Trustees of Cape Coral (Fla.) Hospital last week agreed to sell the 202-bed hospital to Lee Memorial Health System, Fort Myers, Fla., for $140 million.
The deal is expected to close within 60 days, officials said.
Cape Coral, which has lost more than $35 million over the past two years, has nearly $130 million in bond debt and interest. The additional $10 million in the bid could be used to pay a fine imposed by the Internal Revenue Service for improperly spending tax-exempt bond proceeds.
The decision is the latest twist in the two-year ordeal at Cape Coral that has seen three executives fired for allegedly misspending hospital assets, courtships with three investor-owned hospital chains and a previously broken engagement two years ago with Lee Memorial (June 20, 1994, p. 2; Jan. 30, 1995, p. 3; Aug. 28, 1995, p. 3).
One reason Cape Coral chose Lee Memorial, a two-hospital public system, is because Lee is forming a network of six not-for-profit hospitals with nearly 2,000 beds along Florida's southwest coast. Besides Lee Memorial's two hospitals, 807-bed Sarasota Memorial has joined. Three others are considering joining the network, including two hospitals sponsored by Bon Secours Health System.
The network would compete against Columbia/HCA Healthcare Corp. and its six hospitals and 1,000 beds. Columbia also submitted a bid, but no further information was available.
"(The merger) is an indication that there will be two health systems in southwest Florida, which previously to the merger was in doubt," said Peter Young, a healthcare industry analyst based in Fort Myers.
Young said the merger will "strengthen Columbia's competitors over the next few months as (the not-for-profit hospital network) evolves."
Lee Memorial also agreed to pay Cape Coral a $1 million nonrefundable deposit, which would be subtracted from the purchase price at closing. Further details of the deal are expected when Lee Memorial's board holds a public hearing to formally approve the purchase agreement.
In 1994, the Federal Trade Commission challenged the proposed merger of Cape Coral and Lee Memorial. During federal court proceedings, Cape Coral withdrew from the merger agreement and sought other suitors. That prompted the FTC to drop a possible appeal to the U.S. Supreme Court, following the agency's failure to obtain a preliminary injunction to block the deal in federal district and appellate courts.
The FTC also withdrew its administrative antitrust complaint against the hospitals because the deal fell through. However, the FTC technically could resurrect the complaint because it was never resolved and the hospital deal is back on, legal experts said. But officials said that's unlikely from a practical standpoint.
As a safeguard, Lee Memorial also agreed to pay Cape Coral $5 million if the FTC stops the transaction.
If Cape Coral had chosen Columbia, an FTC antitrust investigation could have been mounted, a Lee Memorial official said.