National Medical Enterprises' top executive says recent efforts to sell its psychiatric and rehabilitation hospitals are aimed at helping NME survive and aren't part of a plan to sell the company.
In an interview with MODERN HEALTHCARE, Jeffrey C. Barbakow, NME's chairman and chief executive officer, said recent efforts to divest the bulk of its psychiatric and rehabilitation hospitals are largely part of a plan to refocus the company on its acute-care business and "remain a survivor" in the healthcare industry.
Mr. Barbakow said the Santa Monica, Calif.-based company wants to concentrate on lines of business that will "substantially increase cash flow."
He said NME isn't interested in selling all of its hospitals-it has total assets of $4.17 billion. "Our goal is not to do that. Our goal is to optimize shareholder value." Early last week, NME stock was trading at
$17 a share on the New York Stock Exchange.
However, Mr. Barbakow said that could change if an appropriate suitor were to produce an at tractive offer to buy its hospitals "that shareholders simply couldn't ignore."
Mr. Barbakow said various companies, which he declined to identify, have inquired about purchasing other NME assets, but none of the overtures has developed into serious discussions.
One company rumored to be interested in NME properties is newly merged Columbia/HCA Healthcare Corp. However, analysts have noted that the new hospital chain is unlikely to buy large groups of NME hospitals
Two months ago, NME completed the sale of 28 physical rehabilitation hospitals and 45 outpatient clinics to HealthSouth Rehabilitation Corp. for $350 million (Jan. 10, p. 14). It retained six rehabilitation hospitals in markets where NME has acute-care hospitals. The company's psychiatric operations were put on the selling block last year after the company said it would review those operations and others that aren't in the medical-surgical hospital field.
Mr. Barbakow said NME's studying other possible sales of assets, such as Medical Ambulatory Care, its chain of 36 freestanding dialysis centers and 10 mobile dialysis programs, and Westminster Health Care Holdings, its long-term-care subsidiary in the United Kingdom.
Last week, it was learned that Charter Medical Corp. is expected to buy 50 of NME's 61 psychiatric hospitals for $180 million. Mr. Barbakow acknowledged that the companies are negotiating, but he declined to provide specifics.
Christi Sulzbach, NME's senior vice president for public affairs, last week declined to confirm the proposed sale price, saying terms still are being negotiated. However, a price that low could prompt NME executives to take an additional write-off for its psychiatric business, which NME has been carrying on its balance sheet as having a value of $400 million.
In January, NME took a $286 million write-off on the psychiatric hospital business, which has tarnished the company's reputation and financial status in the past two years.
Because Charter appears to be interested in 50 of the 61 hospitals, NME still would face a decision of whether to keep, close or sell the others, Ms. Sulzbach said. Macon, Ga.-based Charter is the nation's largest chain of psychiatric hospitals with 75 facilities.
In a related development, NME said last week that it would settle lawsuits filed by 23 former psychiatric hospital patients for $2.5 million. The terms work out to an average award of $108,000 to each plaintiff. Many of the patients said they had been hospitalized unnecessarily or discharged when their insurance ran out.
The cost of the settlement is included in a $250 million reserve NME established in the first quarter of 1994.
The company has paid $232 million to settle lawsuits brought by former psychiatric patients and their insurance companies.