Poised to capitalize on a bull market in hospital stocks, Quorum Health Group last week said it will file documents to seek permission for an initial public offering of stock within the next 60 days.
Executives of the Nashville, Tenn.-based hospital chain didn't disclose further information about the equity offering. However, there's been speculation that the venture capital-backed firm would sell stock soon to finance expansion and give its financial backers an opportunity to cash in on their investments.
Quorum was formed in 1989 when executives of Hospital Corporation of America joined forces with New York-based Welsh, Carson Anderson & Stowe to buy the hospital contract management business of Nashville-based HCA. Welsh, Carson and funds controlled by the venture capital firm own nearly 60% of Quorum. Funds controlled by Goldman Sachs, a New York-based investment banking firm, own another 14%.
Quorum, which owns 13 hospitals and manages 258, issued $100 million in publicly traded bonds in 1992. Those bonds are rated B-, a speculative grade, by Standard & Poor's Corp., a New York-based bond-rating agency.
Quorum received a speculative grade on its bonds because of its high debtload, said Michael Kaplan, the agency's healthcare analyst.
Quorum operates the nation's largest network of hospitals. However, it isn't as financially large as Columbia Healthcare Corp., which owns 193 hospitals and has annual revenues of $10 billion, because Quorum operates most of its hospitals through management contracts. In addition, many of Quorum's hospitals are small and rural. Quorum's revenue from management contracts was $50 million for the fiscal year ended June 30, 1993.
Quorum got into the hospital ownership business in 1990 when it bought its first hospital. Then, last year, it made its first major group purchase, buying 10 acute-care hospitals from Charter Medical Corp., Macon, Ga., for $340 million. Since then, it's sold two of those facilities.
For the six months ended Dec. 31, Quorum reported a 156% increase in net income to $14 million, or 26 cents per share, compared with $5.5 million, or 14 cents per share, in the year-ago period. Revenues were up 59% to $262.6 million.