Iasis Healthcare Corp., Franklin, Tenn., may be trying to find a buyer for its Arizona hospitals, which have been plagued by declining volumes and management turnover, sources close to the discussions told Modern Healthcare.
Two sources who requested anonymity said Iasis already has approached potential buyers for its four Phoenix-area hospitals, and that Vanguard Health Systems, which operates four hospitals in the market, has talked with Iasis about buying them.
Eve Hutcherson, spokeswoman for Iasis, said the company would not comment.
"We don't disclose anything related to discussions we may or may not have related to our assets," she said.
Vanguard officials, including Charles Martin Jr., the company's chairman and chief executive officer, did not return calls at deadline.
Iasis bought the Phoenix hospitals from Tenet Healthcare Corp., which inherited them when it bought OrNda HealthCorp in 1997. Martin was president, chairman and CEO of OrNda before Tenet bought it.
"I think the company is looking at improving their operations, and if they were to get value for the Arizona properties, they would definitely consider that," said Elie Radinsky, senior vice president for high-yield research at Jefferies & Co.
David White, Iasis' chairman and CEO, was asked about the Arizona hospitals on a conference call with analysts last week.
He said the market has suffered declining volumes because Iasis closed a skilled-nursing facility unit and had problems contracting for anesthesia services at one of its hospitals.
"We believe Arizona is poised to make a comeback as far as its volumes are concerned," White said. "We like the Arizona market. Don't anybody leave this call thinking we don't like the Arizona market."
He did not directly answer the question of whether Iasis was considering selling its hospitals there or how the hospitals were performing.
The company last week announced the resignation of its chief financial officer as well as a third-quarter loss of $26.7 million. Analysts said the quarter, marked by charges taken in conjunction with the closure of one of the company's 15 hospitals, severance costs and problematic managed-care contracts, could either signal Iasis has hit bottom and is on the way up or that it may become an acquisition target or look to sell some facilities to pay down debt.
John Crawford, Iasis' CFO, will leave Sept. 15. He is the second top executive to resign from the company in recent months. Wayne Gower, a company founder and its original CEO, resigned May 15. Company officials did not comment on when or how Crawford's position would be filled.
The quarter was overshadowed by the closure of 118-bed Rocky Mountain Medical Center, Salt Lake City, for which Iasis took $12 million in charges. "The story here is a very good underlying business with very good assets . . . but we've kind of got a cloud over these numbers because of Rocky Mountain and some other things we're trying to clean up," White said.
Indeed, the quarter ended June 30 was riddled with special charges, including $4.6 million related to Iasis' deferred initial public offering. The company's net loss of $26.7 million for its third quarter compares with a net loss of $788,000 in the year-ago period. For the nine-month period, Iasis lost $25.3 million, compared with net income of $3.7 million in the same period of 2000. Revenue increased about 3% to $217 million for the third quarter and about 10% to $669 million for the nine months.