Unlike Columbia/HCA Healthcare Corp., other investor-owned hospital companies are telling Wall Street their acquisitions aren't being slowed by increasingly aggressive state attorneys general.
Executives at investor-owned companies are facing more questions these days from analysts concerning the state probes and the future pace of their acquisitions of not-for-profit hospitals.
"Other companies don't seem to be having quite the problems Columbia has had," said John Hindelong, a vice president at Donaldson, Lufkin & Jenrette, a New York investment bank.
Of a half-dozen representatives of investor-owned hospital companies interviewed by MODERN HEALTHCARE* at the fifth annual Smith Barney Health Care Services Conference in New York, only Columbia acknowledged that acquisitions have been affected by state attorney general investigations.
Columbia wasn't shy about explaining its position on the activity by attorneys general.
"We don't mind the scrutiny as long as everybody has that scrutiny," said Senior Vice President Victor Campbell, who handles Columbia's investor relations. "We feel good about our relationships with attorneys general."
Richard Scott, Columbia's chairman and chief executive officer, didn't attend the Smith Barney con-ference but has acknowledged acquisitions have slowed as a result of the state probes. "Some (deals) are taking longer to close," Scott said earlier this month during a conference call to announce fourth-quarter and year-end 1996 earnings.
Columbia closed only 17 acquisitions or joint ventures in 1996 with not-for-profit hospitals, according to MODERN HEALTHCARE's third annual list of mergers and acquisitions (Dec. 23-30, 1996, p. 37). In 1995 the Nashville-based company completed 33 acquisitions of not-for-profit hospitals.
Jeffrey Barbakow, chairman and CEO of Santa Barbara, Calif.-based Tenet Healthcare Corp., told Smith Barney attendees his company wants to iron out potential problems with the communities long before attorneys general get involved.
"There are political concerns and community concerns," Barbakow said. "We want to make sure we answer those questions first."
Toward that end, the Federation of American Health Systems, which represents for-profit hospital companies, has launched an effort to educate attorneys general about conversions of not-for-profit hospitals to for-profit status (Jan. 13, p. 2). Federation President Thomas Scully said earlier this month he plans to personally meet with nine state attorneys general (See graphic).
"We're hearing a lot more from investors about Columbia's pace of acquisitions, and there is a general concern that (the stepped-up state scrutiny) may eventually affect all companies," said Sheryl Skolnick, an analyst in the New York office of Robertson Stephens & Co.
Columbia, which owns nearly 350 hospitals, pursues a much more aggressive joint venture strategy than other investor-owned chains, and that strategy has been the focus of many investigations. Columbia executives say they are being examined more closely because they are pioneers.
However, Tenet, the nation's second-largest hospital company and Columbia's chief rival, hasn't encountered roadblocks.
"Tenet hasn't had a deal turned down yet and hasn't had problems in California like Columbia has had with Sharp," Skolnick said, referring to the California attorney general's probe of the valuation of Columbia's proposed 50-50 joint venture with San Diego-based Sharp HealthCare.
King of Prussia, Pa.-based Universal Health Services also isn't being restrained by the attorneys general. "These things certainly haven't been helpful, but our acquisition pipeline is full," Alan B. Miller, UHS' chairman, president and CEO, told investment analysts at the Smith Barney conference.
Miller also sees Columbia's battles with attorneys general as a competitive window of opportunity. "We are a compelling alternative to the companies that have had bad press," said Miller, whose chain operates 35 acute-care and psychiatric hospitals. "If you say to (not-for-profit hospitals) that they are going to be one of 350 or one of 125 hospitals, they tend to lose interest," Miller said. "They will get more attention from us."
Executives of Brentwood, Tenn.-based Quorum Health Group, which owns 18 hospitals and manages 250 not-for-profit hospitals, said they aren't concerned about investigations by attorneys general because the company has had a history of good relations with not-for-profit hospitals.
"The attorney general question is one we're hearing, so we try to be very open," said Steve Hewett, Quorum's vice president, chief financial officer and treasurer. "We're trying to educate not-for-profits and also let them know that selling to the highest bidder isn't necessarily the way to go."