Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 6, 1994 TAG: 9410060021
SECTION: BUSINESS PAGE: B-10 EDITION: METRO
SOURCE: FROM STAFF AND WIRE REPORTS
DATELINE: LOUISVILLE, KY. LENGTH: Medium
The agreement between Columbia-HCA Healthcare Corp. and HealthTrust Inc. comes amid widespread consolidation in the health care industry.
The companies said late Tuesday they expect annual savings of about $125 million from the transaction. Together, their combined annual revenue is expected to exceed $15 billion.
``This consolidation will enhance our efforts with physicians and managed care organizations as we together seek cost-efficient, quality results,'' said R. Clayton McWhorter, chairman and chief executive of the Nashville, Tenn.-based HealthTrust.
Currently, Columbia operates 195 hospitals with 44,000 beds, and HealthTrust has 116 hospitals with 16,000 beds. In the past, Columbia has bought hospitals and then closed them so they wouldn't compete with hospitals it already owned.
Among the hospitals involved are Lewis-Gale Hospital and Lewis-Gale Psychiatric Center in Salem and Clinch Valley Medical Center in Richlands, all owned by Columbia, and Montgomery Regional Hospital in Blacksburg and Pulaski Community Hospital, all owned by HealthTrust.
Last week, the five hospitals announced the formation of Southwest Virginia Health Alliance so that they could market themselves as a group to managed care health plans. The merger of the parent companies should only reinforce the cooperative plans of the five Western Virginia hospitals, an official said Wednesday.
"We haven't considered the implication of it, except that friends we had in the alliance will now become family," said Karl Miller, president of Lewis-Gale Hospital.
The alliance brought together the hospitals and physician groups in each community into a network to compete for health care business. That mission still holds, Miller said. The sixth member of the alliance, St. Luke's of Bluefield, W.Va., is also part of the new family because it is one of five hospitals Columbia owns in West Virginia.
Bernard McDonagh, a securities analyst who follows health company stocks for Piper Jaffray Cos. in Minneapolis, said Wednesday the merger may raise antitrust concerns, because Columbia's dominance of some markets could give it control over prices.
``That's a concern regulators have. They're intent is not to let anyone achieve near monopoly power,'' he said. ``If you got over 35 percent market share they'd begin to get concerned.''
Columbia has 25 percent to 30 percent of the customers in many of the areas it now operates, he added. Lewis-Gale's Roanoke Valley market share falls into that category.
McWhorter will be chairman of the board of the new company. Thomas F. Frist Jr., Columbia's chairman, will be vice chairman of the new company and Richard L. Scott, president and chief executive of Columbia, will keep his current positions.
The boards of the two companies finally agreed to the merger late Tuesday, Rosalyn Elton, vice president of finance for Columbia, said in a telephone interview.
Columbia will pay 0.88 share of its stock for each HealthTrust share and assume about $1.8 billion in HealthTrust debt. Elton said the stock portion of the transaction works out to $3.6 billion when Columbia's Tuesday stock close is used.
In trading Wednesday on the New York Stock Exchange, Columbia stock fell $2 a share, closing at $40.75, reflecting investor concern about the implications of the deal. HealthTrust's shares rose $2.25 to $34.25.
The merger requires regulatory approval and the acceptance of shareholders, who are expected to vote on the proposal early next year.
Staff writer Sandra Brown Kelly contributed information to this report.
by CNB