National Medical Enterprises executives are mulling over the future direction of the company after closing the 1994 fiscal year with a $424.9 million loss.
The Santa Monica, Calif.-based firm's troubled psychiatric operations were responsible for losing $701 million, but gains from the sale of the company's rehabilitation hospitals and other operations helped offset part of the loss.
The company is closing the door on its psychiatric operations woes by settling legal problems and selling most ofHospital companies
the facilities. After the sale earlier this year of its rehabilitation facilities, the company is left with 35 U.S. hospitals.
In a conference call with stock analysts last week, Paul Russell, NME's investor relations director, said the company has "a lot of interesting options and directions to pursue." Executives are looking at whether to make acquisitions in certain markets where NME has hospitals, buy back stock or attempt a leveraged recapitalization, he said.
In addition, he acknowledged that "others may have designs on us," a comment in reference to rumors that the company may be bought by another investor-owned hospital chain.
He declined to put a timetable on when executives would determine the future direction of the company.
The comments were made as NME released its fourth-quarter and fiscal year results.
For the fourth quarter ended May 31, NME took a $77 million restructuring charge that includes severance costs and a write-down in the value of its Santa Monica headquarters building.
For the quarter, the company reported a 127% increase in net income to $6.3 million, or 4 cents per share, compared with net income of $2.8 million, or 2 cents per share, in the year-ago period. Revenues dropped 14% to $702 million.
Last month, NME laid off 200 of its 900 corporate employees. Executives last week said the company will sell its corporate headquarters, and either lease back a portion for offices or move out of the facility.
For the year, the company reported a net loss of $424.9 million, or $2.54 per share, compared with net income of $160 million, or 91 cents per share, in the previous year.
The loss includes the company's $379 million fine to settle federal criminal and civil charges against its psychiatric operations (July 4, p. 2).
NME revenues slipped 7% to $3 billion. The 1993 results were restated to reflect the psychiatric hospital business as a discontinued operation.
NME is selling 47 of its psychiatric hospitals to Charter Medical Corp., Macon, Ga., for about $180 million. It has completed the sale of 27 of those facilities and is awaiting state and federal clearance on the rest.
It is divesting or closing several other psychiatric hospitals, including Southwood Psychiatric Center, a Chula Vista, Calif., facility, which last week agreed to accept responsibility for the 1992 suicide of a 13-year-old patient, Christy Scheck of San Diego. NME spokeswoman Diana Takvam said the judge in the case had previously dismissed fraud claims against the company. Details of the settlement between the hospital and the Scheck family weren't released.
NME Chairman and Chief Executive Officer Jeffrey Barbakow said the company's acute-care hospitals continue to perform well.
However, Mr. Russell acknowledged "weaknesses" at NME's four Texas hospitals, where managed-care penetration is cutting into volumes, and at two California hospitals the company is selling.
NME is set to complete the sale this week of Ontario (Calif.) Community Hospital and Doctors' Hospital of Montclair, Calif., to Pacific Physician Services, Redlands, Calif. NME is expected to receive about $10 million from the sale.
Mr. Russell said NME is positioning its remaining hospitals for managed care. Capitated contracts account for about 1% of revenues, but he expects that to increase rapidly.