After a marathon of activity, Adventist Health System is taking a breather.
Officials at the Winter Park, Fla.-based system say they're working to meld recent acquisitions before they attempt to bring more into the fold.
"We want to assimilate what we've added in the last couple of years," says Mardian Blair, Adventist's president. "It stretched our people somewhat."
That's no surprise, considering what the 32-hospital, not-for-profit system has been up to lately.
In August, Adventist announced it signed a definitive agreement to buy 175-bed LaGrange (Ill.) Memorial Hospital from Nashville-based Columbia/HCA Healthcare Corp. (Aug. 24, p. 18).
In July, Adventist acquired Atlanta-based Housecall Medical Resources, a for-profit home healthcare company.
In March, Adventist took over management of General Health System, a two-hospital system in Baton Rouge, La.
Last November, Adventist opened Celebration Health, a $130 million complex it built as part of a Walt Disney World residential community near Orlando, Fla. In June, after getting certificate-of-need approval earlier in the year, Adventist added 60 inpatient beds to the facility.
"That's an awful lot to take on," says Sandra Johnson, vice president of business development at Adventist.
Adventist started with nine hospitals in 1973 and has grown to a 32-hospital system today. And that growth is evident in its bottom line.
In 1997 Adventist posted net income of $106.2 million on net patient revenues of $1.6 billion. That's an increase of more than 15% compared with net income of $91.8 million in 1996. Net patient revenues totaled $1.3 billion that year.
The numbers are more staggering when compared with just five years ago. In 1993, Adventist posted net income of $56.7 million on net patient revenues of almost $1.1 billion. So, from 1993 to 1997, Adventist's net income rose 87%.
Besides its 32 hospitals-including the planned acquisition of LaGrange Memorial-Adventist has 155 home health agencies and owns or manages 27 nursing homes.
The system's flagship hospital is 1,354-bed Florida Hospital in Orlando, not far from its corporate headquarters.
For Adventist, the move to acquire LaGrange Memorial in suburban Chicago was part of a larger plan.
"Today there are issues of managed care, and you don't want to be isolated," Blair says. "You want to have a critical mass."
Adventist already owns nearby 344-bed Hinsdale (Ill.) Hospital. The two hospitals have about a 60% overlap in their medical staffs.
Adventist also owns 116-bed Glenoaks Hospital in Glendale Heights, Ill., and Bolingbrook (Ill.) Medical Center, an emergency facility with no inpatient beds.
While Adventist sees the addition of LaGrange Memorial as a plus, Standard & Poor's, a New York-based credit-rating agency, put the deal in the minus column.
Last month, Standard & Poor's revised its financial outlook for Adventist to negative from stable. In doing so, Standard & Poor's cited "poor" operating results in fiscal 1997 continuing into 1998, as well as the acquisition of LaGrange Memorial, a move analysts say will "add substantial debt but no liquidity."
In 1997 Adventist had $1.8 billion in operating revenues and $1.7 billion in operating expenses. In 1996 the system had operating revenues of $1.5 billion and operating expenses totaled $1.4 billion, according to Adventist.
Standard & Poor's also says the system must make quick decisions about Florida Hospital's Medicare pilot program, which the rating agency says is losing money.
Despite the change in outlook, Standard & Poor's maintained a strong underlying rating of A- for Adventist. The system plans a $334 million bond issue this month.
Standard & Poor's says the rating reflects "solid credit characteristics including good financial and geographic dispersion and implementation of forward thinking strategies, although some of these have temporarily weakened financial performance."
In their move to acquire LaGrange, Adventist officials say they had talked with Columbia previously about buying the hospital but couldn't agree on a deal.
Then Columbia announced earlier this year that it would sell 45 of its hospitals, including eight in Illinois.
"We were delighted," Blair says.
Adventist jumped at the chance to buy LaGrange Memorial and pair it with Hinsdale.
"Two good hospitals four miles apart; there are all kinds of opportunities for economies of scale," he says.
Both LaGrange and Hinsdale hospitals will remain acute-care facilities. "We're very clear on that," Blair says.
Adventist's acquisition of General Health in March also added mass to the system. Besides two acute-care hospitals, General Health has a psychiatric facility, a 111,000-enrollee HMO and five nursing homes with a total of about 700 beds.
Adventist also beefed up its presence in the home healthcare market this summer when it acquired Housecall Medical Resources, a for-profit provider in the Southeast. Blair says it was a $52 million deal.
Housecall, which will maintain its for-profit status, is under the umbrella of Sunbelt Home Health Care, Adventist's home-care division.
Another high-profile project for Adventist has been its Celebration Health facility. Its 60 inpatient beds were transferred from Florida Hospital Kissimmee, a satellite of Florida Hospital's main facility in Orlando.
The Florida Agency for Health Care Administration gave final certificate-of-need approval for the transfer of inpatient beds only after a deal was struck with other nearby hospitals that had opposed the project (Jan. 12, p. 26).
While the rush of recent activity will mean slower growth over the next two years, Blair, like any good businessman, never says never when it comes to the chance for new opportunities.
"If a real good opportunity comes by and it works financially, we would give it serious thought," he says.