The clout of private equity in the health-care industry continues to grow.

Two Chicago-area private-equity firms focused on the health-care industry will merge companies they own to form a large U.S.-based provider of outpatient physical therapy services.

Water Street Healthcare Partners, which recently acquired Physiotherapy Associates from orthopedic giant Stryker Corp. for $150 million, and Wind Point Partners, which has owned Benchmark Medical since 2000, will combine the two companies in what they are calling a "merger of equals."

The combined company, which will operate under the Physiotherapy Associates name, will generate revenue of $420 million, employ more than 5,500 people and operate nearly 800 physical therapy clinics "serving millions of patients throughout the U.S.," the companies said.

The companies see the combined, larger company as being able to provide better service to patients by gaining leverage when contracting with health insurance companies and related economies of scale in what is considered a highly fragmented market.

The combined company will be based in Philadelphia, where Benchmark has its headquarters, and be run by Bill Floyd, Benchmark's chief executive. It will retain operations in Memphis, where Physiotherapy has been headquartered.

"As U.S. demographics shift to an increasingly older population the demand for physical therapy services will rise," Floyd said.

"We're already seeing it," he said. "Now more than ever people need access to consistent, high-quality physical therapy care."

AMA DUES DOWN: After a brief increase in dues-paying members and related uptick in dues revenue in 2005, the American Medical Association's membership is moving downward again.

The Chicago-based national doctors group said dues revenue fell 3 percent in 2006, to $46.9 million, compared with 2005.

The AMA attributed part of the decline to giving away "more than $400,000 in free memberships to doctors affected" by Hurricane Katrina.

Having a large number of doctors in its membership is considered important to the AMA, which has long boasted of being the largest doctor group but is often criticized by adversaries such as the insurance industry that it is losing its relevance among physicians because of deteriorating membership.

But the AMA is still the nation's largest doctor group, with 238,977 members as of the end of 2006.

Despite the large contribution that dues revenue makes to the AMA's budget, the organization still had a $30.3 million operating profit on $286 million in total revenue in 2006.

The group makes money from publishing operations and various services, such as credentialing doctors for the government and health-care organizations and selling data to health information companies and the drug and device industries.

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bjapsen@tribune.com

Hear Bruce Japsen on WBBM-AM 780 at 6:21 p.m. and 10:22 p.m. Mondays and 11:20 a.m. Saturdays.