A Phoenix health system has added two hospitals to a list of 11 previously announced divestitures.
Banner Health System, which owns or manages 30 hospitals in 14 states, will sell a rural hospital in Nevada and one in California. Banner announced the restructuring and downsizing plan in September (Sept. 24, p. 20). The two hospitals on the auction block are 40-bed Churchill Community Hospital in Fallon, Nev., and 59-bed Lassen Community Hospital in Susanville, Calif.
Banner spokesman Dan Green said Churchill County has rights of first refusal to purchase the Fallon hospital at the still-to-be-appraised value, but Banner will seek bids from other buyers if the county declines. Churchill County, with a $4 million equity stake in the hospital, also owns the land beneath it. Construction projects under way at Susanville will continue, but Banner hopes to sell that facility before the project's planned 2003 completion. Green said both hospitals are profitable.
For the nine months ended Sept. 30, Lassen had net income of $1.3 million on $13 million in total revenue. Fallon earned $1.1 million on $24.9 million in revenue.
The two hospitals were slated to be part of a Nevada-California regional network that never gelled, Green said.
They are the last remaining Banner-owned hospitals in California and Nevada.
"We are absolutely confident we'll find a buyer for those facilities," Green said. "A change in business strategy led us to this decision, not a lack of confidence in the hospitals."
Green said Banner has no plans to divest any other hospitals it has not previously named.
Banner was formed in 1999 when Lutheran Health Systems in Fargo, N.D., purchased Phoenix-based Samaritan Health System in a $345 million deal. All of the hospitals for sale were previously Lutheran hospitals. Banner earned $54.3 million on total revenue of $1.9 billion in 2000.
In September, Banner President and Chief Executive Officer Peter Fine announced that the not-for-profit company would move from Fargo to Phoenix and would restructure and divest facilities by Dec. 31 to maintain and consolidate its strong positions in growth markets in Arizona and Colorado. To date Banner has not sold any of the 11 hospitals and pushed back to March 31, 2002, the target date for selling all the facilities.
Fine said in September that failing to divest would cause the organization to suffer from "capital starvation" that would lessen quality of care and service.
"We have decided to sell the balance of our facilities because we will need to focus our time, attention and capital resources on keeping up with the growth in these key areas of our operations," he said. "We simply don't have the resources to invest in our entire asset base, and we know there are buyers that will invest in the facilities we are divesting. In the long run, this will be best for these facilities and good for Banner."