CALIFORNIA: ATTORNEY GENERAL OPPOSES COLUMBIA/HCA DEAL

      State Attorney General Dan Lungren (R) moved Friday "to halt
 Sharp HealthCare from selling controlling interest in its
 nonprofit hospitals to Columbia/HCA Healthcare Corp., calling the
 deal fundamentally flawed."  SAN DIEGO UNION-TRIBUNE reports that
 Lungren informed Sharp officials in a letter that if they did not
 stop the sale of a half-interest in their hospitals to
 Columbia/HCA, he "would sue to block the deal."  Lungren said in
 a statement, "It is critical that taxpayers of San Diego County,
 who have supported Sharp and its affiliated entities with tax-
 exempt status, be protected against a for-profit transaction,
 which threatens the value of the charity and the charitable
 services provided by the community.  It is my view that the
 transactions, as contemplated, would breach the trust under which
 Sharp operates."  The Sharp and Columbia/HCA deal is the first of
 its kind in California.  Sharp officials were notified through
 the letter that James Schwartz, deputy state attorney general,
 "is opening a civil investigation into the dealings" between
 Sharp's board and Columbia/HCA.  UNION-TRIBUNE reports that after
 receiving the letter, "Sharp officials effectively put the entire
 deal on hold."    
      BAD DEAL:  Schwartz noted that two other for-profit hospital
 chains -- Santa Barbara-based Tenet Healthcare Corp. and
 Nashville, TN-based OrNda Healthcorp. -- submitted higher bids
 than Columbia/HCA.  Columbia/HCA offered $195 million; Tenet
 offered $304 million; and OrNda offered $395 million.  Schwartz
 added that the Sharp hospitals were grossly undervalued.  He
 said, "Should this deal close in the proposed form, we will seek
 to hold the Sharp directors who voted to approve the transaction
 personally liable for" the $100 million to $200 million the
 "charity's public beneficiaries" stand to lose.  Schwartz also
 charged that the San Diego Hospital Association, Sharp's parent
 board, and Sharp's individual hospital boards, "voted to approve
 the sale 'without knowledge of, or resolution of, a number of key
 matters' that could have a significant financial impact on
 Sharp's nonprofit organization."
      SHARP REPLY:  Kearny Mesa-based Sharp, the largest hospital
 system in the region and provider of 30% of the area's health
 care, issued a statement saying, "We disagree with the
 assessments and characterizations of the attorney general. ... 
 We look forward to meeting with the attorney general to clarify
 and resolve these issues."  However, Sharp attorney John Walker
 "wrote a scathing" response to Schwartz, "calling his
 correspondence 'the most unfair and wrongheaded' he had seen from
 a government official."  Columbia/HCA officials said that they
 remain "committed to working out the transaction with Sharp,"
 adding that they believe the deal will have "many positive
 results for the San Diego community" (Dalton, 11/9).
     SHREWD DECISION:  Sanford C. Bernstein & Co.'s Kenneth
 Abramowitz said that "Sharp was right to take less money to deal
 with Columbia because Sharp was under financial pressure from
 California's powerful managed care companies."  He said,
 "Columbia is a big gorilla and Tenet is a little gorilla.  In the
 competitive environment you want to sell out to the strongest
 company you can, with the highest chance of doing well"
 (Freudenheim, NEW YORK TIMES, 11/9).