddenly demanded a bigger stake in the combined firm.

Charles Madden, Orange Coast's chief executive, said Monarch's about-face--less than a week before the groups had planned to sign a merger deal--left him "flabbergasted."

Many such organizations of physicians and other providers across the country have been exploring business combinations in an effort to bargain for better terms on their contracts with managed-care health plans.

A merger of Orange Coast and Monarch would have created a firm serving about 230,000 members of managed-care plans, offering a network of about 900 doctors, and boasting annual revenue of about $150 million.

Madden, previously designated to be chief executive of the new firm, said the deal originally provided for Orange Coast shareholders to wind up with a 60% stake, while Monarch would receive a 40% ownership stake plus cash.

Bart Asner, Monarch's president, said the parties differed over how the business should "look" and that Monarch was "looking to do what's in the best interest" of its physicians. He refused to give specifics.

Orange Coast, which is affiliated with St. Joseph Hospital in Orange, represents 560 physicians, including 45 in a group practice and the rest in a loosely knit association of separate practices. Nearly three-fourths of the physicians are specialists.

Monarch, which was started two years ago, represents about 300 physicians in a loose association. About two-thirds are specialists.

An increasing number of physicians have been attracted to such groups in hopes of surviving professionally as employers embrace managed-care plans as a way of containing health-care costs.

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