Columbia/HCA Healthcare Corp. will beef up its market share in San Jose, Calif., and Alexian Brothers Health System will acquire a Midwest flavor in an unusual three-hospital swap announced last week.
Alexian, which owns one hospital in California and one in Illinois, will give Columbia its 192-bed facility in San Jose and an undisclosed amount of cash. In exchange, Columbia will give Alexian two of its Chicago-area hospitals: 195-bed Hoffman Estates (Ill.) Medical Center and Woodland Hospital, a 94-bed psychiatric hospital, also in Hoffman Estates.
In a separate deal also announced last week, Adventist Health System signed a definitive agreement to buy a Chicago-area hospital from Columbia.
Winter Park, Fla.-based Adventist plans to buy 175-bed LaGrange (Ill.) Memorial Hospital for an undisclosed amount. LaGrange Memorial will become part of Adventist's Midwest region, which includes three other hospitals in suburban Chicago and one in Wisconsin.
The deals are part of Columbia's plans to sell off 37 hospitals in seven states, including eight hospitals it owns in Illinois.
Commenting on the Alexian-Columbia hospital swap, Dean Grant, Alexian's corporate senior vice president, said, "We wanted to concentrate our healthcare services in the Midwest, and there are no synergies in having a hospital 2,000 miles away from the rest of our operations."
Alexian's only other acute-care hospital is near its corporate headquarters in Elk Grove Village, another Chicago suburb. The deal will give Alexian a total of three hospitals, all within a 10-mile radius. Alexian also operates assisted-living and skilled-nursing facilities in St. Louis, Chicago and Waukegan, Ill., and retirement homes in Milwaukee and Tennessee.
For itself, Columbia will gain market share in San Jose, California's third-largest city, where the Nashville-based chain will control three of the city's six hospitals and 53% of its 1,719 beds. Columbia owns two of San Jose's largest hospitals: 388-bed Good Samaritan Hospital and 327-bed San Jose Medical Center.
Both sides will receive profitable facilities, according to Alexian and financial figures obtained by MODERN HEALTHCARE.
Projected 1998 net income for San Jose's Alexian Brothers Hospital is $6.7 million on patient revenues of $150 million. It earned $7.5 million on patient revenues of $140 million in 1997.
Columbia does not release figures for individual hospitals, but Hoffman Estates earned $2.5 million on revenues of $85.7 million in fiscal 1996, the latest year available from the American Hospital Directory. Earnings for Woodland Hospital were unavailable.
The transaction will also give Columbia a quick fix to the state-mandated earthquake upgrades required by 2008 at another of its San Jose facilities, 327-bed San Jose Medical Center, according to Grant. Rather than spend upward of $100 million to make the upgrades, Columbia has the option of transferring its inpatient business to nearby Alexian, which Grant said needs only $2 million in repairs.
Columbia spokesman Jeff Prescott confirmed that San Jose Medical Center has "capital needs" but added that a plan to close the hospital to inpatients has not been reached.
The transaction is expected to close by the end of the year, pending approval by California, Illinois and federal antitrust regulators.
-With Deanna Bellandi