Rehabilitation giant HealthSouth Corp. already has used an impressive display of political muscle to cow its acute-care rivals in its hometown of Birmingham, Ala., but that may just be the start, Modern Healthcare has learned.
The next target may be three-hospital Carraway Methodist Health Systems, a financially strapped system based in Birmingham that has been for sale since last fall.
HealthSouth recently made an offer to manage Carraway with an option to buy, according to Dennis Hall, president of 10-hospital Baptist Health System, Birmingham. Hall said he learned of the offer from local physicians who are being recruited by HealthSouth for its planned state-of-the-art "digital hospital."
The digital hospital, billed as a "hospital of the future" with fully electronic patient records and other technology, already has stirred controversy in Birmingham healthcare circles. The hospital's certificate-of-need application was waived through the normal planning process last year by a special law approved by the Alabama Legislature and signed by Democratic Gov. Don Siegelman. HealthSouth also wrangled a series of tax breaks worth $30 million over 10 years from the city-appointed Birmingham Industrial Development Board.
Last month, Baptist and Brookwood Health Services, a Birmingham hospital owned by Tenet Healthcare Corp., Santa Barbara, Calif., sued to overturn the law and prevent the state's Health Planning and Development Agency from issuing the CON; the lawsuit was filed in Montgomery County (Ala.) Circuit Court (May 20, p. 6).
Richard Scrushy, HealthSouth's chairman and chief executive officer, was out of the country last week and could not be reached, his assistants said. The company declined to make another official available for comment.
Thomas Singleton, president of Cambio Health Solutions, Brentwood, Tenn., confirmed HealthSouth's offer to Carraway. Cambio, a subsidiary of Quorum Health Resources, recently signed a contract to manage the Carraway hospitals and find a buyer for the system.
"There was some discussion for a very brief time, about a month ago, but I'm not sure how serious it was," Singleton said.
Ardent Health Services, Nashville, signed a letter of intent to buy Carraway for about $150 million, and Tenet looked very hard at a deal, but both times, the talks were scuttled because a key physician practice wouldn't agree to extend its lease past 2004 at the system's flagship hospital in Birmingham. That practice, Norwood Clinic, is building a $56 million, 200,000-square-foot office across the street from the site for the digital hospital.
Roger Meadows, a spokesman for the clinic, said the primary reason for the new office on the south side of Birmingham is to tap into a booming market, and the particular location, along U.S. Route 280, was chosen for its convenience for patients, not its close proximity to the digital hospital.
As for a relationship with HealthSouth, Meadows said, "As of today, there is none, and there are no plans for any. They probably will have admitting privileges in that hospital, if it ever opens." Meadows added that the physicians still want to extend their lease at Carraway; Singleton said it is "the highest priority" to persuade the physicians to continue their lease.
Singleton downplayed the idea that HealthSouth would buy Carraway and seek CON approval to transfer its beds to the digital hospital, saying it would be an expensive proposition for HealthSouth. He pointed to the price Ardent was prepared to pay for the system, and added, "We're not at the fire sale point."
HealthSouth's recruitment overtures to Birmingham physicians is another sign of the company's ambitions in its hometown. The $240 million, 219-bed digital hospital's CON prohibits the new hospital from providing services not offered at 141-bed HealthSouth Medical Center, which primarily offers orthopedic services. But the physicians approached by HealthSouth, Hall said, practice specialties that are not offered at HealthSouth Medical Center, such as heart-related specialties.