Quorum Health Group spent almost as much time trying to buy a Nebraska hospital as it did owning it.
Last week, the Nashville-based hospital management company said it was selling its remaining interest in 160-bed Midlands Community Hospital in Papillion, Neb., to Alegent Health of Omaha, Neb.
When the sale is completed, the number of for-profit hospitals in the state will have been reduced to one. The lone for-profit out of 91 acute-care hospitals will be 281-bed Saint Joseph Hospital in Omaha, owned by Santa Barbara, Calif.-based Tenet Healthcare Corp.
Alegent is a six-hospital not-for-profit system formed in 1995 through the merger of two of Omaha's most prominent hospitals, 607-bed Bergan Mercy Medical Center and 532-bed Immanuel Medical Center.
In 1993-two years before Alegent was formed and three years before Nebraska passed the country's first not-for-profit hospital sale public disclosure law-for-profit Quorum wanted to enter the Nebraska hospital market by acquiring Midlands, a private not-for-profit hospital.
Foreshadowing its aversion to for-profit healthcare, the state of Nebraska rejected Quorum's certificate-of-need application to buy Midlands through a newly created joint venture with staff physicians at the hospital. In a first-of-its-kind state CON decision, Nebraska turned down Quorum's application because it concluded that converting the hospital to a for-profit operation would lead to higher prices.
A new study of Virginia hospitals also concluded for-profit hospitals incurred higher operating costs than their not-for-profit counterparts but posted higher profits, in large part because of higher prices (See related story, p. 20).
The Nebraska health department's rejection of Quorum's CON application was upheld by a state CON review committee but overturned on appeal by a state trial court judge. The state declined a further appeal.
But because of the delay caused by the CON dispute, Quorum bought the hospital outright in late 1994 rather than through a joint venture with local physicians.
Less than six months later, however, Quorum sold a 14% interest in Midlands to Alegent. Then, Quorum announced last week it was selling its remaining 86% share in the hospital to Alegent.
Quorum said Alegent will become the sole owner of the hospital when the deal closes "sometime this fall."
Shea Davis, a Quorum spokeswoman, said the decision to divest the hospital after owning it for such a short time was made in the best interest of the community.
"The right thing to do for the hospital was to align more strongly with Alegent," she said.
Davis said the decision had nothing to do with Nebraska's public disclosure law on not-for-profit hospital sales, which could make it tougher for Quorum and other for-profit hospitals to construct networks of facilities.
Davis said terms of the sale aren't being disclosed.
But Charles Marr, Alegent's chief executive officer, said the system is paying a total of $15 million for Midlands, including the earlier 14% stake.
Quorum bought the hospital for $11.4 million in 1994, giving it a 32% profit on the sale in three years.
Papillion is a growing Omaha suburb about five miles south of the city. Marr said the sale requires state CON approval and federal antitrust clearance. With Midlands, Marr said Alegent would control about 37% of the metropolitan Omaha market, and he said he anticipated no antitrust problem.