Three-hospital Carraway Methodist Health Systems, Birmingham, Ala., shed its two smaller hospitals last week, but its money-losing flagship remains without a buyer.
LifePoint Hospitals, Brentwood, Tenn., said last week it signed a definitive agreement to acquire 47-bed Carraway Burdick West Medical Center, Haleyville, Ala., and 57-bed Carraway Northwest Medical Center, Winfield, Ala. Terms were not disclosed. For-profit LifePoint expects to win regulatory approval in time to close the purchase by year-end.Completing that deal would leave the Carraway system with only 363-bed Carraway Methodist Medical Center, Birmingham. Carraway previously intended to sell all three hospitals in one deal-first to Ardent Health Services, Nashville, and then to Tenet Healthcare Corp., Santa Barbara, Calif.-but both deals foundered this spring.
System officials decided to sell the two rural hospitals to raise cash for Carraway Methodist, said Tom Singleton, president and chief executive officer of Cambio Health Solutions, Brentwood, Tenn., which took over management of the Carraway system in May. Cambio is a unit of investor-owned Triad Hospitals, Dallas. Those hospitals are also in better shape financially and were easier to sell, Singleton said.
The main deal-breaker for both Ardent and Tenet was Norwood Clinic, a multispecialty physician group practice with its main office on the Carraway Methodist campus. The clinic had planned to build a new office in fast-growing south Birmingham, and had refused to commit to having a presence at Carraway Methodist once the clinic's lease ends in 2004, but those moving plans have been shelved, said Cathy Fickes, interim CEO of Carraway Methodist and a senior consultant at Cambio.
The $56 million clinic project doesn't look as good financially as it once did, while the prospects of Carraway Methodist look more promising, Fickes said. Audited figures aren't yet available, but Fickes said the Carraway system as a whole will report a loss in the "upper $20 million" range on net patient revenue of $162.8 million for the 12 months ended June 30. Most of that loss came at the Carraway Methodist campus.
The hospital's turnaround plan-which includes cutting bad debt, trimming the average length of stay of Medicare patients, and renegotiating managed-care and lease contracts-is expected to reduce operating losses at Carraway Methodist by more than $10 million for fiscal 2003, Fickes said.
Singleton said a final decision to sell Carraway Methodist hasn't been made, but, he added, anything that improved its operations would also make it more attractive to buyers.
Earlier this month LifePoint purchased 100-bed Russellville (Ala.) Hospital for $19 million. Also last week, LifePoint said it would pay $25 million to buy the remaining 30% interest that it did not already own in 99-bed Western Plains Medical Complex, Dodge City, Kan. HCA, Nashville, acquired a 70% interest in the hospital in 1995, and that interest was one of the assets spun off as LifePoint in 1999. LifePoint operates 24 hospitals.