Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 11, 1994 TAG: 9402140308
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: LAURA WILLIAMSON STAFF WRITER
DATELINE: LENGTH: Long
In what could be the first step toward creating a consolidated hospital network for the Roanoke Valley, Lewis-Gale Hospital's parent company, Hospital Corporation of America, merged Thursday with Louisville, Ky.-based Columbia Healthcare Corp., creating the largest health-care service company in the world.
Karl Miller, president of Lewis-Gale Hospital in Salem, said Columbia President and Chief Executive Officer Richard L. Scott mentioned during a visit to Roanoke that he might be interested in buying Carilion, parent company of Roanoke Memorial and Community hospitals.
"I don't know whether that was tongue in cheek," Miller said.
Scott's track record would indicate otherwise.
Scott, a merger-and-acquisitions attorney by training, has been buying hospitals since he helped found Fort Worth, Texas-based Columbia Hospital Corp. in 1987. Last fall, he merged Columbia with Galen Health Care Inc. of Louisville, Ky., creating a network of 96 hospitals in 19 states.
Among those hospitals was St. Luke's Hospital in Bluefield, W.Va. Scott immediately tried to buy Bluefield Regional Medical Center, its competition. Bluefield rejected the offer.
According to The Wall Street Journal, Scott tries to expand his markets first by purchasing acute-care hospitals from publicly traded companies (such as HCA), then adding not-for-profit hospitals (such as Roanoke Memorial and Community hospitals) and home health networks. Carilion also has a home health service.
Purchasing Carilion would fit Scott's "one-stop shopping" philosophy of health care, a spokesman for the newly formed Columbia/HCA Healthcare Corp. said.
"We are always in the process of buying facilities that might complement our network," spokeswoman Lindy Richardson said. She would not say whether Scott hoped to purchase Carilion.
An offer would come as no surprise to Carilion Senior Vice President Lucas Snipes, who paid close attention to what happened in Bluefield.
"There's no reason to believe they won't do this sort of thing in this market," he said. He added that no offer had been made.
As for whether Carilion would agree to a merger, Snipes wouldn't say.
"I'm not sure what the value would be to the community," he said.
A merger that would create a health-care monopoly in Roanoke might not even be feasible, Snipes said, because it might violate federal antitrust laws. Carilion ran into similar problems when it merged Roanoke Memorial and Community hospitals several years ago, touching off a three-year legal battle.
On the other hand, Scott might decide to sell Lewis-Gale to Carilion, said Eugene Melnitchenko, a health-care analyst for New York-based Legg Mason Wood Walker.
Lewis-Gale's Miller doesn't believe that will happen, in part because Scott made a point of visiting Lewis-Gale before any other HCA-owned hospital. With the addition of HCA's 96 hospitals, the new company owns 192 hospitals in 26 states and three countries.
Lewis-Gale "continues to be one of the top 10 in the system in terms of reputation," Miller said. "The thought of us being sold is pretty remote."
The merger will mean more efficient buying power for Lewis-Gale's parent company, Miller said, and could result in "more competitive" pricing for patients at Lewis-Gale Hospital and its sister, Lewis-Gale Psychiatric Center.
Consolidating health care services into large networks to reduce costs follows a national trend in health reform and fits in with President Clinton's managed-care philosophy.
Thursday's merger was Scott's second attempt to buy HCA. He helped put together an unsuccessful $3.9 billion bid for the company in 1987.
Scott acquired the company through a tax-free exchange of shares that involved no cash. During simultaneous meetings in Nashville, Tenn., and Louisville, both companies' shareholders voted to swap one share of HCA stock for 1.05 shares of Columbia stock.
Stock prices for both companies have risen significantly since merger plans were announced this past fall. HCA stock rose 2 3/4 points Thursday, closing at 42 3/8. Columbia stock rose 2 7/8 points, closing at 40 1/2.
\ MEDICAL MERGER\ THE HOSPITALS\ \ Roanoke Memorial Hospital:
Not-for-profit corporation, acute care general hospital.
Total revenue (fiscal year ending Sept. 30, 1992): $282,386,389.
Licensed beds: 675
\ Community Hospital of Roanoke Valley.
Not-for-profit corporation, acute care general hospital.
Total revenue: $117,191,808
Licensed beds: 400
\ Lewis-Gale Hospital
For-profit corporation, acute care general hospital.
Total revenue (fiscal year ending 12/31/92): $135,332,437
Licensed beds: 406.
\ Lewis-Gale Psychiatric Center
For-profit corporation, psychiatric hospital
Total revenue: $21,974,401
Licensed beds: 145
by CNB