Cape Coral (Fla.) Hospital executives said they would proceed this week with plans to offer their hospital to the highest and best bidder as they await a federal appellate court decision on their proposed merger with Lee Memorial Hospital in Fort Myers, Fla.
The financially troubled and scandal-plagued hospital will mail requests for proposals to about seven hospital groups that have previously shown interest in an acquisition or partnership arrangement, said Bernard O'Neil, a Cape Coral spokesman.
"We will send out packets that will set out the process, criteria and timetable," said Mr. O'Neil, who also is a vice president with Quorum Health Resources. By January, Cape Coral could begin to review offers, he said.
Cape Coral hired Nashville, Tenn.-based Quorum in September to help manage the hospital that has been beset by a scandal that resulted in the firing of its top three executives and an indictment of a former board member for insurance fraud.
At least two investor-owned hospital chains, including Columbia/HCA Healthcare Corp. and Health Management Associates, are interested in buying Cape Coral. Columbia/HCA owns two of the five hospitals in Lee County. Its proposed merger with Healthtrust would give it a third hospital. HMA owns a hospital in nearby Charlotte County.
Earlier this year, 201-bed Cape Coral agreed to be acquired by 602-bed Lee Memorial (April 11, p. 16).
But a monkey wrench was thrown into the deal when the Federal Trade Commission challenged the proposed merger (May 2, p. 6). And for the past three months, the merger has been under review by the 11th Circuit Court of Appeals in Atlanta. A decision is expected any day, Lee Memorial attorneys said.
Because of the delay and mounting financial pressures, Cape Coral's board last month asked Lee Memorial for permission to "pursue alternative affiliations, consolidations or mergers" (Oct. 24, p. 2).
Financially strapped Cape Coral has been losing about $1 million a month this year and is struggling under $175 million in debt and liabilities. Nervous bondholders and physicians on Cape Coral's medical staff have put pressure on the hospital to begin seeking another partner.
In response to Cape Coral's request, Lee Memorial initially required two primary conditions. First, Lee Memorial would have a right of first refusal of any offer. Second, Lee Memorial would be provided with monthly reports "describing and including any such back-up contracts being pursued."
Mr. O'Neil said the Cape Coral board rejected Lee's conditions because "it would inhibit other bidders." He said the reports and first-refusal conditions would most likely violate routine confidentiality requirements in the bids.
Late last week, after hearing Cape Coral's concerns, Lee Memorial withdrew all conditions, a Lee Memorial spokeswoman said.
Still, Lee Memorial has stated that it will lose several million dollars if the deal with Cape Coral falls through. Just in legal fees and staff time, Lee Memorial has "expended more than $1 million." It also said it "has forgone significant other business opportunities worth millions of dollars in reliance on a future affiliation."