COLUMBIA/HCA ENCOUNTERS HURDLES IN UNIVERSITY PARTNERSHIP EFFORTS
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November 07, 1994 12:00 AM

COLUMBIA/HCA ENCOUNTERS HURDLES IN UNIVERSITY PARTNERSHIP EFFORTS

Jay Greene and Sandy Lutz
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    The 534-bed Medical Center of the Medical University of South Carolina is discussing a partnership arrangement with both Columbia/HCA Healthcare Corp. and American Medical International.

    A university spokesman said a hospital committee is expected to recommend entering into exclusive negotiations with one of the investor-owned chains over the next several weeks.

    The Charleston, S.C., case is one of several in which not-for-profit hospitals are attempting to overcome barriers and form partnerships with for-profit companies. The tension is particularly high among academic institutions. One such potential deal between Columbia/HCA and Emory University in Atlanta fell apart late last month (Oct. 31, p. 12).

    One stumbling block in South Carolina appears to be working out an ap-propriate partnership arrangement between a public university and an investor-owned chain, said Scott Regan, medical center director of public relations.

    The most likely structure would be the creation of a separate not-for-profit holding company that would lease the hospital to either Columbia/HCA or AMI, Mr. Regan said.

    Columbia/HCA also is negotiating with Tulane University, New Orleans, and the Medical College of Virginia, Richmond, to operate their medical centers.

    AMI recently acquired 68-bed Hilton Head Hospital, Hilton Head Island, S.C., for $12 million in a partnership deal with the University of South Carolina, which owns a 10% interest. A locally controlled foundation holds the remaining 20% interest.

    Both Columbia/HCA and AMI own hospitals in the Charleston area. AMI operates 100-bed East Cooper Community Hospital in Mount Pleasant, S.C., 15 miles east of Charleston. The Dallas-based company owns two other hospitals in South Carolina.

    Columbia/HCA owns 298-bed Trident Regional Medical Center in Charleston and three other hospitals in the state. When its expected merger with Healthtrust is completed next year, the company will own eight hospitals in South Carolina.

    Not-for-profit Georgia hospitals that opposed a joint venture between Emory University and Columbia/HCA helped block the deal that was to be a crown jewel in Columbia/HCA's collection of academic medical centers.

    What one hospital executive described as a "chasm" between for-profit and not-for-profit hospitals became apparent when some not-for-profit hospitals voiced displeasure to Emory officials.

    "A lot of the SunHealth hospitals were upset," said Donald P. Logan, president of Southern Regional Medical Center in Riverdale, a city just south of Atlanta. Southern and Emory are both members of SunHealth, a Charlotte, N.C.-based alliance of not-for-profit hospitals.

    Mr. Logan said he did not oppose Emory's deal with the Louisville, Ky.-based hospital giant. However, his hospital has decided not to join an Atlanta-area healthcare network with Columbia/HCA and Emory because it would have changed Southern Regional's tax status to for-profit.

    "The implications were too great," Mr. Logan said. Although dozens of other hospitals have made the jump from not-for-profit to for-profit this year, Mr. Logan said Southern Regional's board and executives weren't willing to do the same. "We're just not willing to pay the price," he said.

    Emory officials declined to comment on reports of pressure from not-for-profit colleagues or other "specific issues (that) led to the demise of negotiations," said spokesman Curt Carlson.

    The deal would have joined Columbia/HCA's eight Atlanta-area hospitals and 19 clinics with one of Emory's two hospitals, eight clinics and 668-member group practice (Oct. 31 p. 12).

    In addition to its Atlanta-area facilities, Emory has an affiliate network of 47 hospitals in Georgia, Alabama and South Carolina. For example, some of those hospitals have specific agreements to refer cardiac patients to Emory.

    Charles McJunkin, president of VHA Georgia, Atlanta, said, "Most of the not-for-profit hospitals in Georgia refer considerable numbers to Emory, and they may have expressed discomfort with the relationship (with Columbia/HCA)," he said. VHA Georgia is a regional system of 30 not-for-profit hospitals that's part of the VHA national alliance.

    Observers said opposition by not-for-profit hospitals was just one of several factors that torpedoed the deal. One source said Emory's board, a virtual "Who's Who?" of Atlanta corporate ex-ecutives, saw the joint venture as a good business opportunity for Emory, but became uncomfortable with Columbia/HCA's changing corporate persona. Since the joint venture was announced in May, Columbia/HCA agreed to merge with Healthtrust, a Nashville, Tenn.-based hospital chain, and Medical Care America, the nation's largest surgery-center chain.

    Corporate culture was another stumbling block, others said.

    "Several of us, including me, were quoted as saying the deal was fraught with peril and were criticized severely for it," said Sandra Person Burns, executive director of the Atlanta Health Care Alliance, a business coalition. "There was absolutely no physician buy-in when they announced it." She added that it would be difficult to "slam-dunk" Columbia/HCA's corporate culture into Emory's academic identity. Such a deal is "90% cultural and 10% contractual, but Columbia thought it was 10% cultural and 90% contractual."

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