Hamstrung by a pending tax ruling from the Internal Revenue Service, Columbia/HCA Healthcare Corp. opened the door to let Shands HealthCare into the Jacksonville, Fla., market as a direct competitor.
Gainesville, Fla.-based Shands recently announced a proposed partnership with 500-bed University Medical Center in Jacksonville and a planned purchase of UMC's next-door neighbor, 269-bed Methodist Medical Center (June 30, p. 4).
But Shands' negotiations with UMC happened only after Nashville-based Columbia waived its right to ban UMC from talking to other hospital systems about potential deals.
Columbia, which owns 311-bed Columbia Memorial Hospital in Jacksonville, entered a joint venture agreement of its own with UMC in March 1996. The agreement, which expires in March 1998, bars UMC from negotiating with other systems.
However, the IRS has yet to give its approval to the Columbia-UMC deal.
Although it's interested in working with UMC, Columbia doesn't want to leave the medical center without options should the IRS deny the joint venture, a Columbia spokesman said.
"It's apparent that the IRS process approval is a complicated one," the spokesman said. "We don't want the process to be detrimental to UMC."
Shands wants to get into the Jacksonville market to beef up its already existing relationship with UMC and to create a more efficient marketplace in Jacksonville, said Warren E. Ross, M.D., senior vice president at Shands.
Shands is affiliated with the University of Florida, Gainesville, and has 280, or 28%, of its medical faculty practicing in Jacksonville, mostly at UMC. A formal acute-care partnership with UMC would create an extensive delivery network, Ross said.
Terms of a relationship between Shands and UMC haven't been ironed out, Ross said, but Shands is not interested in acquiring UMC.
If the IRS approves the Columbia-UMC joint venture agreement, the Shands deal is off, but the Shands affiliated physicians will continue to practice at UMC, he said.
Meanwhile, Shands' partnership with UMC will work only if it's able to acquire Methodist, Ross said. It's important that neighboring hospitals are not in direct competition and that the city's bed count is reduced.
"The right way to help our faculty in Jacksonville is to work with both UMC and Methodist Medical Center to (streamline) services and scale them more appropriately to service the needs of the community," he said. Jacksonville's citywide occupancy is at 50%, he noted.
Ross said a final sales agreement on the the Methodist deal should be reached by September. The transaction still would need state and federal approvals.