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Columbia sets amputation
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April 16, 1998: 2:28 p.m. ET
Ailing hospital chain sells 34 outpatient centers to HealthSouth for $550 million
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NEW YORK (CNNfn) - Columbia/HCA Healthcare Corp. said Thursday it will sell 34 outpatient surgery centers to rival HealthSouth Corp. for $550 million cash, roughly $100 million more than analysts expected.
Columbia, the nation's largest hospital chain, said the sale follows restructuring plans begun last November to cut its health-care network by about a third.
Analysts said HealthSouth, which already is the nation's largest outpatient center operator, had been coveting such a purchase since then.
"This acquisition, which we expect to be immediately accretive to earnings, further reinforces HealthSouth's position as the nation's largest operator of outpatient surgery centers," said Richard Scrushy, HealthSouth's chairman and chief executive officer.
"These 34 centers represent an excellent geographic fit with our existing network," said Scrushy. "Over 75 percent of these centers have HealthSouth outpatient rehabilitation centers in the same market."
The deal for the centers is expected to be completed in the third quarter 1998, pending regulatory approvals including a Hart-Scott-Rodino Act filing.
The ambulatory centers are located in Alabama, California, Iowa, Illinois, Kentucky, Louisiana, Minnesota, Mississippi, North Carolina, Nevada, Oregon, Rhode Island and Texas.
On completion of the deal, HealthSouth will operate about 212 outpatient surgery centers and 1,200 outpatient rehabilitation locations.
PaineWebber analyst Helen O'Donnell said the deal constitutes a "win-win" for the nation's two biggest outpatient center operators.
"It's good news on both fronts. HealthSouth was very eager to buy when Columbia said it wanted to sell some centers," she said. "And the centers are in many of the markets where Columbia doesn't have hospitals at all, or at least not an integrated network."
The sale comes seven months after federal investigators launched a wide-scale probe into Columbia's Medicare billing practices.
A.J. Rice, an analyst with Bear Stearns, said that doesn't mean Columbia sold its centers at a cut-rate price. "They got about $100 million more than we thought they would," he said.
Rice said the hospitals are complementary enough that anti-trust concerns don't appear likely. And as such, he said, the deal is likely to get regulatory approval.
Shares of Birmingham, Ala.-based HealthSouth (HRC) were up 5/8 at 29-1/2 in New York Stock Exchange trading Thursday, while shares of Nashville-based Columbia (COL) were off 1/8 at 33.
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Columbia/HCA
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