Quorum Health Group will keep just three of the 10 acute-care hospitals the company bought from Charter Medical Corp. last October for $340 million.
That disclosure is contained in Quorum's Securities and Exchange Commission registration statement for its initial public offering.
In the registration statement, Quorum said it intends to sell 184-bed Suburban Medical Center, Paramount, Calif., and 183-bed Physicians and Surgeons Hospital, Shreveport, La., by the end of September. Quorum executives declined to give additional details about those future sales.
However, the Suburban facility, located in the competitive Los Angeles area, clearly doesn't fit Quorum's strategy of operating hospitals in medium to small-sized markets. Quorum owns 13 hospitals and manages another 262 in 44 states.
The Nashville, Tenn.-based company is selling 14% of its shares in the offering, which could raise as much as $100 million. Welsh, Carson, Anderson & Stowe, which financed the company's leveraged buyout in 1989, and its affiliates control 54.8% of Quorum's shares. That will shrink to 47.4% after the offering.
Also, this month, Quorum agreed to sell 110-bed Stuart Circle Hospital, Richmond, Va., to Bon Secours Health System, which operates St. Mary's Hospital in Richmond.
Quorum already had sold two of the 10 former Charter facilities and has agreed to swap another two with Columbia/HCA Healthcare Corp. (April 18, p. 8).
Of the original 10, Quorum will keep two hospitals in Macon, Ga., and 225-bed Desert Springs Hospital, Las Vegas, which had been regarded as the crown jewel in the package. Desert Springs generated a fourth of Charter's acute-care hospital revenues of $375 million in 1992, according to Charter documents. Profit figures weren't available.
Quorum also disclosed in the registration statement that it is being investigated by HHS for its preparation of Medicare cost reports for its hospitals. Quorum executives said the investigation began last June and that the company had provided a "significant volume of information to the government." A spokeswoman in the inspector general's office declined to comment on the investigation.
Quorum spokeswoman Sandy Anthony said the company expected to reach a "satisfactory conclusion" with the government on the matter. Any claims the government would have would not have a "material adverse effect" on the company, the company said.
In addition, the company acknowledged a federal inquiry into purchasing contracts between Baxter International and some investor-owned chains, including Quorum. The probe reportedly includes Baxter contracts with Quorum, HealthTrust-The Hospital Co., and the former Hospital Corporation of America, all of Nashville (Feb. 21, p. 10). The inspector general's spokeswoman said this review did not include her office.
In the year ended June 30, 1993, Quorum's hospitals bought $225 million in products from Baxter and received a rebate of less than 3% on the purchases. Quorum said it tells each hospital how much it receives from Baxter as a result of its purchases.