Acute Care Industry Review


By Kevin Lumsdon

For-profit suitors lined up six deep this spring to bid for Lexington Medical Center, a courtship that began after the hospital abandoned a merger with two regional facilities in nearby Columbia, S.C. But county-owned Lexington spurned all offers, choosing to stay single at a time when merging or selling has become synonymous with survival.

CEO Mike Biediger shakes off any suggestion that Lexington’s board has only delayed the inevitable. “No one can predict the future,” he says, adding that the West Columbia hospital is “very solid, very strong” as a solo player. Last year, it had a margin of $7.9 million, before writing off some onetime expenses. This year looks even better, says Biediger. The hospital also added new facilities and equipment in recent years (its assets have an average age of 5.5 years), but without taking on a lot of debt.

What’s more, doctors, employees and Lexington County residents seem to prefer the status quo right now. “There was some concern that changes to the hospital might be unfavorable if we were to merge or sell out.” says Biediger. “They’re happy that we’ve decided to remain independent.”

It’s more than Lexington’s solid financial footing that made the hospital “one of the hottest properties in the country,” as Columbia’s daily newspaper, The State, put it. The hospital is situated in one of South Carolina’s fastest-growing counties, thanks to an influx of white-collar workers who commute to jobs in Columbia and elsewhere in the region. The county’s population , growing at a rate of 2.2 percent a year, is attracted by good schools and new homes built on the shores of nearby Lake Murray.

What’s not booming in Lexington County – and elsewhere across the state so far – is managed care. Though the pace has picked up in recent years, HMOs and other health plans have nabbed only 9 percent of the population, says Jim Head, senior vice-president at the South Carolina Hospital Association. Two years ago, then-Gov. Carroll Campbell announced a plan to move Medicaid recipients into managed care plans, a change that might have spurred employers to follow suit. But given uncertainties over how Campbell’s plan would be financed – and with Medicaid block-grant proposals being debated in Washington – the South Carolina Legislature prostponed action, says Head. In the meantime, HMOs are lining up for licenses to do business in the state.

Perhaps the biggest jolt to Columbia’s health care market occurred last year, when Lexington, Richland Memorial Hospital, and Baptist Medical Center announced their intent to merge. That domino apparently was tipped by the stunning news that the region’s fourth big player, Providence Hospital, had signed a 50-50 joint venture with for-profit Columbia/HCA Healthcare Corp.

Despite the momentum added by Columbia/HCA’s entry on the scene, Lexington broke off talks with Baptist and Richland after a couple of months, “They were willing to move the merger along more quickly than we were,” says Biediger. “At that stage, we hadn’t discussed any consolidation of clinical services. We wanted to nail down how our services would be affected.”

After pulling out of that deal, Lexington’s board was free to entertain offers from others, including Columbia/HCA. The Nashville, Tenn., chain needs a hospital such as Lexington to round out its services in the region, says Head. Providence, for example, doesn’t deliver babies, though it’s well known for cardiac care. Other for-profit chains made their own plays for Lexington, including Tenet Healthcare Corp., Quorum Health Group, OrNda Healthcorp, Universal Health Services and Health Management Associates. In rejecting them all, says Biediger, Lexington still has not closed the door on future alliances and affiliations.

That day may arrive sooner rather than later, says Josh Nemzoff, a consultant in Nashville who works with hospital boards to evaluate mergers and other options. “The tide is definitely changing among hospitals owned by government bodies,” says Nemzoff. “They’re deciding that maybe they shouldn’t be in the health care business.”

Nevertheless, county hospitals such as Lexington have an especially tough time explaining a sale to the many people they need to please. “Selling your hospital is never popular with the people who work there, the medical staff or the people out in the community,” Nemzoff adds. “In add the deals I’ve witnessed, I’ve never seen those groups stand up and say it’s a great idea.”

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