Columbia/HCA Healthcare Corp. may sell its share in Pentagon City Hospital, Arlington, Va., to its former not-for-profit partner, which had co-owned the 102-bed facility through a joint venture.
"We hope to make a decision sooner rather than later," said Columbia spokesman Jeff Prescott.
Arlington Health Foundation formed the 50-50 partnership with Columbia in 1996. Columbia contributed two hospitals-100-bed Dominion Hospital in Falls Church, Va., and 121-bed Reston (Va.) Hospital Center-to the venture, along with Fairfax (Va.) Surgical Center.
For its stake in the venture, Arlington Health contributed its 282-bed Arlington Hospital and $8 million in cash.
But the fate of Pentagon City had been unclear since it was purchased in 1997 by the joint venture.
The foundation's board voted in February to end the joint venture, saying its federal tax exemption could be in jeopardy because it did not have majority control of the partnership.
Fueling that fear was a March 1998 revenue ruling in which IRS addressed the tax consequences facing a not-for-profit hospital that forms a joint venture with a for-profit.
The ruling said that the not-for-profit partner must have majority control of a joint venture with a for-profit partner in order for the not-for-profit to maintain its tax-exempt status (March 9, 1998, p. 3).
The foundation and Columbia began dissolving the joint venture early this year, and each regained the historic assets it had contributed to the venture.
The board of Arlington Health Foundation recently voted to buy Pentagon City outright from Columbia after months of negotiation. Both sides are negotiating the terms of the possible sale.