Originally created 08/16/97

HealthSouth exec says he wants parts of Columbia/HCA



NEW YORK (AP) - HealthSouth Corp. chief Richard Scrushy say he doesn't want any of Columbia/HCA's hospitals or home care agencies, but he'd like other pieces of the besieged health care giant.

Wall Street is intrigued as investors pushed stock of Columbia/HCA Healthcare Corp. higher on a glum day for the stock market.

And health care analysts say Columbia/HCA chief executive Thomas Frist Jr. should also be interested.

"I think once he gets his management team in place, he'll probably look at it seriously," said Sandy Lutz of Rauscher Pierce Refsness in Dallas.

Frist took over the company 22 days ago, after the board ousted Richard Scott and as a federal medical fraud investigation expanded.

Scrushy, chairman and CEO of Birmingham, Ala.-based HealthSouth, said he told Frist on Thursday he wants to buy the company's diagnostic, surgery and rehabilitation centers and occupational therapy clinics.

"He assured me that he had not made a decision whether to divest the company of any of the divisions we're interested in, ... but when he does, he will give us an opportunity to talk to him," Scrushy said during a telephone interview Friday.

But Scrushy said he isn't interested in the only division that Columbia has publicly said it plans to sell: the company's 570 home health care agencies. And he said he doesn't want Columbia's 342 acute care hospitals.

Scrushy sent a fax to Frist on July 23, offering to buy Columbia outright, but never got a reply. He said the offer was just an effort to get his company to the table for any future decisions, anyway.

"I don't think there's a company large enough to buy all of Columbia," Scrushy said.

John Runningen, a principle with Cordova Capital in Atlanta, isn't so sure. "I think he's interested in the whole company and, like any good prudent buyer, he's pointing out the negatives to try to buy it at a reasonable price," Runningen said.

HealthSouth reported revenues last year of $2.4 billion, compared with Columbia's $20 billion. But the medical fraud investigation has driven Columbia's stock down and Scrushy has completed $5 billion worth of acquisitions this year.

Runningen said the two companies would make a good fit. Columbia has historically concentrated on buying hospitals, while much of HealthSouth's focus is on helping patients after they leave the hospital.

As to Frist's reported promise?

"He gave Rick Scott the same response when Rick wanted to buy the company back in 1988," Runningen said. Six years later, Scott purchased Frist's company, Hospital Corporation of America.

Analyst Peter Emch of Alex. Brown & Sons says Scrushy's interest in parts of the company should be taken more seriously than speculation that he wants the whole company.

But he's not sure what Columbia/HCA would gain either way.

Columbia/HCA spokesman Jeffrey Prescott said Frist had spoken with Scrushy but he didn't know the details and he declined to comment on the possibility of any deal with HealthSouth.

"We're talking with lots of people all the time, but we don't talk about them publicly until there is something firm," Prescott said.

Scrushy said he won't call Frist again. "The ball is in his court," Scrushy said of Frist, who gave no clue as to when he'll make such decisions.

Columbia/HCA's stock closed out the week up $1.121/2 a share at $32.43† in heavy trading Friday on the New York Stock Exchange following news of HealthSouth's offer.

Columbia shares had traded as high as $44.871/2 earlier this year. And Scrushy's original offer was for between $40 and $45 a share - or about $30 billion.

Columbia is the ninth largest employer the nation, running hospitals and centers in 36 states. It also operates in Britain, Switzerland and Spain. But the company is the target of a sweeping federal investigation looking into whether it overbilled government health programs.

Scrushy has said he hopes to put HealthSouth in all of the nation's largest 300 cities within 10 years. HealthSouth already has a presence is in all 50 states.