
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, October 3, 1993                   TAG: 9310030081
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-5   EDITION: METRO 
SOURCE: The New York Times
DATELINE:                                 LENGTH: Medium

2 HUGE HOSPITAL CHAINS TO MERGE

In a consolidation that reflects the powerful pressures for change in health care, the nation's two largest hospital chains, Columbia Healthcare Inc. and HCA-Hospital Corp. of America, said Saturday that they had agreed to merge.

HCA is the parent company of Lewis-Gale Hospital in Salem.

The new company, which would operate 190 hospitals, would be the largest investor-owned hospital chain in the world.

Richard L. Scott, the chairman and chief executive of Columbia, who will be the president and chief executive of the new company, said the value of the deal was $10.25 billion, making it the seventh-largest merger in any industry since 1981. He said the merger would be accomplished in a tax-free exchange of shares. No cash will be involved.

The merger is the largest in a wave of health care industry consolidations across the country in anticipation of President Clinton's health care proposals and growing pressures to slow the longstanding increases in health costs.

Only last month, the Columbia Hospital Corp., as it was known then, completed a merger with the Galen Health Care Inc., a hospital chain owned by Humana Inc., a large health maintenance company. Columbia changed its name after the merger.

Subject to approval by the shareholders and federal antitrust regulators, the new company, which will have 125,000 employees in 26 states, will be called Columbia/HCA Hospital Corp. The executive offices will be in Louisville, Ky., and Nashville.

Thomas F. Frist Jr., a physician who was the highest paid executive in the country last year as the head of HCA, will be the chairman of the new company. He received compensation of $127 million from HCA last year, mainly through options to buy stock at steep profits.

The merger, coming so soon after the Columbia-Galen merger, surprised Wall Street securities analysts. "It is very unusual," said Kenneth S. Abramowitz, a health care analyst at Sanford C. Bernstein & Co. "After companies make a major acquisition, they usually digest it for one or two years."

Scott said in a telephone interview Saturday that the new company would be in a stronger position to compete for national business and to offer lower prices at a time when both government and private purchasers were insisting on economies. "Nobody is succeeding unless they are reducing costs," he said.

by CNB