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Columbia eyes spin-off
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November 11, 1997: 7:45 a.m. ET
Health giant looking to put some hospitals into separate company
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NEW YORK (CNNfn) - Columbia/HCA Healthcare Corp., the nation's largest for-profit health chain, is reportedly considering spinning off about a third of its 340 hospitals into a separate public company.
The Wall Street Journal, citing people familiar with the situation, said many of the hospitals that could be spun-off were acquired as part of Columbia's $3.45 billion acquisition of HealthTrust Inc. three years ago.
The health chain is also expected to sell or spin off at least a portion of its lucrative surgery centers as well as diagnostic units and rehabilitation centers -- assets that some on Wall Street project would bring at least $1 billion.
Columbia is already trying to sell its home health care unit for a reported $450 million. Integrated Health Services Inc. of Owings Mills, Md. is seen as a likely buyer. However, many think Columbia may only get about half the asking price.
The move to stem Columbia's rapid growth comes as the federal government is conducting a major Medicare fraud investigation of the company. In contrast to the rapid expansion seen under former chief executive Richard Scott, Columbia's new CEO Dr. Thomas F. Frist Jr. and president Jack Bovender have recently said they would like to pare down the $20 billion health care company built under Scott to a more manageable size.
The company would not comment on whether any specific restructuring plans have been formulated. Columbia's board of directors is set to meet Thursday.
Sources close to the company told the Journal that board members are ready to discuss breaking up the company. They said Frist already has a broad outline that will be discussed with directors.
Columbia is also reportedly looking for a way to pare down while keeping its surgery centers.
Sources cited by the Journal say Frist is leaning toward spinning off the company's rural hospitals, just as he did when he headed Hospital Corp. of America, which spun off its weaker rural hospitals to form HealthTrust.
The company is also said to be considering selling hospitals in weaker markets or aligning with not-for-profit hospitals and retaining a minority stake in those hospitals.
The ongoing probe in Columbia's activities and the possibility of federal fines or other sanctions for violating Medicare rules could make it difficult to execute the deals. From the beginning of the investigation, Columbia has denied "systemic" wrongdoing.
Columbia's rehabilitation and surgery centers could go to HealthSouth Corp. which just agreed to sell off some of its nursing homes and other businesses to Integrated Health Services Inc. for $1.15 billion in cash.
HealthSouth chairman and chief executive Richard Scrushy told the newspaper he and Frist have talked informally about a deal, although no offer has been made.
Scrushy said he is considering a variety of possible ventures with Columbia/HCA including joint control of Columbia hospitals in some markets. However, he said he is not interested in purchasing Columbia.
Scrushy wrote Columbia's board in July saying he was interesting in buying Columbia/HCA for up to $45 a share. That offer was withdrawn in August.
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Columbia/HCA
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