Back in the acquisition driver's seat, Tenet Healthcare Corp. last week signed deals valued at more than $400 million to buy three not-for-profit hospitals in markets where the chain is forming large health systems.
In two of the markets-New Orleans and El Paso, Texas-providers said they saw a diminishing role for not-for-profit systems (See related story, p. 2).
"Our exploration of the not-for-profit community concluded there wouldn't be a not-for-profit system in this city in a few short years," said Byron Harrell, president and chief executive officer of Mercy-Baptist Medical Center in New Orleans.
Although the city is home to several not-for-profit hospitals, Harrell said he believed the market will be dominated by three systems, two owned by for-profit companies and one by the government.
In El Paso, Tenet will buy 353-bed Providence Memorial Hospital, leaving R.E. Thomason General Hospital, a tax-supported public hospital, as the city's only not-for-profit facility.
"Given the harsh realities of healthcare today, we are compelled to act dramatically to compete in this evolving industry," said David Buchmueller, Providence's president and CEO.
Providence, a member of VHA, the nation's largest alliance of not-for-profit hospitals, is across the street from one of four Columbia/HCA Healthcare Corp. hospitals in the area. El Paso is where Columbia bought its first hospitals, establishing its blueprint for market consolidation.
Providence had assets of $167 million and reported net income of $12.1 million on revenues of $151.4 million in 1993, according to HCIA, a Baltimore-based healthcare information company.
In New Orleans, Mercy-Baptist was created 21 months ago through the merger of Mercy Hospital, a Roman Catholic facility, and Southern Baptist Hospital. Both hospitals are still in operation.
Terms of the Tenet deal were not released, but Harrell said proceeds would flow back to the religious systems that owned the two hospitals. Mercy-Baptist has $90 million in debt that will be repaid. It reported profits of $7 million for the six months ended March 31 on revenues of about $125 million.
Sources close to the deals said Columbia and OrNda HealthCorp, another investor-owned hospital chain, also bid on Mercy.
"This demonstrates a real receptiveness in the market to the new organization, Tenet," said Christi Sulzbach, Tenet's senior vice president. Tenet, the nation's second-largest investor-owned hospital system, was formed earlier this year through the merger of National Medical Enterprises and American Medical International. The Santa Monica, Calif.-based chain operates 83 hospitals in 13 states and four foreign countries.
About the prospect of bumping into Columbia on other acquisitions, Sulzbach said, "The industry is beginning to realize there is a substantial alternative" to Columbia.
In Arkansas, Tenet joined with St. Vincent Infirmary Medical Center in Little Rock to buy 104-bed Methodist Hospital of Jonesboro from Methodist Health System, Memphis. Tenet and St. Vincent have formed a joint venture called HealthStar of Arkansas that will own the hospital. Tenet owns three other hospitals in Arkansas.