Company To Sell 104 Hospitals To Employee-Owned Company
Jun. 01, 1987
NASHVILLE, Tenn. (AP) _ Hospital Corporation of America's plan to sell more than 100 small hospitals to an employee-owned company will allow it to consolidate its larger acute-care centers in the Southeast, HCA's chairman said today.
Thomas F. Frist Jr. said the Nashville-based company plans to sell its holdings in about 10 states and remain in 16 states, allowing the firm to ease management demands.
HCA, the world's largest publicly held hospital management company, plans to sell 104 hospitals, including 19 in Texas, 16 in Tennessee, 11 in Florida and seven in California, corporate officials said during a morning news conference. The corporation does not plan to release the names of hospitals involved until Tuesday.
However, Victor L. Campbell, vice president of investor relations for HCA, confirmed that HCA is moving completely out of 10 states: Alabama, Arizona, Idaho, Indiana, Mississippi, Missouri, Oregon, Utah, Washington and Wyoming.
The new company, which has not been named, will be based in Nashville and will control mostly suburban and rural, community-oriented hospitals, the officials said. Hospitals to be sold to the new company accounted for $1.5 billion in net revenues in 1986.
HCA will retain sole ownership of the HCA Management Co., which manages more than 225 hospitals, and HCA Psychiatric Co., which owns and manages more than 50 such facilities. The corporation also will continue to own or manage more than 40 facilities in six other nations.
Charles N. Martin Jr., an HCA executive who will be among those heading the new firm, said the changeover will result in some employee cuts in areas such as billing, collecting and housekeeping. However, he could not give an exact number.
The $1.9 billion reorganization plan will not mean a change in services, said spokeswoman Meta Gaertnier.
The restructuring does not require approval of HCA stockholders and should be completed during the third quarter, Campbell said.
The employee-owned company is subject to review by state and federal agencies, including the U.S. Department of Labor, Ms. Gaertnier said.
Falling occupancy rates for hospitals and changes in Medicare and private insurance plans have brought a decline in earnings for HCA and most companies in the hospital industry. HCA reported its first-ever quarterly loss in December, but the rate of decline has generally been slowing.
The restructuring plan, first announced May 15, awaited financing commitments made public following the board's approval of them Friday.
Drexel Burnham Lambert Group Inc. provided a financing commitment to the new company of up to $956 million, while Wells Fargo Bank, N.A., will provide financing of up to $940 million, said Victor L. Campbell, vice president of investor relations for HCA.
HCA had revenues last year of $5 billion, Ms. Gaertnier said.
HCA President R. Clayton McWhorter will be chairman and chief executive officer of the new company.