Unlike the "scary" growth of Columbia/HCA Healthcare Corp., the prospect of a second for-profit hospital giant is drawing cheers from some not-for-profit hospitals.
In South Florida, the planned merger of Tenet Healthcare Corp. and OrNda HealthCorp looks like a blessing, said Brian Keeley, president and chief executive officer of four-hospital Baptist Health Systems, Miami.
"This is great for competition," Keeley said. "The nightmare we all had was that Columbia might pick off Tenet and OrNda."
Keeley said he hopes to team up with the new company against Columbia. The combination is logical: Tenet and OrNda have competed against each other in the region north of Miami, while Baptist dominates south of Miami to the Florida Keys. Columbia is a rival of all three, Keeley said. Moreover, Tenet already owns two hospitals in a physician-hospital organization with Baptist.
"Columbia's forte is Florida," Keeley said. "They've got 30% of the hospitals. (Tenet-OrNda) is going to be a tremendous counter-response in the market."
Frank Murphy, CEO of Morton Plant Mease Health Care, Dunedin, Fla., also views the deal positively. Morton Plant Mease and OrNda have signed a letter of intent to form a joint system in the north Tampa Bay market (Sept. 30, p. 19). Murphy said the Tenet-OrNda merger won't interfere. In fact, a Tenet-OrNda combination most likely would make it easier to raise capital for such regional developments, Murphy said.
The deal isn't nearly as shocking as the 1993-1994 creation of Columbia, which now has $17 billion in annual revenues, Murphy said. At $8.5 billion in combined annual revenues (Tenet-OrNda) "is much, much smaller, but it creates a big company in some markets. I think it's exciting," he said.
Another measure of not-for-profit hospitals' calm reaction to news of a fresh for-profit rival comes from VHA. The Irving, Texas-based alliance of 1,100 not-for-profit hospitals has been a staunch Columbia foe. Of Tenet-OrNda, VHA only said: "It's not surprising. It fits with continuing consolidation in the industry."
Tenet-OrNda also might sit easier with hospital suppliers. Columbia began aggressive negotiations after its creation, which pooled $2.6 billion in 1995 supply purchases. OrNda already is part of Tenet's purchasing arm, BuyPower.
The new chain could prove to be a "more vendor-friendly" alternative to Columbia, said Michael Bourch, chairman of Biomed International, a Nashville, Tenn.-based technology startup.