Hospital giant Columbia acts to get even bigger

October 06, 1994|By New York Times News Service

Columbia/HCA Healthcare Corp. was already the nation's largest for-profit hospital chain, by far. But that wasn't big enough. When word leaked that the second-largest chain was considering merging with a rival, Columbia/HCA saw an opportunity to get much bigger in a hurry.

The $5 billion stock-swap merger that Columbia/HCA and HealthTrust Inc. announced Tuesday night will create a behemoth with revenues of $15 billion, about five times those of the nearest rival, National Medical Enterprises of Santa Monica, Calif.

The chain will grow to 311 hospitals and 125 outpatient centers in 37 states and Europe and will have almost 120,000 employees, spreading from high-tech urban centers that are the flagships of the Columbia/HCA group into scores of surrounding rural communities where HealthTrust has a near monopoly on hospital service.

Columbia/HCA said that the deal would be profitable for its shareholders from the outset and that further profits would come from increasing efficiency and taking market share from competitors.

"We expect to change the services offered in some facilities, but we are not planning to close any," said David T. Vandewater, chief operating officer at Columbia/HCA.

The result would be that patients would have to travel farther for some services, but the company said that the overall level of care will increase.

Columbia/HCA would end up with heavy concentrations of hospitals in several states, including Tennessee, Texas and Florida, but company officials and Wall Street expressed confidence that the merger would not be blocked by antitrust actions.

Columbia does not expect to end up with much more than one-third of the beds in any major market. Antitrust lawyers say that such a concentration will not be a problem, provided there are more than a handful of other competitors in each market.

The merger reflects the rush in the hospital industry to create enterprises big enough to prosper in an era when patients are staying for shorter periods and a growing portion of health care is provided in clinics, specialized surgery centers or the home.

HealthTrust's stock closed up $2, at $34, on the New York Stock Exchange yesterday. Columbia's stock lost $2.125, to $40.625.

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