Executives of Columbia/HCA Healthcare Corp. and Medical College of Virginia Hospitals last week confirmed that they're talking about a joint venture, lease or other business arrangement.
The talks come on the heels of collaborative discussions between Columbia/HCA and another major teaching hospital, Emory University Hospital in Atlanta (May 2, p. 10).
"Clearly, we cannot be an island," said Eugene P. Trani, president of Virginia Commonwealth University, last week when asked about his discussions with Rick Scott, president and chief executive officer of the nation's largest hospital chain. Those discussions were initiated by Columbia/HCA, Mr. Trani said.
Depending on how a transaction is structured, Columbia/HCA could double the size of its network in the Richmond area, where it operates three hospitals with about 1,000 beds. There are about 15 medical-surgical hospitals in Richmond.
Last month, the Virginia Legislature passed a law that provides the state's two university teaching hospitals with increased flexibility to enter new partnerships. University officials are trying to determine how far that flexibility extends, Mr. Trani said. For example, the law is unclear about whether a company such as Columbia/HCA could lease or buy an equity interest in the hospital.
Medical College hospital, an 852-bed institution that is part of Virginia Commonwealth University, has an annual budget of $370 million.
Mr. Trani described discussions with Columbia/HCA as being in the "very preliminary stages." However, he said the hospital executives aren't talking with companies other than Columbia/HCA at this time. "Clearly, there's a desire on both sides to see what can be done," Mr. Trani said.
Columbia/HCA now operates two teaching hospitals, Michael Reese Hospital and Medical Center in Chicago and the University of Louisville (Ky.) Hospital.
The negotiations with the Richmond hospital are among 40 that Columbia/HCA is conducting in markets throughout the country, Columbia/HCA executives told analysts last week in a conference call.
Since January, the chain of 196 hospitals in 26 states has acquired six hospitals, one of which, Winter Park (Fla.) Memorial Hospital, is a joint venture. The most recent acquisitions were a swap with Quorum Health Group in which Columbia/HCA received two Atlanta hospitals from Quorum for two Columbia/HCA hospitals in Texas and Alabama.
In addition, Columbia/HCA has agreements to buy two others, another of which, Rapides Regional Medical Center, Alexandria, La., is a joint venture.
Also last week, the company released its first-quarter earnings, which showed an 8% increase in operating income but an 80% drop in profits because of several one-time charges.
The company took $159 million in one-time charges related to the merger with Hospital Corporation of America in February. The charges included $40 million in employee benefits and severance, $12 million in professional fees, $42 million to write down information system assets and $53 million to write down assets in markets where hospitals will be consolidated. Operating income for the quarter was $603 million, compared with $557 million in the same quarter last year.
Columbia/HCA reported net income of $45 million, or 13 cents per share, for the quarter ended March 31, compared with $221 million, or 65 cents per share, in the year-ago period. Revenues increased 5% to $2.8 billion.
Because the HCA merger was just completed in mid-February, "few of the HCA merger synergies were realized in the first quarter. These synergies represent additional cost-saving opportunities in the future," said David Vandewater, chief operating officer.