Columbia/HCA Healthcare Corp. will end its tempestuous journey into the northeast Ohio market, agreeing last week to sell its 50% interest in four Cleveland-area hospitals.
Cleveland's University Hospitals Health System will assume the Nashville-based chain's share of the facilities, which operate under two joint ventures with the Sisters of Charity of St. Augustine Health System, or CSA.
Expected to close by July, the $65 million deal will return the hospitals to not-for-profit status. Columbia will receive only a fraction of what it paid for the assets.
The deal intensifies the dominance of two major systems in the Cleveland hospital market: six-hospital UHHS and nine-hospital Cleveland Clinic Health System. The two systems have financial ties with all but five of Cuyahoga County's 24 hospitals, according to the local hospital association.
Columbia's November 1995 entry into the Cleveland market and its vow to create a statewide network in Ohio helped spark a rash of hospital mergers and affiliations in the state.
Charles Evans, president of Columbia's Mid-America division, said the joint venture couldn't reach its goal of a regional network because of consolidation around UHHS and the Cleveland Clinic, along with Columbia's corporate retrenching in mid-1997.
Columbia also lost a protracted battle to acquire the state's largest insurer, Blue Cross and Blue Shield of Ohio, which state regulators rejected.
Columbia had been shopping for a potential buyer of its Cleveland assets since last year (Sept. 28, 1998, p. 10).
While Columbia declined to release financial results of the four joint-venture hospitals, Evans said they are profitable.
Under a memorandum of understanding signed last week, UHHS and CSA will form two new joint venture corporations, in Cleveland and Canton.
The Cleveland partnership will control the assets of the existing Caritas Healthcare Partnership, including 266-bed St. Vincent Charity Hospital, 161-bed Saint Luke's Medical Center and 183-bed St. John West Shore Hospital, all in Cleveland. The Canton partnership will include the assets of 376-bed Mercy Medical Center in Canton.
The joint venture strengthens UHHS' presence on Cleveland's West Side. UHHS President and Chief Executive Officer Farah Walters said the deal will provide opportunities for clinical integration and create "easy access" to UHHS specialists and facilities for patients of the Catholic hospitals. It could also include joint managed-care contracting.
Sister Judith Ann Karam, president and CEO of the CSA health system, said CSA is exploring reinstatement of the four hospitals in the Catholic Health Association. As a result of the for-profit status of the joint venture with Columbia, the hospitals lost their membership in the association.
Karam said the system has kept the CHA updated about its activities and retains a nursing home with CHA membership.
"We haven't missed a beat as far as the Catholic identity of our hospitals," Karam said.
Karam said Columbia and CSA concluded after a strategic planning session last May that their ventures needed to become part of a broader network. After discussions with potential partners, both companies decided it would be best if Columbia left the partnership, Walters said.
Columbia continues to co-own with physicians three surgery centers in the Cleveland market.
Columbia said it is also exploring strategic options for its joint venture with CSA in Columbia, S.C., which was not affected by last week's transaction.