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Wednesday, June 14, 2000

By Ken Ige, Star-Bulletin
Straub Clinic & Hospital merged with medical network
management firm PhyCor, of Nashville, Tenn., in 1997.

Straub CEO
stepping down

The hospital's physicians also
are in talks to acquire assets
from PhyCor Inc.

By Peter Wagner


Eighteen months into his tenure as chief executive at Straub Clinic & Hospital, Jonathan Grimes has resigned.

The 46-year-old administrator, an employee of Nashville, Tenn.-based management company PhyCor Inc., is scheduled to leave his post July 30.

Meanwhile, Straub's physicians are in the "early stages" of talks to reacquire the hospital's assets from PhyCor, Grimes said in an interview yesterday.

"We are definitely in the process of redefining the relationship," he said, noting discussions have been ongoing for several months.

A spokesman for the Straub physicians' group, which shares seats on a policy board with PhyCor appointees, could not be reached for comment.

PhyCor acquired Straub's assets in 1997 in a merger that had PhyCor assume some of Straub's debts and enter into a management agreement with the physicians.

Grimes, who had been vice president of development at PhyCor, came to Hawaii as operating vice president of PhyCor Hawaii in November 1998 and replaced Blake Waterhouse as Straub's CEO in January 1999.

' It's been a great adventure
for me and my family.'
Jonathan Grimes


"My role at Straub I knew from the start was going to be intermediate," Grimes said.

"It's been a great adventure for me and my family."

No replacement has been named, said Grimes, who plans to return to Nashville without immediate job prospects.

Grimes' resignation comes on the heels of the announced resignations last week of PhyCor Chairman and CEO Joseph C. Hutts and Vice Chairman Derril W. Reeves.

PhyCor, a medical network management company, has been losing money in the past two years and has seen its stock plummet on the New York Stock Exchange from a 52-week closing high of $7.87 last June 16 to today's close of 59 cents. The company's stock traded as high as $41.75 in 1996.

PhyCor operates about 20 physician networks with more than 25,000 physicians nationwide.

As of March 30, it also operated 35 clinics across the country but recently said it was selling nine of those clinics.

PhyCor made a number of cost-cutting changes at Straub, laying off about 40 of its roughly 1,300 employees last year and cutting physicians' pay up to 30 percent.

The company has said it is moving toward management-only arrangements, hoping to get away from owning assets.

PhyCor last week declined to identify which clinics are for sale. Company officials could not be reached for comment today.

"PhyCor is redefining its relationship with all its groups," Grimes said.

"My objective was to put Straub in the position to facilitate that redefining roll."

Of PhyCor's financial problems, Grimes said, "These are very difficult times for health care organizations everywhere."

The Nashville company's problems include a $26 million first quarter loss, a rating cut on its debt, a lawsuit over an Atlanta-based physicians' network it bought in 1998, and the closing of its medical clinic in Mesa, Ariz., because of financial woes.

He said Straub could pursue partnerships with other medical providers. "I think they're in a pretty good position to look for strategic partnerships."

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