Norton Healthcare, a not-for-profit system based in Louisville, Ky., is outsourcing part of its hospital management business as it tries to refocus on its core ownership business in the wake of its 1998 purchase of four Kentucky hospitals from HCA-The Healthcare Co.
Norton has signed a multiyear contract with Indianapolis-based Blue & Co., an accounting and consulting firm, which will allow Norton to use the firm's financial services to help it manage 14 rural hospitals in Illinois, Indiana and Kentucky. The system owns six hospitals and leases one, all in Kentucky.
Norton is still committed to its managed regional hospitals, said Stephen Williams, Norton's president and chief executive officer, in a written statement issued to MODERN HEALTHCARE.
"At the same time, partnering with such a strong firm as Blue & Co. eliminates the need for Norton to add costly infrastructure to further serve the managed hospitals, further allowing us to focus more energy and resources on the continued integration of our hospitals," he said.
Norton manages the hospitals through for-profit subsidiary Alliant Management Services. Under the new structure, Alliant will hire top managers at the hospitals and oversee daily operations, but Blue & Co. will supply some financial training, including corporate compliance and accounts receivable management.
Richard Hacker, vice president of Alliant, said Blue & Co. will have representatives on a board that will govern Alliant, although the number has not been decided.
Although Blue & Co. will share in Alliant's revenue from the managed hospitals under the contract, it will have no equity in the business, Hacker said.
Norton has managed rural hospitals since 1978, he said. Management accounts for less than 1% of its revenue.
In 1998, Norton bought four hospitals from HCA, then called Columbia/HCA Healthcare Corp., for $232 million. Since 1997, Norton has suffered operating losses. In 1999 it posted an operating loss of $31.8 million on operating revenue of $535.2 million. Nonoperating revenue, including investment income, put the system in the black by $22.4 million.
Norton spokesman Mike Fleming said the system expects to report an operating profit this year. Norton also last month offered two separate bond issues, one of $184 million and another of $200 million, to refinance the system's debt from the HCA deal.