Community opposition appears to be a key factor prompting many hospitals that have pending deals with Columbia/HCA Healthcare Corp. to break from the troubled Nashville-based hospital chain.
Meanwhile, Columbia's own business needs are spurring it to restructure or drop other transactions.
Most notably, the company late last week backed away from its plans to become a major player in benefits management.
Columbia said it will sell off most pieces of Value Health, the Avon, Conn.-based benefits management company that it bought Aug. 6 for more than $1.1 billion in cash.
The sale had yet to become final when Columbia was rocked by a series of major legal developments. In mid-July FBI agents staged a raid on at least 35 Columbia facilities or business offices in seven states; the company's top two executives resigned; and three of the company's mid-level executives were indicted.
At that time, the company's new chairman and chief executive officer, Thomas Frist Jr., M.D., said Columbia would go through with the Value Health acquisition.
In an interview last week, newly appointed Columbia President and Chief Operating Officer Jack Bovender Jr. said the deal was so far along at that point it would have been too complicated to unwind. The easier move was to buy Value Health with the intention of selling it eventually because it didn't fit with Columbia's new strategy, Bovender said.
"What we will do is shop (the Value Health pieces) in the market," he said. "I'm sure there are willing buyers."
The Value Health businesses up for sale provide information technology and manage pharmacy or behavioral health benefits for health plans. The three divisions accounted for 80% of the company's $1.9 billion in 1996 revenues. Columbia is keeping a unit for workers' compensation programs.
On the hospital acquisition front, a number of transactions also are dying.
Columbus, Ohio-based Doctors Hospital Foundation, which runs three hospitals, and Columbia insist mounting public opposition was not a factor in their decision to kill their deal last week.
But Columbia opponents are claiming victory in its failed bid for the osteopathic teaching system, a deal that had been pending since March. Consumers Union predicted the deal's collapse would signal an end to Columbia's phenomenal acquisition streak.
Doctors Vice President of Planning and Marketing Howard Sniderman said negotiators couldn't agree on a sale price. He said Columbia wanted to adjust the initial $115 million proposal based on lower Medicare reimbursements in the 1998 federal budget.
"We felt, up until the last couple of days, that an agreement was going to be reached," probably in September, Sniderman said.
He said the fraud investigation of Columbia "really didn't have anything to do with the decision."
Local opponents of the transaction are skeptical of his contention. Public opinion rapidly soured against the deal after the three Columbia executives were indicted.
The indictments prompted a chorus of cries for the deal's termination. Among the opponents was the Coalition for Community Health Care, formed by some of the same labor, religious and consumer groups that mobilized against Columbia's proposed purchase of Blue Cross and Blue Shield of Ohio a year ago. That deal also fell through.
One outspoken opponent, Manuel Tzagournis, M.D., vice president for health sciences at Ohio State University, said last-minute snags in negotiations might have given Doctors' board of trustees an excuse to call off the sale.
"As time went on, I think they began to have more doubts," he said.
The deal with Doctors is the third pending Columbia hospital acquisition canceled since the company's legal problems mushroomed.
Within the last month Mary Shiels Hospital, a 15-bed facility in Dallas, and Columbia nixed their proposed joint venture, which was agreed to last November.
Last week the board of Roger Williams Medical Center in Providence, R.I., voted to end the 152-bed hospital's pending sales contract with Columbia before its Sept. 30 expiration date. Earlier, Columbia agreed to let Roger Williams negotiate with other possible partners (Aug. 25, p. 3).
The sale of Roger Williams to Columbia, pending since June 1996, generated significant community opposition and led to the passage of state law strictly limiting sales of not-for-profit hospitals.
Meanwhile, community opposition and litigation threaten Columbia's proposed 30-year lease of the three hospitals operated by Medical University of South Carolina in Charleston. Technically the deal is pending, but last month MUSC said it's considering other options (Aug. 18, p. 24).
Another deal being reconsidered is Columbia's proposed acquisition of 125-bed Southwest Hospital in Little Rock, Ark.
Columbia has inked deals with at least five other hospitals or hospital systems, and those transactions were alive as of late last week (See chart, p. 3).
The list of new transactions is unlikely to grow by leaps and bounds as it has in the past because Columbia is downshifting its hospital acquisition strategy, its executives said.
"We have stated that we're not in the acquisition mode, but if the right hospital comes along-and it makes sense-we'd certainly be interested," Bovender said.
While moving slowly on the acquisition front, Columbia has canceled five construction projects expected to cost $215.4 million and create 400 new hospital beds.
One project, a children's hospital in El Paso, Texas, is in limbo; Bovender said the company is evaluating its options there and might end up in a partnership on the deal.
The five canceled projects are Westbank Hospital, New Orleans; Amarillo (Texas) Medical Center; Midwest City (Okla.) Hospital; Las Cruces (N.M.) Hospital; and Northwest Medical Center, Houston.
On the flip side, Columbia recently completed three projects and has five under construction. Six other projects in five states are in the planning stages.
Separately, former Columbia Chairman and CEO Richard Scott has hired former U.S. Attorney Gerald Feffer to represent him in the ongoing federal investigation of the company and its executives.