More than a dozen hospital companies or groups have expressed interest in buying Hilton Head (S.C.) Hospital, a 68-bed resort-island facility managed by Quorum Health Resources.
But Hilton Head's decision to consider options also has drawn concern from some of the island's 23,694 residents and several board members who have questioned the speed with which the hospital is moving.
The proposed sale comes on the heels of the recent resignation of Hilton Head's administrator, Steven Caywood, and a critical report by Nashville, Tenn.-based Quorum last fall that indicated some physicians were dissatisfied with the hospital's board.
Mr. Caywood, 52, a Quorum employee whose resignation is effective March 11, said he's leaving to give the board complete freedom to decide the hospital's future.
"Given the change in direction of the board on the future of the hospital, it is appropriate I resign to allow them to explore all options," said Mr. Caywood, a 26-year veteran administrator who has managed Hilton Head since 1992.
The potential sale also comes several months after the hospital conducted a high-profile credentialing review of its biggest admitter, Rajko Medenica, M.D. Dr. Medenica, an oncologist, has been named in a malpractice lawsuit for an operation he conducted at Hilton Head on a female cancer patient in 1992.
Dr. Medenica, who was represented by famed trial attorney F. Lee Bailey, agreed to limit the types of procedures he performs at the hospital, and that's expected to reduce the facility's revenue, a hospital spokesman said. Hilton Head was represented by well-known hospital attorney John Horty, the spokesman said.
But William L. Bethea Jr., Hilton Head's chairman, said the hospital is looking to sell or merge solely because of healthcare reform. The board voted to request acquisition proposals in January.
"We are looking at aligning with larger organizations to access managed-care plans and help us deal with changes in healthcare," Mr. Bethea said. "We'd like to do it now while we are in a good, solid position."
Sources said some board members' interest in a sale was sparked by inquiries made late last year by Columbia/HCA Healthcare Corp. and Health Management Associates.
Mr. Bethea said the hospital management companies began site visits last week. By the end of March, the board will begin reviewing request for proposals submitted by the companies, he said.
The companies include Quorum, Columbia, HealthTrust-the Hospital Co., OrNda Healthcorp, American Medical International, Bon Secours Health System, Health Management, Blue Cross and Blue Shield of South Carolina and several area not-for-profit hospitals, including Beaufort (S.C.) Memorial Hospital, Hilton Head's main competitor.
Jack McConnell, M.D., a former board member who resigned last month, said he's concerned about the effects of outside ownership of the hospital. He declined say why he resigned.
"Most board members don't know what's going on. I was told there had been a decision to sell the hospital in December. I was concerned that we hadn't talked about it on the board," said Dr. McConnell, who was chairman of the hospital's strategic planning committee.
A source close to the board who asked to remain anonymous said Columbia/HCA and Health Management Associates had sent letters in November indicating interest in acquiring the hospital. The source said those inquiries stimulated the board's review of a possible sale.
William Shoen, HMA's president and chief executive officer, confirmed that the Naples, Fla.-based company contacted Hilton Head last fall. A Columbia spokesman also confirmed contacting Hilton Head late last year.
Hilton Head reported net income of $1.1 million on total revenue of $27.9 million in 1993, according to HCIA, a Baltimore-based healthcare research company. During the past three years, the hospital has earned a total of $9 million, although income has been declining.
Opened in 1975, the hospital has total assets of $23.1 million and total liabilities of $9.8 million, HCIA said.
If sold for $15 million, the estimated book value of the property, some board members would like to pay off the hospital's debt of $7.4 million and place the remaining $7.6 million in the hospital's foundation, which could then be used to support community health activities, said the source. The foundation now has an account of about $2 million, the source said.