Columbia/HCA Healthcare Corp.'s acquisition of the nation's largest outpatient surgery chain is expected to bring thousands of additional physicians into the chain's fold as investors and referral sources.
Last week, Columbia/HCA, the nation's largest non-government hospital chain, agreed to buy Dallas-based Medical Care America in an $858 million stock swap.
"This is bringing the old Humana doctors into the fold," said John Runningen, healthcare analyst at Robinson Humphrey. He noted that Medical Care frequently opened outpatient centers near Humana hospitals, where physicians had been alienated by the company's health plan pressures. Columbia/HCA took over those Humana hospitals last September.
Some of those ties were already on the mend, however. For example, in Dallas, Medical City Dallas Hospital, a former Humana facility, bought a 50% interest in a Medical Care surgery center on its campus last December. That deal, the terms of which were not disclosed, came after Medical Care announced an affiliation agreement with Columbia/HCA last fall. Columbia/HCA and Medical Care have other joint ventures in Corpus Christi, Texas; Houston; and Denver.
However, Columbia/HCA prefers equity arrangements to affiliation agreements, said David Vandewater, Columbia/HCA's chief operating officer. "Common ownership is an important ingredient in making these things work," he said last week.
Nearly half of Medical Care's 96 centers are located adjacent to Columbia/HCA hospitals. In addition, both companies have large concentrations in Texas. Medical Care has 17 centers and Columbia/HCA has 35 hospitals in the state. In Florida, Medical Care has 16 centers and Columbia/HCA has 48 hospitals.
Even so, only 28% of Medical Care's surgeons do inpatient procedures at Columbia hospitals, executives said. Increasing that to 38% would add $20 million in annual profits to Columbia/HCA, they said. Some 4,000 physicians refer patients to Medical Care centers; about half also are investors in the facilities.
Attracting physicians is critical as Columbia/HCA is increasingly challenged to drive more volume through all its facilities in the wake of payer pressures.
"The fundamental fact is that outpatient utilization will decrease the way inpatient utilization will decrease," said Ira Korman, president of Integra Health Services, a Dallas-based consulting firm.
The acquisition will unite two healthcare chieftains who are longtime business associates and have led their companies with similar corporate philosophies. Both Columbia/HCA CEO Richard Scott and Donald Steen, Medical Care's founder and chairman, believe physician equity is a key ingredient in keeping costs under control.
Three-fourths of Medical Care's centers are joint ventures with physicians, with an average physician stake of less than 30%. Columbia/HCA also offers physicians equity stakes, and is expected to complete such a syndication this week in San Antonio, Texas. Gary Looper, who manages that market for Columbia/HCA, said he was "tickled to death" about the Medical Care announcement and said the two MCA facilities will fit nicely into Columbia/HCA's four-hospital network.
He declined to provide financial details about the syndication, but said 400 physicians had requested offering materials.