Community Care of America may soon be for sale.
The Naples, Fla.-based rural healthcare services company, which owns two hospitals and 54 long-term-care facilities in eight states, said last week it has hired the investment firm Smith Barney to evaluate the company's strategic alternatives. Those include a sale of the company.
"I, as well as our board, felt we had to look at all of our strategic alternatives, and indeed a sale is among them," said Gary Singleton, president and chief executive officer. "We are a young company and highly leveraged. We have to build up equity through a merger or link up to where we are acquired by someone else."
CCA's troubles have been many this year. Singleton replaced Kenneth Creasman, who resigned in April within weeks of a canceled second public stock offering. It also followed HCFA's decertification of one of CCA's nursing homes in Iowa after it was cited by the state for several healthcare violations (April 29, p. 78).
CCA has since corrected the Iowa problems, but its stock never recovered. After trading at about $12 a share in late March, it had plummeted to $4 a share in NASDAQ trading by the middle of last week. CCA had $94 million in net revenues last year.
CCA's initial public offering was made in August 1995. In April, CCA delayed a second offering of 3.1 million shares of common stock in hopes of raising $48.1 million.
Because of a lack of capital, CCA was unable to close the acquisition of three hospitals owned by Memorial Health Services, Adel, Ga. The Memorial facilities' annual revenues were about $25 million.
"In trying to close the acquisitions, we were having difficulty raising equity," Singleton said. "The deal hasn't gone away."
Singleton said CCA should be an attractive acquisition given its current low stock price. "This should be an attractive package for somebody to pick up," Singleton said.
However, industry analysts say it may be difficult to sell CCA in its entirety because it's a mixed bag of ownership, management and leasing arrangements with nursing homes, hospitals, three physician practices, four clinics, one home healthcare agency, one child day-care center and six assisted-living units.
"There just hasn't been any real forethought in what they've been doing with such a random asset collection," said Greg Moerschel, vice president and senior healthcare analyst at the Chicago office of Chicago Corp., an investment banking firm. "You don't have to buy Community Care to get 50-bed hospitals. There's more than enough of those out there."
Across town at Health Management Associates, executives said they didn't have any interest in acquiring CCA. HMA, which focuses on rural and nonurban hospitals, said its management isn't engaged in the same business as CCA.
"CCA doesn't compare to companies like HMA and Community Health Systems," Moerschel said.
Many investor-owned firms such as CCA have attempted to duplicate the success of HMA, which has had annual revenue growth of 21% in the past five years and earnings growth of 29% during the same period. Several smaller hospital companies have started up in hopes of similar successes (July 1, p. 32). HMA owns 25 rural and nonurban hospitals in 11 states.