Acute Care Industry Review


Reprinted from the March 6, 1995 issue of MODERN HEALTHCARE
Copyright, Crain Communications Inc., 740 Rush, Chicago, IL 60611 All rights reserved

by Sandy Lutz and Karen Pallarito
Columbia keeps on growing
Shareholders of Columbia/HCA Healthcare Corp. and Healthtrust approved the $5.6 billion merger of the two companies into a 318-hospital corporation last week, and Columbia proceeded with its largest single hospital transaction.

The merger with Healthtrust, however isn't expected to be completed until later this month.  The Nashville, Tenn.-based company continues to negotiate with the Federal Trade Commission concerning antitrust conflicts in certain markets.

Sources said the FTC continues to review how the merger will affect hospital competition in Corpus Christi, Texas, and some Florida markets.  In addition, Florida's attorney general, Jerome Hoffman, is continuing his own investigation.

Richard Scott, Columbia's president and chief executive officer, said "a few additional" hospitals may have to be divested to complete the deal.  Columbia last month agreed to sell three Utah hospitals to satisfy FTC concerns in the state.

The merger boosts Columbia's financial girth to $15 billion in annual revenues, a fact that has brought trepidation from some not-for-profit hospital leaders (Feb. 20, p.2).

However, a week after two alliances of not-for-profit hospitals warned members about selling out to investor-owned systems, JFK Medical Center in Atlantis, Fla., a member of SunHealth Alliance, signed a deal with Columbia.

Hospital officials said the JFK transaction is the single largest hospital sale to an investor-owned system since the 1984 sale of Wesley Medical Center in Wichita, Kan., to Hospital Corporation of America for $265 million.

Although the exact terms of the JFK deal were not disclosed, officials said proceeds from the sale will create a not-for-profit foundation with $275 million in assets.  Officials did not disclose how much of that total is being contributed by the hospital in cash reserves.

However, that figure includes net proceeds after repaying the hospital's $100 million debt.

Officials said JFK, like many other hospitals, found itself in a rapidly consolidating market in which it had to align with a strong network.  Within the past year, 11 of 15 hospitals in Palm Beach County have consolidated into three networks, forcing JFK to make a decision as well.  Columbia has 12 other hospitals in its south Florida network, which covers Dade, Broward and Palm Beach counties.

"Stand-along facilities will not have the best access to managed-care contracts and may face challenges in continuing as viable institutions in the future," said Tony McNicholas, JFK's board chairman.

The hospital received all but 13% of its revenues from discounted or negotiated payer sources, such as Medicare, Medicaid and managed care.

"This is a fairly unusual transaction for Columbia in Florida," said Joshua Nemzoff, a principal with Ponder & Co. who led the negotiating team for JFK.  "A majority of the not-for-profits Columbia has bought in the state have been in trouble."

In contrast, JFK was "one of the top-performing hospitals in the state," he noted.

For the year ended Sept. 30, 1994, JFK reported operations income of $10.3 million on revenues of $127.6 million.

The hospital was growing in a competitive market.  In the past two years its inpatient admissions increased 26% to 12,500 in 1994.

Another Columbia deal in Florida was hitting more snags last week, however.  The Florida Consumer Action Network, which claims to be the state's largest consumer group, demanded the release of certain documents from the board of Helen Ellis Memorial Hospital, Tarpon Springs.

Columbia has agreed to lease the city-owned hospital in a joint venture that requires approval from voters in the town of 18,000 residents.  The hospital currently is leased from a not-for-profit foundation, which would continue to own a 50% stake in its operation.

Calling Columbia a "mega-conglomerate," the group's executive director charged the board with operating in secret and not revealing enough information about the deal with Columbia.

At the urging of Tarpon Springs City Manager Costa Vatikiotis, the Tarpon Springs City Commission late last month delayed setting a vote on the transfer of the hospital's lease.  Hospital officials had urged the five-member council to set a May 23 date.

Jeff Touchton, a spokesman for the hospital, said there was a general consensus that the community needed more information about the deal before voting.  The city must give 45 days' notice before holding the election, but the hospital wanted to give voters as much time as necessary, he said.  "We feel we need to inform and educate everyone about the future of the hospital," he added.

Meanwhile, healthcare executives predicted Columbia soon will expand its presence in the Northeast.

Reports were widely circulating that the chain is negotiating with Landmark Medical Center in Woonsocket, R.I.  When contacted by MODERN HEALTHCARE, Stephen Hines, a vice president for human resources and public relations at the 295-bed facility, said officials had not comment.

Columbia also declined to comment on whether it is negotiating with Landmark.

The chain now operates two acute-care hospitals in New Hampshire - Portsmouth (N.H.) Regional Hospital and Parkland Medical Center in Derry.

Jim Forbes, a vice president with CS First Boston Corp. in New York, declined to cite any particular deals, but said he knew that Columbia will be moving into the Northeast in "a big way.

"To them, I think it's the one part of the country that's relatively untapped," he said.  Forbes said he expects the chain to make an announcement in the next two to three months, with other acquisitions and joint ventures to follow.

Possible expansion areas include Massachusetts and Pennsylvania, he said.



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