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Archive for Tuesday, November 18, 1997

COLUMBIA SHAKEUP COULD LEAD TO NEW OWNERSHIP OF OVERLAND PARK HOSPITAL

November 18, 1997

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— Columbia/HCA Healthcare may sell more than 100 hospitals under a restructuring plan.

Columbia/HCA Healthcare Corp., besieged by a federal fraud investigation that prompted a management shakeup in July, on Monday announced a restructuring plan that could include selling off more than 100 hospitals.

Columbia's Mt. Oread Medical Arts Centre in Lawrence is not included in the restructuring and will not be sold, said company spokesman Jeff Prescott.

Columbia's board approved a plan effective Jan. 1 designed to cut overhead and administrative costs and, possibly, shrink the once rapidly growing company to a more modest size. Company managers are considering whether to spin off parts of the nation's largest hospital chain to shareholders, reducing the number of Columbia's 340 hospitals to about 230 and its surgery centers from 148 to 115.

Prescott said Columbia Overland Park Regional Hospital is among the hospitals targeted to become a publicly traded company.

"Essentially what would happen ... the hospitals in this group are going to be considered potential spin-offs," he said.

"These (hospitals) would leave Columbia/HCA and become completely independent."

It could take 12 to 18 months for the changes to be enacted, he said.

Prescott also said he didn't expect to reorganization to affect Columbia's plans to build a second hospital in Lawrence. Columbia is currently involved in a lawsuit with the city of Lawrence over its plans to build a second hospital. The Lawrence City Commission in December denied Columbia a permit to construct the hospital.

The restructuring plan is the latest move in a series of steps by Columbia's new chief executive officer, Thomas F. Frist Jr., to respond to a sweeping federal investigation of alleged Medicare fraud by the company.

``By creating smaller, more independent, community-based networks, we will enhance our commitment to providing quality patient care through local hospitals and local health care networks,'' Frist said in a statement. ``The goal is to return the company's attention to local hospitals and health care networks.''

Columbia President Jack Bovender said the reorganization will reduce Columbia's operating divisions from 36 to 18 and cut costs.

A company statement did not say how the hospital chain would cut overhead. Officials were not immediately available for further comment.

If the company, with the help of consultants at Goldman, Sachs & Co., decides to spin off some of its business lines, the newly formed companies would operate independently but are expected to remain part of Columbia's national purchasing agreements, information systems and managed care contracting.

The chain likely will split into one large hospital company and three or four smaller health care businesses, an industry source with close ties to Columbia told The Associated Press on condition of anonymity. But any spin-off or other restructuring alternative would require the approval of Columbia's board and government regulators.

The company has been the subject of a federal investigation since at least March, when offices in El Paso, Tex., were raided by the FBI. That was followed last summer by a seven-state raid in which truckloads of documents were seized from Columbia hospitals and offices.

Federal investigators are looking into whether Columbia overcharged Medicare, Medicaid and other government health programs.

On July 25, company founder and CEO Richard Scott and President David Vandewater were forced to resign. Less than a week later, three Columbia middle managers were indicted in Florida on charges they overcharged Medicare by at least $1.8 million. They have pleaded innocent.

Federal investigators say Columbia itself is a target of the probe, which means the company could be indicted.

Frist, the founder of Hospital Corporation of America, took over when Scott was forced out.

In the mid-1980s, Frist restructured HCA by spinning off rural hospitals into a company called HealthTrust. After the stock market crashed in 1987, HCA was seriously undervalued, so Frist led a leveraged buyout. He took it public again three years later, and Columbia agreed to buy HCA in 1994.

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