Reprinted from the January 27, 1997 issue of MODERN HEALTHCARE
Copyright, Crain Communications Inc., 740 Rush, Chicago, IL 60611 All rights reserved.

By Bruce Japsen

Baylor on selling block?
University, health system boards at odds over sale
The decision by the Baylor University Board of Regents to consider a merger or sale of Dallas-based Baylor Health Care System has triggered a Texas-sized controversy over control of the $1.1 billion hospital system.

The decision pits the regents against the healthcare system’s board, which opposes relinquishing any control of the system to another organization, particularly an investor-owned hospital chain.
Baylor Health Care System

The healthcare system’s president and CEO, Boone Powell Jr., said the system has been examining affiliations with Dallas-area not-for-profit systems, but his board isn’t interested in selling to an investor-owned firm.

“The board of trustees has no interest in changing ownership and community focus and no interest in selling to a for-profit,” Powell said.

Rumored to be waiting in the wings are the country’s largest and second largest investor-owned hospital chains: Nashville, Tenn.-based Columbia/HCA Healthcare Corp. and Santa Barbara, Calif.-based Tenet Healthcare Corp.

The not-for-profit system’s strong balance sheet reveals why the chains would be interested in the system but makes it unclear why the university would be willing to share or sell the good fortune of the system.

A spokesman for the university only would say that the regents “view a sale as the best opportunity to keep the system together.”

The system reported net operating income of $47.2 million on net patient revenues of $587.6 million in 1995, according to MODERN HEALTHCARE’S 1996 Multi-unit Providers Survey.

The system owns or leases eight of the 13 hospitals in its network. The remaining five hospitals are connected to Baylor through affiliation agreements, but they aren’t controlled by the system board. The system’s flagship facility is 804-bed Baylor University Medical Center near downtown Dallas.

The system’s board and university regents must jointly approve any merger or sale of the system, but the regents, who appoint the system board members, acted unilaterally to consider a transaction.

Earlier this month, the regents met in at Baylor University’s main campus in Waco, Texas. They passed a resolution to consider a merger or a sale and hired well-known hospital sales consultant Josh Nemzoff of Nashville to help them.

Nemzoff wouldn’t disclose potential buyers of the Baylor system.

Powell said he and system board members weren’t told who the regents hired as a consultant until Jan. 17, when Nemzoff unveiled his recommendations, and system and university officials met in executive session to discuss his report.

Meanwhile, at least one of Baylor’s hospitals unleashed a publicity campaign against a sale or merger.

Last week, Baylor Medical Center at Garland (Texas) took out a full-page advertisement in the Jan. 23 Dallas Morning News urging people to contact regents by phone or mail, listing their addresses and phone numbers.
It said: “Our mission is to serve the community…not Wall Street.”