FTC OKs Merger of Two Largest Hospital Chains
The Federal Trade Commission approved an agreement Friday that will permit the nation’s two largest hospital chains to proceed with a multibillion-dollar merger.
Columbia-HCA Healthcare Corp.’s purchase of HealthTrust Inc. will create a corporation with 320 hospitals and more than 100 outpatient surgery centers in 36 states, England and Switzerland. The companies said they will complete the deal on Monday.
It marks another milestone in Columbia-HCA’s rapid rise from an upstart company founded in 1987 to a national leader in the consolidation trend sweeping the U.S. health care industry as it faces a new era of cost-cutting.
As a condition for approval of the deal, the commission said Columbia-HCA agreed to sell seven hospitals and end a joint venture at another hospital. This will settle charges that the merger, announced last October, would reduce or eliminate competition in some markets.
Under the terms of the deal, Columbia-HCA will give about $3.3 billion worth of its shares to HealthTrust and assume about $1.7 billion in debt.
HealthTrust will operate as a wholly owned subsidiary of Columbia-HCA, with both companies based in Nashville, Tenn.
Columbia-HCA has agreed to sell three hospitals in the Salt Lake City-Ogden, Utah, area and one hospital each in areas of Pensacola, Fla.; Okaloosa, Fla.; Ville Platte-Mamou-Opelousas, La., and Denton, Tex.
It will also end a joint venture in Orlando, Fla., the commission said.
Without the sale of the hospitals, the merger could have resulted in higher prices, reduced services or both in the affected areas, according to the commission.
The agreement will permit the merger on the condition that the sales in Utah occur within nine months and the others within a year.
The deal marks the fourth major acquisition for Columbia in two years, amid numerous smaller ones.
In 1983, Columbia bought Galen Health Care Inc. and its 78 hospitals. Next, were HCA-Hospital Corp. of America, 96 hospitals, and Medical Care America, 96 outpatient surgery centers, both bought in 1994.
Columbia’s strategy has been to combine hospitals, outpatient centers, diagnostic centers and other medical facilities into health care networks that would provide a full breadth of services.
Because of its sheer size, Columbia can save millions on overhead costs, including surgical devices, hospital supplies and administration.
“We anticipate annual savings of approximately $125 million from cost reductions and improved efficiencies resulting from our consolidation,” Columbia President and Chief Executive Richard Scott and HealthTrust Chairman R. Clayton McWhorter said Friday in a written statement. “By leveraging our economies of scale and collective strengths and efficiencies, we believe that we can greatly control health care costs while maintaining quality patient care.”
McWhorter will become chairman of the new company. Scott will retain his positions and Columbia Chairman Thomas Frist will become vice chairman.
The new company will have more than $15 billion in annual revenues. Columbia said Friday that the seven hospitals to be sold comprise less than 1.5% of the combined companies’ 1994 revenues.
The company purchasing each hospital will have to be approved by the commission and the merged company would have to obtain permission before purchasing any hospital in the affected communities for the next 10 years.
