Columbia/HCA Healthcare Corp. and American Medical International are at loggerheads over control of one of the largest hospitals in Dade County, Fla., 406-bed South Miami Hospital.
The hospital has signed a letter of intent with Dallas-based AMI, but Columbia/HCA said AMI can't do business in southern Miami because AMI signed a five-year noncompete agreement in 1991.
The noncompete agreement was part of AMI's sale of Kendall Regional Medical Center, Miami, to Columbia/HCA in June 1991. At the time, Columbia Hospital Corp. was an 11-hospital chain that was just starting to build its network in southern Florida.
Since then, Louisville, Ky.-based Columbia/HCA has become a chain of about 200 hospitals that owns one-fourth of Florida's hospitals.
To Columbia/HCA, the agreement means AMI can't do business with South Miami because the hospital directly competes with Kendall, which is less than 10 miles away.
"We've got a noncompete," said Dan Moen, president of Columbia/HCA's Florida division, "and (AMI) understands that they're going to have to deal with us on that. I expect that we'll work it out."
He denied that Columbia/HCA had threatened AMI with legal action.
But Columbia/HCA would like to buy not-for-profit South Miami Health System, which includes South Miami Hospital and SMH Homestead (Fla.) Hospital.
Earlier this year, South Miami began talking to hospital companies about a partnership or sale. Those contacted included Baptist Hospital in Miami and investor-owned chains Columbia/HCA; Nashville, Tenn.-based OrNda HealthCorp; Santa Monica, Calif.-based National Medical Enterprises; and Nashville-based Healthtrust.
"We were in the bidding process, and (AMI) won," Mr. Moen said.
However, Columbia/HCA came in second and would like to add South Miami and SMH Homestead to its six-hospital Miami network, he said.
South Miami officials confirmed that the hospital had signed a letter of intent with AMI. Terms of the letter say the systems will pursue "development opportunities." However, the agreement is "not to be viewed as a sale of (South Miami Hospital) to AMI," according to a hospital statement. South Miami is precluded from entering discussions with other potential partners.
John Geanes, South Miami's president and chief executive officer, declined to talk about the AMI deal. However, he did acknowledge that the hospital has a "temporary cash flow situation," which resulted from a computer conversion. He added that the hospital expected to "momentarily be coming out" of that cash-flow problem.
AMI sources confirmed that the company agreed to loan South Miami $10 million to $20 million as part of their deal. But Mr. Geanes said the hospital hasn't borrowed any money.
South Miami has about $72 million in outstanding bonds, which are insured and AAA-rated.