Beverly Enterprises' effort to expand its long-term-care services to include specialty care and subacute care continued last week as the company signed a letter of intent to purchase American Transitional Hospitals in a deal valued at $33 million.
As part of the agreement, Beverly will acquire privately held ATH in exchange for 2.4 million shares of Beverly common stock. Beverly's stock closed down 50 cents at $13.13 on the New York Stock Exchange April 13, the day after the announcement. However, the final purchase price will be determined by the price of Beverly's stock on the day the deal is completed, which isn't expected to occur until June.
Beverly now operates more than 800 nursing homes nationwide. Franklin, Tenn.-based ATH operates five licensed long-term transitional hospitals in Indianapolis; Houston; Dallas; Phoenix, Ariz.; and Tulsa, Okla.
Under the proposed deal, ATH will become a wholly owned subsidiary of Beverly Enterprises, and ATH's chairman and chief executive officer, Robert Crosby, will continue to run the company. In addition, Mr. Crosby will become an executive vice president of Beverly.
"We're really excited about this deal," said Beverly Chairman David Banks. "The transitional-care model Bob Crosby has developed will slip right into our nursing homes and will take us to the next level (as a subacute-care provider)."
The deal will allow ATH to expand its current model of treating subacute-care patients in acute-care hospitals to the nursing-home setting, Mr. Crosby said.
Providers who treat subacute-care patients within acute-care hospitals license the units as a hospital within a hospital and are eligible for a higher, cost-based reimbursement from Medicare.
However, hospitals within hospitals have come under scrutiny by HCFA. Critics have contended that the arrangement exists merely to generate higher revenues for hospitals (March 28, p. 44).
However, Mr. Crosby has argued that ATH units-unlike hospitals that develop their own hospital-within-a-hospital unit-simply rent space from hospitals and aren't affiliated with their acute-care landlords.
He also said 50% to 80% of patients who use ATH's hospitals are managed-care patients who come from outside the hospital. Nonetheless, he acknowledged that HCFA's increased scrutiny of the hospital-within-a-hospital idea has prompted ATH to expand its delivery of care in other settings.
Plans exist to develop two ATH transitional hospitals in Beverly homes in Phoenix, Mr. Banks said.