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Paracelsus Healthcare Corp., based in Pasadena, Calif., said Monday it has signed a "non-binding" letter of intent to buy the 3-year-old FHP Hospital in South Salt Lake for an unspecified amount.

If the deal goes through, it would make Paracelsus the third largest hospital chain in Utah, after Intermountain Health Care and Columbia-HCA.The sale is subject to a variety of approvals, including directors of the two companies and federal regulators.

If those hurdles are met, a spokesman for FHP said a "definitive" agreement should be signed by mid-March.

"This partnership will strengthen FHP's health-care network in Utah," said Larry Bridge, president of FHP of Utah, in a release. "Through this proposal, FHP will continue providing high-quality care while offering greater options to our members. FHP members can use the same hospitals and medical facilities with uninterrupted service."

Robert Joyner, vice president and general counsel of Paracelsus, said the company intends to offer health care to all.

"The purpose of Paracelsus is to open the hospitals up to the general public. We're not going to single out any one group, we're going to be talking with everybody. We're a community-based health-care company, we are not an HMO."

Paracelsus, founded in 1981, also is waiting for final federal approval on its purchase of the 120-bed Davis Hospital and Medical Center in Layton and the 139-bed Pioneer Valley Hospital in West Valley City.

With those two, and the $60 million, 125-bed FHP Hospital, Paracelsus will own 9 percent of the state's hospital beds. It currently has 21 hospitals.

Intermountain Health Care, with nearly 50 percent of the acute-care hospital beds in the state, is Utah's largest hospital chain, followed by Columbia-HCA, with 20 percent of the Utah hospital beds.

Rick Kinnersley, spokesman for the Utah Association of Health Care Providers, said the deal would strengthen Paracelsus' competitive position in the local market.

FHP International decided eight months ago to sell its two hospitals, one in Utah, the other in California, after its directors voted last June to restructure the corporation to secure more patients for its 57 outpatient clinics in five states, including seven along the Wasatch Front.

Paracelsus, a $4 billion publicly traded corporation, is opening its medical centers to nonaffiliated health-maintenance organizations and other health-care insurers by organizing them under a new physician-management company called Talbert Medical Group. Those centers had formerly provided health care exclusively to FHP's 181,000 members in Utah.

Under the sale agreement, Paracelsus will provide hospital services for FHP patients at all three of its Wasatch Front hospitals.

"Part of the deal was a long-term commitment for hospital services for FHP patients," FHP spokesman Dee Brewer said.

FHP International, based in Fountain Valley, Calif., entered Utah in 1976 when it bought Utah Group Health Plan. It is currently expanding its health plans to include St. George and other areas of the state. Originally known as an HMO, it now offers 13 health insurance plans to employer groups and individuals.

Brewer said the hospital at 2500 S. State currently employs some 700 health-care workers and support staff.

The Associated Press contributed to this story.