Two mental health provider firms are merging their contract management businesses into a new firm that will control about half of the market for hospital-based psychiatric and substance-abuse treatment units.
Mental Health Management, McLean, Va., and Horizon Mental Health Services, Denton, Texas, will form Horizon Mental Health Management, which will operate 105 hospital-based units in 32 states. According to MODERN HEALTHCARE's 1993 survey of contract management firms, 223 hospitals contracted with 12 contract management firms to manage psychiatric units in 1992.
The new company will be 27.5% owned by Mental Health Management and 72.5% owned by Horizon and is projected to have about $3.5 million in net income on annual revenues of $50 million.
The owners plan to expand the business and may eventually spin it off into its own publicly held company, said Michael Pinkert, Mental Health's president and chief executive officer. Mental Health is traded on the American Stock Exchange; Horizon is privately held.
As part of the agreement, Mental Health also will assume operations of 60-bed Mountain Crest Hospital, Fort Collins, Colo., from Horizon. Horizon has been leasing the hospital from Charter Medical Corp., Macon, Ga. With that facility, Mental Health will operate seven freestanding psychiatric hospitals.
The Mental Health-Horizon deal is expected to be completed by the end of the month.