Emory University System of Health Care in Atlanta last week signed letters of intent to enter into two joint ventures with Columbia/HCA Healthcare Corp., creating the region's most powerful healthcare system with nine hospitals and 27 clinics.
The new system, which would be linked through ownership and managed-care contracting, also could become one of the largest regional systems in the nation with a university teaching hospital as its centerpiece.
The deal could become a prototype for comparable ventures in other markets. Columbia Chief Financial Officer David Colby confirmed that the Louisville, Ky.-based chain is discussing similar arrangements with at least 17 other not-for-profit teaching hospitals.
In Atlanta, the first joint venture links Emory's 583-bed Crawford Long Hospital with Columbia's eight Atlanta-area hospitals. The second combines Emory's eight primary-care clinics with Columbia's 19 clinics.
The deal does not include 604-bed Emory University Hospital or Columbia's eight other Georgia hospitals. Those hospitals, however, could be linked with the joint ventures through managed-care contracting.
Final agreements between the parties could take another five to six months to complete, said Thomas Frist, M.D., Columbia/HCA's chairman. "We don't know of any medical centers that are linked with this many primary-care hospitals," Dr. Frist said. "We are in somewhat uncharted waters," he said.
Rumors of the pending deal over the last few months caused a number of Atlanta's 29 other hospitals to consider merging, said William Foley, president and chief executive officer of Saint Joseph's Health System, which operates St. Joseph's Hospital of Atlanta.
"They are going to have a major impact on the market with the geographic access they have and the collective strength," Mr. Foley said. "The rumors have caused a panic among hospitals."
The Emory-Columbia system would face three main competitors for managed-care contracts in the Atlanta area. They include 10-hospital Medical Resource Network, a PPO formed earlier this year by a group of VHA of Georgia hospitals; SouthCare Medical Alliance, a PPO formed by six other VHA of Georgia hospitals; and seven-hospital Northwest Georgia Health System.
Under the transaction, Columbia will become the hospital joint venture's general partner, with a 75% share of the combined assets, and Emory will become the limited partner with a 25% share, said Mr. Colby. Profits from the hospital joint venture will be shared 75%/25%.
Total assets are unavailable, as evaluations of the hospitals are being conducted by the Atlanta office of KPMG Peat Marwick, Mr. Colby said.
Emory will be responsible for conducting managed-care contracting for both the hospital and physician joint ventures. In the primary-care center joint venture, Emory would become the managing partner in charge of recruiting, credentialing and supervising physicians, said Charles R. Hatcher, M.D., Emory's vice president for health affairs.
Dr. Hatcher said Emory intends to recruit other private practice physicians to staff the clinics. In addition, Columbia and Emory will seek acquisitions of other clinics to bolster its market presence, he said.
Columbia/HCA's agreement with Emory was the second deal with a not-for-profit hospital last week (See related story, p. 24).
The company also signed a letter of intent with Murray County Hospital Authority to lease Murray Medical Center, a 42-bed hospital in rural Chatsworth, Ga. The hospital is about 30 miles south of Chattanooga and would be Columbia/HCA's sixth hospital in the Chattanooga area.
Earlier this year, Murray Medical Center sought out healthcare systems interested in affiliating. The hospital has lost money for the past three years; last year, it lost $253,000 on revenues of $7.5 million, according to the hospital chief operating officer, Terry Laitala.
The hospital's primary competitor is Hamilton Medical Center, a 268-bed not-for-profit hospital in nearby Dalton, Ga.