Was ailing HMO a steal or a deal for thrifty Scott?

• Position: Health maintenance organizations; DHP Holdings LLC founder, Chmn and CEO Steve Scott

Can a deal be a steal when you're robbing yourself? That's what some shareholders wonder after Durham-based Coastal Physician Group Inc. unloaded its health-maintenance organization, Doctors Health Plan Inc. The buyer was DHP Holdings LLC, owned by Steve Scott, founder, chairman, CEO and 53% owner of Coastal.

The $6 million tag puts the price per member - Doctors has 41,000 - at $146. A year earlier, Cigna Corp. paid $1,545 per head for Healthsource Inc., including 212,000 in North Carolina. "The first thing you ask is, was it sold at arm's length and was a fair price paid?" says Rod Hathaway, a vice president at Milwaukee-based Heartland Advisors Inc., a big Coastal shareholder. He refuses to elaborate on what he calls "a touchy situation."

Coastal had to sell Doctors fast to get the money loser off its books, Scott explains. Coastal's dire finances - it lost $228 million over the last two years - have caused it to unload much of its assets. This isn't the first time Scott has been a buyer. Last December, Scott Medical Group LLC snagged a physician-management company from Coastal.

Because the Doctors sale is a "conflict-of-interest transaction," Scott needed majority approval from either the other shareholders or the directors with no ties to him. There are two disinterested members on the board. Both voted for the sale. Coastal also hired an investment bank, Hartford, Conn.-based Advest Group Inc., to assess the deal and finalize it. Advest had 30 days.

So how hard was Doctors shopped? Outsiders have shown interest...