Samaritan Health System's proposed sale of two hospitals to for-profit companies differs greatly from its previous attempts at dealmaking but should allow the debt-ridden system to better focus on the rapidly expanding region east of its Phoenix headquarters.
In a deal announced in late January, Samaritan will sell 213-bed Maryvale Samaritan Medical Center in western Phoenix to Nashville-based Vanguard Health Systems and 118-bed Havasu Samaritan Regional Hospital in Lake Havasu City to Brentwood, Tenn.-based Province Healthcare (Feb. 2, p. 4).
Eight-hospital Samaritan previously had proposed merging its entire system with Phoenix-based HealthPartners of Southern Arizona and San Francisco-based Catholic Healthcare West. Both deals fell through.
Industry observers said they're confident the sales of the two hospitals will go through, allowing Samaritan to shed nearly one-fifth of its beds. That, they said, will give the debt-ridden Samaritan two things it's been seeking: independence and greater access to capital.
"An outright sale was the best option for us," said Dan Green, Samaritan's vice president of system development.
In the near term, Samaritan will use proceeds from the deal to finance expansion in the East Valley region, where the Phoenix suburbs of Apache Junction, Chandler and Mesa are growing rapidly.
Terms of the sales, expected to be completed in June, weren't disclosed.
Samaritan's second largest hospital is 511-bed Desert Samaritan Medical Center in Mesa, accounting for one-third of the slimmed-down system's beds. "It's the predominant facility in Mesa, and will be the centerpiece for future plans," Green said.
Besides Desert Samaritan, three other acute-care hospitals operate in Mesa. Samaritan's flagship is 714-bed Good Samaritan Regional Medical Center in Phoenix.
The threat of competition in Mesa appears to have subsided in recent months. In October Columbia/HCA Healthcare Corp. revised its plans for a $60 million, 100-bed hospital there and began seeking another site after residents complained about potential traffic and noise (Oct. 6, 1997, p. 108). The conventional wisdom now is that the facility won't get built amid Columbia's troubles.
Meanwhile, the entry of Vanguard, the new company formed by former OrNda HealthCorp top executive Charles Martin Jr., and Province into the Phoenix market has other providers buzzing.
Reginald Ballantyne III, president of PMH Health Resources, which operates a 183-bed hospital near downtown Phoenix, met with Martin last week. Ballantyne said PMH is interested in growing its business in the West Valley, where the Maryvale hospital is located.
Ballantyne said he and Martin agreed to meet again after the deal is completed to discuss whether the two systems could collaborate.