For years, Paracelsus Healthcare Corp., Houston, has been shrinking. From a high of 31 hospitals after a 1996 merger, the company, since renamed Clarent Hospital Corp., said last week it will vanish into thin air as soon as it finds buyers for the two of its eight remaining hospitals for which it doesn't yet have sale agreements.
"It does seem like it's a natural progression," said Deborah Frankovich, Clarent's senior vice president and treasurer. "We started the year with 10 hospitals, we sold two, and now we have agreements to sell six others. We don't have any agreements on (the last two hospitals), but we're working toward that."
Frankovich couldn't predict how long it would take to find buyers for the two hospitals-46-bed Cumberland River Hospital, Celina, Tenn., and 39-bed Flint River Community Hospital, Montezuma, Ga.-but once that is accomplished, the next task will be "an orderly wrap-up of the company." Clarent hired Merrill Lynch & Co. earlier this year to find buyers for its hospitals and determine the company's future (June 11, p. 18). Frankovich said the sales should allow Clarent to pay off its working capital debt and $130 million in notes due in 2005.
Clarent's latest deal is a definitive agreement to sell the assets of its largest hospital, 110-bed Heartland Health System, Fargo, N.D., to the town's dominant provider, 344-bed MeritCare Health System. MeritCare said it is paying $33 million for the assets and will consolidate services between the two sites. The deal is expected to close by Jan. 31, 2002. At closing, Heartland will be renamed MeritCare South University, which reflects the building's address, 1720 S. University Drive.
Clarent owned eight hospitals when it emerged from Chapter 11 bankruptcy protection earlier this year and changed its name from Paracelsus. When Paracelsus, then based in Pasadena, Calif., merged with Champion Healthcare Corp., Houston, in 1996, the combined company, which kept the Paracelsus name, operated 31 hospitals in 11 states.
Persistent financial troubles and shareholder lawsuits led Paracelsus to seek a buyer. When that effort failed, the company began the sell-off. In two pending deals, the company is selling four hospitals to Health Management Associates, Naples, Fla., and selling 191-bed BayCoast Medical Center, Baytown, Texas, to the only other hospital in town, 252-bed San Jacinto Methodist Hospital. Terms were not disclosed.
The sale of Heartland to MeritCare has been expected (Nov. 12, p. 17). Heartland has struggled mightily since 74-bed Innovis Health opened in Fargo in November 2000. The $90 million Innovis facility, which also includes a six-story physician office tower linked to the hospital by an atrium, was developed and is owned in a 50-50 joint venture of Blue Cross and Blue Shield of Minnesota and Dakota Clinic, a 175-physician multispecialty practice.
The clinic and Heartland had an acrimonious divorce when Paracelsus ended a lucrative deal through which the clinic provided ancillary services to the hospital. The two also clashed over medical records when Heartland separated its inpatient records for patients from the clinic's outpatient files for the same patients.
Roger Gilbertson, M.D., president and chief executive officer of MeritCare, said the hospital will move its rehabilitation, transitional-care and adult psychiatric services units, urgent-care clinic and elective orthopedic and outpatient surgeries to the Heartland location, which will not maintain an emergency room. The facility will be staffed for about 120 beds, although there won't be any traditional medical-surgical beds, Gilbertson said. Moving the specialty-care units will free up 76 beds for medical-surgical use on the main campus, he said.