Greatwest to Post Loss From Sale of Hospitals
Greatwest Hospitals Inc., a Santa Ana health care company, said Thursday it expects to receive about $45 million in net cash proceeds from the sale of its hospital operations to American Healthcare Management Inc., Dallas. The transaction will probably result in a loss, however, of between $3 million and $3.5 million, which will be recorded in the second quarter, ending March 31.
Harlan Loomas, chairman and chief executive, said the loss will reflect the writing off of discounts on mortgage debts in excess of $5 million, and Greatwest’s decision to provide for future costs related to the sale of its hospital operations.
The sale is the major element of Greatwest’s plan to shift from the hospital business to a national network of prepaid health plans.
Price Has Changed
The deal, scheduled to be closed next month, was initially valued at $95 million but is now worth about $88 million, Loomas said in a phone interview. He said the price changed because Greatwest decided to keep about $7 million in accounts receivable instead of selling them to American Healthcare.
Greatwest’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 officials have said they have no plans to close any of the facilities, but, instead, will improve them.
“The sale of the hospital operations will substantially strengthen the company’s financial condition and, more importantly, will enable us to concentrate our efforts on expanding our prepaid health plan business,” Loomas said.
Shareholders Must Approve
He said the sale requires the approval of shareholders, and that a date for the shareholders meeting will be set shortly. He also said the company’s new name will be announced soon. Greatwest had said earlier that it would change its name to better reflect its switch from owning hospitals to operating prepaid health plans.
Late last year, Greatwest announced plans to divest its hospital facilities and focus on its 200,000-member health maintenance organizations. Greatwest operates an HMO called General Medical Centers and recently agreed to acquire Independence Health Plan Inc., a Southfield, Mich., HMO with about 105,000 members.
For the first quarter of fiscal 1985, ended Dec. 31, 1984, Greatwest posted net income of $245,000, compared with net income of $560,000 for the same quarter last year. Revenues increased from $10.9 million to $37.5 million.
