The value of each of National Medical Enterprises' remaining 61 psychiatric hospitals has plummeted at least one-third in the past six months, according to the charge NME took to its second-quarter earnings last week.
The Santa Monica, Calif.-based firm last week officially got out of the psychiatric business, at least on its balance sheet. The company took a $287.4 million loss from discontinued operations.
Of that total, $1.7 million was a loss in operating the psychiatric hospitals. The remainder-$286 million-represents the reduced value of the hospitals, the cost of selling them and how much it will cost NME to operate them until they are sold. For the year ended May 31, 1993, NME had reported the asset value of its 61 psychiatric hospitals as $715 million. The $286 million charge would reduce that value by 40%.
NME's decision to exit the psychiatric business follows a year of troubles in which the company was accused of fraudulent billing and unethical practices at its psychiatric facilities.
NME executives declined to say how close they are to finding a buyer. Christi Sulzbach, senior vice president for public affairs, said the company's discussions with various buyers gave NME a clearer picture of what the hospitals were worth, allowing it to put a value on write-off to earnings. Because NME still hopes to sell the hospitals, it has no immediate plans to shut them down, she added.
Because of the psychiatric hospitals loss, NME reported a net loss of $226.2 million, or $1.36 per share, for the quarter, compared with net income of $52.4 million, or 30 cents per share, in the year-ago period. Net revenues dropped 2% to $770 million.
For the six months, NME reported a net loss of $267 million, or $1.61 per share, compared with net income of $103 million, or 58 cents per share, in the year-ago period. Revenues dropped 2% to $1.5 billion.-Sandy Lutz
National Medical Enterprises
3 months ended 11/30 FY1994 FY1993
Revenues (thousands) $769,952 $785,335
Net income (thousands) ($226,191) $52,381
Earnings per share ($1.36) $0.30
6 months ended 11/30
Revenues (thousands) $1,544,976 $1,575,753
Net income (thousands) ($266,971) $103,005
Earnings per share ($1.61) $0.58