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Reprinted from the October 2, 1995, issue of
MODERN HEALTHCARE
Copyright, Crain Communications Inc., 740 Rush Chicago, IL 60611 All
rights reserved |
by Sandy Lutz
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| Universal Health to buy Amarillo public
hospital |
In a surprise move, the public hospital district in
Amarillo, Texas, last week agreed to sell 360-bed Northwest Texas Healthcare
System to Universal Health Services, a King of Prussia, Pa.-based company.
The tax-supported hospital district had been talking to Columbia/HCA
Healthcare Corp. earlier this year, then decided to put the hospital up for
bids. About 10 companies expressed interest in the hospital, and last week
the hospital district’s board voted to sign a letter of intent with
Universal.
“We have come to the conclusion that the most economic and sensible way to
maintain our mission of providing high-quality, cost-effective care to our
area, including our medically indigent, is for the city to get out of the
high-risk business of running a healthcare enterprise,” said Jim Simms, the
board’s chairman.
Terms of the deal were not released, but they are expected to be disclosed
in a couple of months when the city’s commission votes on the deal.
Northwest Texas’ earnings before interest, taxes, depreciation and
amortization – a common formula called EBITDA used in valuation – were $28
million in 1994.
Hospital chains typically pay between five and seven times EBITDA, which
would give an estimated purchase price of at least $140 million.
The hospital district’s decision relieves it of being both the payer and
provider in healthcare, said Josh Nemzoff, president of Nemzoff & Co.,
negotiated the deal for the hospital district. He said district residents
will no longer be paying $8.5 million a year in taxes. In addition,
Universal is expected to pay taxes of about $3 million a year.
Universal, an investor-owned system, operates 31 hospitals, seven of them in
Texas.
Universal also agreed to provide “hospital-based indigent care to qualified
indigents that is medically necessary,” according to the agreement.
Northwest Texas provided $21.2 million in charity care in 1994.
The hospital reported net income of $13.8 million on revenues of $129
million in the fiscal year ended Sept. 30, 1994.
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