Overseas holdings represent a fraction of its total operations, but Columbia/HCA Healthcare Corp.'s explorations into worldwide markets are picking up steam.
While Columbia's hospital acquisitions have slowed in the U.S., the Nashville-based healthcare company is taking a closer look at opportunities in other countries. It plans to accelerate acquisitions and new ventures in international arenas, markets that are being ignored by other U.S. healthcare provider services companies. Domestically, Columbia's acquisitions of not-for-profit hospitals practically were cut in half last year compared with 1995 (April 14, p. 50), and its dealmaking this year has continued at a slower speed.
"It's a small presence, but it's a solid presence," says Donald Steen, president of Columbia's international group, which is based in Dallas, regarding Columbia's overseas hospitals. "We're the only (U.S.) chain that is seriously looking at opportunities outside the U.S."
Other U.S.-based hospital companies have pulled back from international ventures. Columbia rival Tenet Healthcare Corp. has divested the international business it inherited from American Medical International, which merged with National Medical Enterprises to form Tenet in 1995. In an attempt to focus on domestic operations, Santa Barbara, Calif.-based Tenet last year sold its facilities in Australia, Britain, Malaysia, Singapore and Thailand. Tenet still has one hospital in Spain and one in Switzerland, but the international operations "are not a focus," says Lance Ignon, a Tenet spokesman.
Meanwhile, Columbia's European holdings have grown to six hospitals, which the company projects will post about $260 million in revenues this year.
Columbia's earnings before interest, taxes, depreciation and amortization, a measure of valuation commonly known as EBITDA, were up 16% to $4.3 billion for the year ended Dec. 31, 1996, but international numbers were even stronger. "Our margins overseas are a couple percentage points higher than domestic (operations)," Steen says.
Columbia executives expect their international operations to become a growing source of revenues. They say international facilities should benefit from the company's outcomes research, efficiencies in staffing and purchasing power.
"We think what we are doing in the U.S. has other advantages overseas, but we're doing it so it doesn't distract from our focus," Steen says.
On Wall Street, analysts who have been critical of some of Columbia's domestic strategies like what they see overseas.
"One thing the U.S. can do is export knowledge on how to work with managed-care systems," says Sheryl Skolnick, an analyst with Robertson Stephens & Co. in New York. "Columbia can help there."
With other countries experimenting with managed care, Wall Street sees growth opportunities, especially in Europe where healthcare costs have risen. "It may be that the timing is right for a private for-profit company to enter an overinflated healthcare market," Skolnick says.
Since Steen took over Columbia's international operations in early 1996, the company has changed its strategy abroad from focusing on chains of hospitals to purchasing individual facilities. One obstacle to dealmaking overseas is that many of the international chains are operating successfully and aren't interested in selling.
"We have not found a suitable chain for us to buy," Steen says.
Two months ago, Columbia acquired a 54% stake in 110-bed Instituto Dexeus, an independent teaching hospital in Barcelona, Spain. It's the company's first venture in Spain and third in Europe.
Two of Columbia's international properties were acquired from another U.S. chain. Wellington Hospital, which has two acute-care campuses in London, and Hospital De La Tour in Geneva, Switzerland, were acquired when Columbia merged with Galen Health Care in 1993.
Columbia is looking at acquisition possibilities in Germany, Latin America and the Pacific Rim. It also has considered potential deals in Australia, France and South Africa, Steen says.
"We patiently explore good economic opportunities in countries where economies, politics and currencies are stable," he says.
Because there are "plenty of hospitals" in Europe, Steen says Columbia's strategy will be to make acquisitions there. In other regions it's interested in development projects where there's a need for new state-of-the-art facilities.
By far, Columbia's most successful foreign market is London. Although Columbia owns just four of the 46 privately held hospitals in the area, its facilities generate 33% of the revenues from that category of facilities.
"It indicates our hospitals are bigger and more successful," Steen says.
Columbia's London operations comprise more than 600 acute-care beds and 1,500 employees. Columbia's United Kingdom division includes Harley Street Clinic, Princess Grace Hospital, Portland Hospital for Women and Children, and Wellington Hospital, all in London. The division also covers the company's Swiss hospital.
In England, there are two healthcare systems: the government-supported system that provides free healthcare to 89% of the population, and a private system, which is used by the more affluent sector of the population.
Columbia doesn't have access to the public system.
About 11% of United Kingdom citizens belong to the private system, which means they purchase their own health insurance. Citizens are willing to pay more to use the private system because it's more highly specialized in surgical areas and they can choose their own physicians. Members of private plans also don't have to wait as long for services. For example, it can take longer than a year to receive a hip replacement in the public system, observers say.
Columbia believes it has even greater opportunities to develop its presence in Spain because a larger portion of the population-35%-participates in the private healthcare system in that country.
The company also has made inroads in England through deals that have been thwarted back home. For example, while Columbia failed in its bid to acquire Blue Cross and Blue Shield of Ohio earlier this year, it has completed a deal with a British insurance company.
Hoping to gain a foothold in a country in the early stages of managed care, Columbia late last year formed a 50-50 joint venture with a London insurer, PPP Healthcare. That agreement called for PPP to purchase a 50% stake in Columbia's four British hospitals.
PPP also agreed to increase services provided to its health plan enrollees by the Columbia hospitals.
Says Peter Owen, PPP's group chief executive, "London will remain at the heart of the private healthcare market, and therefore the heart of our hospital network strategy.