In a deal valued at more than $44 million, Universal Health Services beat out two other hospital chains to invest heavily in a booming Texas border community by acquiring 94-bed Edinburg (Texas) Hospital.
Edinburg is in Hidalgo County, an area where job growth and population prospects have been buoyed by trade with Mexico. With about 420,000 residents, Hidalgo County was the nation's fourth-fastest-growing metropolitan area from 1990 to 1992, according to U.S. Census Bureau reports.
Edinburg's not-for-profit hospital, which is owned by an independent hospital authority, lacked the capital to expand, officials said. "We needed a capital infusion," said Mark Thompson, the hospital's assistant administrator.
Even so, some in the community oppose the deal, and a citizens group last week was trying to collect the necessary 300 signatures to let voters decide whether the sale should go through. The deal is expected to be completed within four months, executives said.
Some residents "didn't want to see our healthcare concentrated in the hands of a single provider," said Robert Gandy, president of the First National Bank of Edinburg and a supporter of the petition drive. Mr. Gandy had supported a competing bid by Community Health Systems for the hospital.
The other bid came from Healthtrust-The Hospital Co. The total value of that bid and Community's weren't disclosed.
King of Prussia, Pa.-based Universal also owns the county's largest hospital, 428-bed McAllen (Texas) Medical Center. That hospital is the most profitable of the chain's 13 acute-care and 13 psychiatric facilities (Dec. 6, 1993, p. 20).
With Edinburg, Universal would operate two of the five hospitals in Hidalgo County.
Under the terms of the deal, Universal has agreed to either buy or lease Edinburg for 10 years for $14 million, hospital executives said.
However, because the hospital is owned by an authority, it's not clear what the $14 million will be used for, Mr. Gandy said. "That will be the subject of the next debate."
Universal also has agreed to build a $25 million replacement hospital in Edinburg and spend about $5 million renovating the current facility into a specialty hospital. In addition, Universal has pledged to build a medical office building for an undisclosed price.
Houston-based Community and Nashville, Tenn.-based Healthtrust also offered to build replacement facilities.
However, Universal's operations at nearby McAllen weighed heavily in the decision to sell to that firm, said Edinburg Chairman Albert Morales. He noted that McAllen Medical Center is the state's eighth-largest Medicaid provider, so affiliating with that hospital would help Edinburg when the state moves to select contracting. "Not being included in one of those (Medicaid) contracts would jeopardize the existence of the hospital," Mr. Morales said.
Converting the hospital to for-profit status also will add substantially to the county's tax revenues. Mr. Morales estimated that the replacement hospital will add $700,000 annually in taxes, and the current facility will pay $300,000 annually in taxes.
The sale adds jobs, too, because "we'll have two hospitals as opposed to one now," Mr. Morales said.
In 1992, Edinburg, which is managed by Nashville-based Quorum Health Group, reported net income of $457,667 on net patient revenues of $21.8 million, according to HCIA, a Baltimore-based healthcare research firm.