Tuesday, Sept. 9, 2003 | 11:08 a.m.
Analysts are speculating on which health care company will buy Lake Mead Hospital and two medical office buildings in North Las Vegas -- and one says the hospital is likely to remain open if it's not sold.
Troubled owner Tenet Healthcare said it has not decided what will happen if the 198-bed hospital and nearby medical buildings do not sell. Tenet announced it would sell Lake Mead Hospital and 13 others in March to improve the company's portfolio.
"We are actively looking for buyers for all of the hospitals we decided to sell and certainly Lake Mead is one of those," said David Langness, Tenet director of communications.
The sale is part of a plan to turn around the Santa Barbara, Calif.-based company, which has been plagued by numerous problems including weak earnings, litigation and federal investigations.
Lake Mead Hospital is one of two Tenet hospitals still for sale. In the last three weeks, Tenet has sold 10 of its hospitals to three different health care operators. Two hospitals in California and Pennsylvania will close.
Tenet expects to garner a combined $47 million in proceeds for the sale of Lake Mead Hospital and a Houston hospital and the closing of hospitals in Pennsylvania and California. The closing of a 69-bed hospital in Santa Ana, Calif., factors into proceeds because it was a leased building and most of the patients and staff are transferring to another Tenet hospital in Orange County, Langness said.
Tenet decided to sell Lake Mead Hospital because it was the only Tenet hospital west of the Rocky Mountains other than several in California.
"We made the decision to really focus where we are really strongest," Langness said.
On Aug. 25, Health Management Associates purchased five hospitals for $550 million in Florida, Missouri and Tennessee. Wall Street analysts and Tenet said the deal represented the best facilities. On Aug. 26, Albert Einstein Healthcare Network purchased a suburban Philadelphia hospital for $13 million. On Sept. 2, Tenet sold four Arkansas hospitals to Triad Hospitals for $175 million.
"With looming legal issues and a tough industry environment, we think Tenet's future hospital asset sales could be a bit challenging," Prudential Financial health care analyst David Shove said in a statement on Aug. 27. The statement was made before the Arkansas hospitals were sold.
In the same report, Shove said Tenet should receive in-line valuations for the other hospitals.
A state report shows Lake Mead Hospital had $187,718 in net operating revenue for 2002, which is down from $1.3 million in 2001.
Fulcrum Global Partners, LLC analyst Sherly Skolnick said she does not think Lake Mead Hospital will be any easier or harder to sell than the others.
Surrounding demographics and extensive renovations can make a property harder to sell, Skolnick said.
But, she's not sure if either is the case with Lake Mead Hospital.
In the last year, Tenet renovated Lake Mead's lobby and invested $2.1 million to expand its emergency room by more than 2,600 square feet.
Lake Mead Hospital has had multiple owners since it opened more than 40 years ago, and has grown from 15 beds to nearly 200 beds.
"Over time and changes in ownership, the hospital has grown and expanded," said Nancy Whitman, director of business development at Lake Mead.
Analysts aren't certain which company will buy Lake Mead Hospital, but there is plenty of speculation.
King of Prussia, Pa.-based Universal Health Services Inc. and Nashville, Tenn.-based HCA Inc. are the largest hospital operators in the Las Vegas area and some Wall Street analysts say both are good candidates -- though local officials for both chains say the companies have no plans to buy Lake Mead.
"The Universals that are already there or HCA are people I would say would still certainly be on the lists," said Frank Morgan, health care analyst with Jefferies & Company, Inc. "HCA, Triad or Universal are very logical."
Plano, Texas-based Triad Hospitals is building a $31.4 million hospital licensed for 25 beds in Mesquite, a town northeast of Las Vegas on the Arizona border, but says it doesn't plan to enter the Las Vegas market.
"This was just a unique opportunity for us because it did not have a hospital," said Pat Ball, Triad spokeswoman. "We don't have any plans to move into Las Vegas."
Triad is typically in suburban areas, she said.
If Tenet doesn't find a buyer, it will likely remove Lake Mead Hospital from the auction block and take it out of discontinued operations on its financial statements, Morgan said.
"There's probably no imminent closing because I think they would have put it in the list of those they plan to close," Morgan said. "(Las Vegas) is an attractive market. There's good growth in the Las Vegas market."
Rob Mains, health care analyst with Advest Inc., said Lake Mead Hospital is in a growing market.
"The Las Vegas market is a fabulous market," he said.
Triad is not a potential buyer because it is a minority owner in Universal Health Services hospitals in the valley and non-compete clauses could be a problem, Mains said.
Triad is a minority owner with Universal Health Services of Valley Hospital, Desert Springs Hospital, Summerlin Hospital and soon-to-open Spring Valley Hospital.
Universal Health Services owns land in North Las Vegas, but there has been no talk of developing it or purchasing Lake Mead, said Michael Tymczyn, spokesman for Valley Health Systems, a subsidiary of Universal Health Services.
Cheryl Smith, spokeswoman for HCA-owned Sunrise Hospital, said HCA isn't considering buying Lake Mead Hospital either. HCA owns MountainView Hospital, which is less than seven miles from Lake Mead Hospital.
No matter which company buys Lake Mead Hospital, efforts are being made to minimize disruption of daily operations.
Skolnick said it is unusual for the local hospital to know it is for sale prior to a transaction announcement.
This is because sometimes doctors refer patients elsewhere, staff leave and patients get nervous, she said. "The transition usually goes fairly smoothly," Skolnick said. "The usual worries are -- are people going to have their jobs? Are programs going to change in the hospital? The amount of nervousness that preceeds the actual announcement usually is more than is necessary."
Tenet and Lake Mead officials said it has been business as usual at the hospital despite the impending sale. The hospital employs more than 600 people.
"Our business has stayed pretty consistent at Lake Mead," Langness said. "I don't think it has an impact on the number of patients at all."
"It has a real community feeling at this hospital," Whitman said.
Many doctors and staff have been there for 20 or more years, she said. HCA, Triad or Universal are very logical.
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