Three more not-for-profit hospitals last week said they plan to sell their institutions to investor-owned systems in deals that total more than $295 million.
Louisville, Ky.-based Columbia/HCA Healthcare Corp. is spearheading two of the deals, the biggest for Tulane University Hospital and Clinics, New Orleans.
Tulane signed a letter of intent with Columbia/HCA because the university wanted to "partner with someone who could provide a large share of the market," said John LaRosa, M.D., chancellor of the university's medical center. Columbia/HCA Healthcare Corp. has agreed to pay $130 million for an 80% interest in the 269-bed tertiary-care hospital.
The deal also would accomplish one of Columbia/HCA's goals-to affiliate with top medical institutions in each of its markets.
Earlier this year, talks between Tulane and Ochsner Medical Institutions, which operates 409-bed Ochsner Foundation Hospital in New Orleans, broke down over administrative issues.
Dr. LaRosa noted that Tulane considered several options, including buying its own network. That strategy, however, "would use up a substantial amount of resources of the university," he said.
Even though Tulane would have only 20% equity interest, he said, it would appoint half of the board's directors, including the chairman. Columbia/HCA would be the venture's general partner and would hold the hospital's management contract, according to the proposed agreement.
Dr. LaRosa said the deal Tulane made was not motivated by a need for cash. However, he said, Tulane is "like most universities in that it is looking to the future with some anxiety."
According to the Chronicle of Higher Education, the university had an endowment of $291 million in 1993, which ranked it 65th in the nation.
Although the $130 million in sale proceeds and 20% of the hospital's future profits would flow to the university, Dr. LaRosa said Tulane had not determined how the money would be spent.
Columbia/HCA owns two other hospitals in New Orleans.
Columbia/HCA found last week that it will encounter some new investor-owned competition in one of its Florida markets. Champion Healthcare Corp. said it would buy Methodist Medical Center, Jacksonville, Fla. Terms were not released, although Methodist has about $89 million in debt that will be assumed or repaid.
Methodist is the second not-for-profit healthcare organization in Jacksonville to agree to a buyout from an investor-owned chain in the past month. In late August, Columbia/HCA agreed to buy 80% of Memorial Healthcare System, which operates two hospitals and three outpatient surgery centers in Jacksonville (Sept. 5, p. 6).
The Methodist deal is the latest in a spree for Champion, a three-hospital chain. Last month, the Houston-based company agreed to buy two psychiatric hospitals for $25 million, and Champion also is in the midst of a $38 million deal to merge with AmeriHealth, a small Atlanta-based hospital chain (Sept. 26, p. 18).
Finally, in San Angelo, Texas, Columbia/HCA has agreed to pay $75 million for 142-bed Angelo Community Hospital, a not-for-profit hospital in a remote area of west central Texas.
Like Tulane's board, the trustees of Angelo realized the hospital needed to be part of a larger system, said Robert Butler, Angelo's president and chief executive officer. "We're seeing some national contracts dealt out, and we were being excluded," he said.
Initially, the hospital's board talked with Quorum Health Group, a Nashville, Tenn.-based hospital management company that operated another hospital in town, about a possible deal. That led to inquiries by American Medical International, a Dallas-based hospital chain, and Columbia/HCA, Mr. Butler said.
Proceeds from the sale will repay about $25 million in bond debt. The current hospital board will govern a new not-for-profit foundation financed by the remaining $50 million, he said.
The status of Columbia/HCA Healthcare Corp.'s deals with teaching hospitals:
Tulane University Hospital and Clinics-Columbia/HCA signed a letter of intent to own 80% of the hospital.
Emory University System of Health Care, Atlanta-Columbia/HCA will own 75% of a joint venture that operates nine hospitals. The deal is expected to be completed later this year.
University of Louisville (Ky.)-Columbia/HCA signed a 25-year lease to operate University of Louisville Hospital in July.
Vanderbilt University Medical Center, Nashville, Tenn.-Columbia/HCA owns 50% of the system's psychiatric hospital.
Medical College of Virginia Hospitals, Richmond-Affiliation talks underway.