Greatwest Hospitals Inc., which only three weeks ago said it wanted to get out of the hospital business to concentrate on expanding its health maintenance organizations, said Thursday that it plans to sell its entire hospital group to American Healthcare Management Inc. of Dallas for about $95 million.
The Santa Ana company's hospital group, which lost $367,000 on revenues of $107 million in fiscal 1984, includes seven Southern California hospitals with 650 licensed beds, a clinic, eight health-service companies and five medical-office buildings.
American Healthcare operates 38 health care facilities in 14 states, including several in Southern California. It has agreed to assume certain Greatwest Hospital obligations, which will be credited against the purchase price of $95 million.
American had previously expressed an interest in buying Greatwest's hospital group, according to Ralph Kuhns, American's senior vice president and treasurer. He said the company had no plans to close any of the Greatwest facilities and that it plans to improve them. In Southern California, American operates skilled nursing facilities in Huntington Park, Monterey Park, Hawthorne, Inglewood, Long Beach and Vista.
Hospital industry analysts said the deal makes sense for both companies.
"I think considering the hospitals and the locations, it's a reasonable deal for both sides," said David Goldsmith, a health care analyst with Robertson, Colman & Stephens in San Francisco. "Neither of them felt they had the critical mass to be a significant factor in the Southern California market."
Harlan Loomas, chairman and chief executive of Greatwest, said, "It's a great fit. I'm delighted."
Loomas said that although Greatwest would not realize a material loss or gain on the sale, the proceeds would have a "favorable impact on the company's balance sheet" and enable the company to concentrate all its resources on providing prepaid health plans. Greatwest recently agreed to acquire Independence Health Plan, a Michigan HMO with 105,000 members. Greatwest is in the process of choosing a new name to reflect its shift from hospitals to health plans.
"Our purchase of these facilities will greatly expand the company's base of operations in California," said John A. Bradley, chairman and chief executive officer of American Healthcare in a statement. For the first nine months of fiscal 1984, American Healthcare posted net income of $7.2 million on revenues of $193 million, compared with net income of $2.8 million on revenues of $60.1 million for the first nine months of fiscal 1983.