COLUMBIA: MORE DETAILS EMERGE ON DOWNSIZING PLANS
Columbia/HCA Healthcare Corp. chair and CEO Dr. Thomas FristThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
yesterday announced plans to "dismantle" much of the company
"Richard L. Scott spent a decade building." Under the plan,
Columbia will be reorganized into "five operating groups, three
of which would be candidates for spinoffs," the Washington Post
reports (Hilzenrath, 11/18). The Wall Street Journal reports
that at the core of Columbia will be the "East" and "West"
divisions, which consist of 232 hospitals, mostly in "bustling
markets." The company expects to spin off its "America,"
"Atlantic" and "Pacific" divisions, which consist mainly of
"hospitals in beleaguered urban markets ... as well as some rural
and small-city facilities" (Lagnado, 11/18). The New York Times
reports that "if the spinoff is completed," Columbia "will be
leaving markets that have been weak performers or in which it has
attracted local criticism, including Chicago, Boston and Kansas
City, MO." In addition, the company "has also decided that the
surviving entity will abandon the Columbia name" (Eichenwald,
11/18).
ON WALL STREET
While the "divestitures could take 12 to 18 months to
complete," Columbia said it would start consolidating January 1.
The reorganization could save the company "approximately $100
million," according to a Columbia source. Columbia's shares
closed with a 25-cent drop yesterday to $31.1875 on the New York
Stock Exchange (Wall Street Journal, 11/18). Yesterday's news
received a "lukewarm" greeting from investors who were not
surprised by the long-expected changes which could "leave
investors hanging for some time," the Chicago Tribune reports.
Standard & Poor's Corp. analyst Robert Gold said, "It's not at
all clear what the underlying growth rate of the company will be
when this is all over. It's very hard, if not impossible, to
value the company right now" (Graham, 11/18). The Washington
Times reports that Standard & Poor said Columbia's sale "could
raise needed cash to pay off a growing debt load or fines that
might be imposed." However, the agency said Columbia's A-minus
rating was lowered to BBB because doctors are referring patients
to other hospitals and consumers have become skeptical of
Columbia hospitals (Goldreich, 11/18).
FOR SALE
The company will most likely pull out of the Chicago, Boston
and Louisville, KY, areas and five states, including Arkansas,
Illinois, Massachusetts, North Carolina and Wyoming. Although
Texas is expected to remain a focus for the company, Dallas
Morning News reports that Columbia might "shed 15 Texas
hospitals." However, even with the sale, "Columbia would still
have 52 hospitals in the state, the most anywhere" (Ornstein,
11/18).
HERE, THERE AND EVERYWHERE
The Boston Globe reports that "the reorganization is
confirmation that the firm has abandoned hopes of building a
network" in Massachusetts. The restructuring may lead to the
sale or spinoff of MetroWest Medical Center in Framingham
(Blanton, 11/8). The Lexington Herald-Leader reports that
Columbia "would sell 12 of its 13 Kentucky hospitals, including
all six in Central Kentucky." Only Bowling Green Hospital would
"remain in the Columbia fold" (Wager, 11/18). The Chicago
Tribune reports that Columbia is expected to completely exit the
Chicago market, in which is "has floundered ... since it entered
the area in 1993." Columbia's "flagship Columbia Michael Reese
Hospital and Medical Center" is believed to be "doomed to be
closed or converted to other uses" (11/18). Denver Post reports
that the "five hospitals Columbia runs in metro Denver aren't
among the 115 that would be sold or spun off" (Algeo, 11/18).
The Charleston Daily Mail reports that while "West Virginia will
be part of the shuffle" in that "a new division president ...
will oversee state operations," the reorganization "won't
directly affect the eight hospitals Columbia owns or operates, at
least not immediately" (11/14). The Tampa Tribune reports that
"Columbia would place all but three of its 52 Florida hospitals
into its new East division, which it plans to keep intact." The
others, "including Columbia South Bay in Sun City Center, would
land in the Atlantic division, which could be spun off or
otherwise restructured" (11/18). The San Francisco Chronicle
reports that Columbia would sell three hospitals in Northern
California. The three hospitals are those in Healdsburg,
Sebastopol and San Leandro (11/18). The Arizona Republic reports
that the restructuring will most likely lead to the sale of
Columbia properties in Arizona, as the state is one of the
markets that Columbia is looking to spin off (Miller, 11/18).