Hospital ownership could be like a game of musical chairs in Alabama.
Last week, Birmingham-based HealthSouth Corp. and University of Alabama at Birmingham Health System announced they have entered into exclusive negotiations over HealthSouth's sale of the medical campus that includes HealthSouth Medical Center, located in downtown Birmingham, just outside the UAB campus. The announcement throws into question the futures of four hospitals in Jefferson County.
One that's been in question for a while is HealthSouth's so-called digital hospital, which has been under construction in Birmingham for about four years. The certificate of need for the unfinished digital hospital stipulates that it must replace beds at another facility. When HealthSouth's former chief executive officer, Richard Scrushy, announced the digital hospital in 2001, he said it would replace the downtown hospital UAB wants to buy.
But HealthSouth is also in negotiations to sell the rights of the unfinished digital hospital to Baptist Health System, Birmingham. What Baptist plans to do with it is unknown.
It may be used as a replacement for yet another Birmingham hospital, Baptist Montclair, said system spokesman Ross Mitchell. Baptist recently announced that it was attempting to team with for-profit Triad Hospitals, Plano, Texas, to form a joint venture and replace Montclair.
HealthSouth might also apply to transfer the beds from Metro West, a hospital in Fairfield, Ala., that closed in 2004, to the digital hospital. Andy Brimmer, a spokesman for HealthSouth, said the company hasn't decided what it's going to do with the Metro West beds, but the company hasn't applied for a bed transfer.
Jay Grinney, HealthSouth's CEO, has told investors that HealthSouth has no plans to remain in the acute-care business. At least one current HealthSouth stockholder, John Katopodis, a former Birmingham City Council president who has been critical of Grinney and the new management team, said the company should open up the bidding process rather than enter exclusive negotiations.
When asked if other bids had been made on the HealthSouth Medical Center, Brimmer referred to a company statement that said "there were no other offers on the table" when HealthSouth entered exclusive discussions with UAB.
Separately, last week HealthSouth announced that Joel Gordon voluntarily resigned from the company's board effective May 10, leaving just two directors-Robert May and Jon Hanson-who were with HealthSouth before March 2003, when the Securities and Exchange Commission alleged massive accounting irregularities at the company.
Meanwhile, the prosecution in the criminal fraud case against Scrushy rested last week and at the request of the prosecution, the presiding judge, Karon Bowdre, dismissed two charges-one count of money laundering and one count of mail fraud-against Scrushy. Five other charges were dropped over the past two weeks and at deadline Scrushy was facing 51 counts in connection with the alleged $2.64 billion accounting fraud at the company.