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By Kevin Lumsdon
For-profit suitors lined up six deep this
spring to bid for Lexington Medical Center, a courtship that began after the
hospital abandoned a merger with two regional facilities in nearby Columbia,
S.C. But county-owned Lexington spurned all offers, choosing to stay single
at a time when merging or selling has become synonymous with survival.
CEO Mike Biediger shakes off any suggestion that Lexington’s board has only
delayed the inevitable. “No one can predict the future,” he says, adding
that the West Columbia hospital is “very solid, very strong” as a solo
player. Last year, it had a margin of $7.9 million, before writing off some
onetime expenses. This year looks even better, says Biediger. The hospital
also added new facilities and equipment in recent years (its assets have an
average age of 5.5 years), but without taking on a lot of debt.
What’s more, doctors, employees and Lexington County residents seem to
prefer the status quo right now. “There was some concern that changes to the
hospital might be unfavorable if we were to merge or sell out.” says
Biediger. “They’re happy that we’ve decided to remain independent.”
It’s more than Lexington’s solid financial footing that made the hospital
“one of the hottest properties in the country,” as Columbia’s daily
newspaper, The State, put it. The hospital is situated in one of South
Carolina’s fastest-growing counties, thanks to an influx of white-collar
workers who commute to jobs in Columbia and elsewhere in the region. The
county’s population , growing at a rate of 2.2 percent a year, is attracted
by good schools and new homes built on the shores of nearby Lake Murray.
What’s not booming in Lexington County – and elsewhere across the state so
far – is managed care. Though the pace has picked up in recent years, HMOs
and other health plans have nabbed only 9 percent of the population, says
Jim Head, senior vice-president at the South Carolina Hospital Association.
Two years ago, then-Gov. Carroll Campbell announced a plan to move Medicaid
recipients into managed care plans, a change that might have spurred
employers to follow suit. But given uncertainties over how Campbell’s plan
would be financed – and with Medicaid block-grant proposals being debated in
Washington – the South Carolina Legislature prostponed action, says Head. In
the meantime, HMOs are lining up for licenses to do business in the state.
Perhaps the biggest jolt to Columbia’s health care market occurred last
year, when Lexington, Richland Memorial Hospital, and Baptist Medical Center
announced their intent to merge. That domino apparently was tipped by the
stunning news that the region’s fourth big player, Providence Hospital, had
signed a 50-50 joint venture with for-profit Columbia/HCA Healthcare Corp.
Despite the momentum added by Columbia/HCA’s entry on the scene, Lexington
broke off talks with Baptist and Richland after a couple of months, “They
were willing to move the merger along more quickly than we were,” says
Biediger. “At that stage, we hadn’t discussed any consolidation of clinical
services. We wanted to nail down how our services would be affected.”
After pulling out of that deal, Lexington’s board was free to entertain
offers from others, including Columbia/HCA. The Nashville, Tenn., chain
needs a hospital such as Lexington to round out its services in the region,
says Head. Providence, for example, doesn’t deliver babies, though it’s well
known for cardiac care. Other for-profit chains made their own plays for
Lexington, including Tenet Healthcare Corp., Quorum Health Group, OrNda
Healthcorp, Universal Health Services and Health Management Associates. In
rejecting them all, says Biediger, Lexington still has not closed the door
on future alliances and affiliations.
That day may arrive sooner rather than later, says Josh Nemzoff, a
consultant in Nashville who works with hospital boards to evaluate mergers
and other options. “The tide is definitely changing among hospitals owned by
government bodies,” says Nemzoff. “They’re deciding that maybe they
shouldn’t be in the health care business.”
Nevertheless, county hospitals such as Lexington have an especially tough
time explaining a sale to the many people they need to please. “Selling your
hospital is never popular with the people who work there, the medical staff
or the people out in the community,” Nemzoff adds. “In add the deals I’ve
witnessed, I’ve never seen those groups stand up and say it’s a great idea.”
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