Casting doubt on the future of one of the country’s largest reproductive-service chains and its pioneering chairman, Dr. Norbert Gleicher, Chicago-based GynCor Inc. has filed for Chapter 11 bankruptcy protection.
GynCor, which operates locally as the Center for Human Reproduction and has clinics in six states besides Illinois, owes creditors nearly $30 million, court documents show. The clinics, however, will continue to operate and their 250 employees will be paid as company officials con-
sider a reorganization, Gleicher said Tuesday.
In the early 1990s, CHR gained a lion’s share of in-vitro fertilization services in the Chicago area when the state widened insurance coverage for couples who needed medical help to have a baby. CHR won bidding contests to become the service provider for Blue Cross and Blue Shield of Illinois and other insurers as the era of managed-care health maintenance organizations took hold.
CHR also was responsible for the first in-vitro fertilization delivery in the Midwest and recently gained attention by offering so-called money-back guarantees for infertility treatments.
Gleicher, himself, has been a national leader in the field of in-vitro fertilization, pushing medical and cultural boundaries in the mid-1980s as fast as he pushed his chain to expand to 26 clinics throughout the country in the 1990s.
But an unstable capital base, a failed public offering, large salaries and undisclosed “internal issues” led to last week’s bankruptcy filing, according to a review of court documents as well as interviews with company officials and individuals close to the company.
Gleicher said the company will contemplate an internal restructuring that could keep it running. He said it made a profit during the last year.
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“I don’t think any of our patients will even notice,” said Gleicher, who estimated that CHR treats between 7,000 and 10,000 people in the Chicago area each year.
Still, CHR’s troubled financial picture came as little surprise to colleagues and competitors in the fields of obstetrics and gynecology, some of whom said Gleicher’s aggressive approach to medicine did not translate well into the world of business, particularly in an industry where quality control is of utmost importance.
“The rumors of his death were like Mark Twain–we kept waiting for it,” said Dr. Richard Rawlins, director of the IVF unit for Rush-Presbyterian-St. Luke’s Medical Center. “It’s all really a shame because he provided a good service at a good cost.”
The bankruptcy filing listed 18 creditors, including investors, lawyers, accountants, real estate agents, pharmacists, a marketing firm, a diagnostics company and computer and furniture suppliers. Creditors said the privately held center, which reported 1998 revenues of $47 million, had longstanding problems paying its bills.
“We’ve been selling to them about 10 years. They’ve always had cash-flow problems,” said Jay Pine, president of Braun Drugs, of Chicago, which is listed in court papers as being owed more than $298,000.
But those same papers indicate that any cash-flow problems apparently did not extend to salaries of staff, including Gleicher’s. A salary list attached to the bankruptcy filing indicated that Gleicher is paid roughly $700,000 annually.
“They have some rather hefty salaries. I know doctors make a lot of money, but some of them seem well in excess of a lot of money,” Pine said.
Gleicher, who also served as the company’s chief executive until 1998, said his salary is not out of line with industry standards.
And while several competitors said privately that CHR expanded too quickly, Gleicher blamed the company’s financial difficulty on a public stock offering that failed in 1996 amid a market downturn. The company had assumed a great deal of debt in anticipating the offering would net the company millions, Gleicher said. Ever since, private investments have dried up, he added.
“It is very easy to say we grew too much and spent too much,” Gleicher said. “But we did what everybody else felt was right in those days and that was to acquire practices. We would have walked away with $35 million from that public offering.”
Outside Illinois, the company has clinics in California, New York, New Jersey, Florida, Delaware and Maryland.
Nick Pann said his marketing firm filed suit against the center earlier this year after waiting more than two years to be paid a debt of $391,000 for radio time to promote a New York branch of the infertility center.
“We kind of hung with them on faith because they seemed like a pretty viable business,” said Pann, of Storandt Pann Margolis, in Western Springs. “We’ve been blindsided.”
Chapter 11 allows a company to postpone payment to its creditors while it reorganizes its finances.
The largest creditor, Vivra Inc., a health-care service company based in San Mateo, Calif., invested in the center in 1996 on the premise that CHR would buy up endocrinologists’ practices and eventually sell stock to the public, said Vivra chief financial officer LeAnn Zumwalt. Court filings indicate that Vivra is owed $17 million, but Zumwalt said the figure is only $12 million. She could not explain the discrepancy.
John Rinehart, a CHR endocrinologist, said he and other physicians working for the center sold their practices to the management company, GynCor.
“The financial aspects we turned over to them and thought we could concentrate on the practice of medicine,” he said.
Rinehart said the bankruptcy means physicians will be working on reduced salaries, though he declined to offer specifics.
CHR has not been without its share of public controversy over the years.
In 1994, a North Side woman who prosecutors said passed only a gym class during two semesters of college was convicted of impersonating a medical doctor at a CHR clinic.
She furnished the clinic a photograph of herself and the clinic mailed its clients brochures describing her as holding both a PhD and a medical doctor’s certificate from the University of Chicago.
CHR raised ethical questions in 1998 when Gleicher appeared unconcerned that his clinic was treating a couple not married to each other–and, in fact, married to other people.
Just this month, Gleicher drew attention–and criticism from some bioethicists–when he marketed a plan to offer full refunds to couples who don’t conceive after undergoing treatment.
The program, deemed “excessively commercial” by its critics, hoped to attract business from couples who ordinarily couldn’t afford infertility services.
All couples due a refund from the program will receive one, despite CHR’s financial problems, Gleicher said.
Nevertheless, Gleicher has been a noted pioneer in the field of in-vitro fertilization.
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He has been president of CHR since 1981, shortly after its founding. A graduate of the Tel Aviv Medical School in Israel who completed his residency at the Mt. Sinai School of Medicine in New York, he was chairman of Obstetrics and Gynecology at Mt. Sinai Hospital Medical Center in Chicago from 1980 until 1990.
He also has published hundreds of peer-reviewed scientific papers, abstracts and book chapters and is editor-in-chief of two scientific journals, The Journal of Assisted Reproduction and Genetics and the American Journal of Reproductive Immunology.
“I used to think he came full-blown from the head of Zeus, but he’s mellowed quite a bit over the years,” said Rawlins, noting that Gleicher started the first IVF program in Illinois at Mt. Sinai in the early 1980s amid a climate fraught with political and religious pitfalls.
“He fought the culture and went ahead and did it,” Rawlins said. “He blazed the trail and many have followed. You could call him a pioneer in the field.”