Charter Medical Corp. and OrNda HealthCorp last week signed a "strategic affiliation agreement" to develop joint ventures, form integrated delivery networks and work together on other cooperative initiatives.
The agreement, however, is not exclusive, meaning both companies can strike similar deals with other providers.
Charter spokeswoman Nancy Gore said the agreement was not the first step toward an eventual merger of the two companies. "It's purely a strategic initiative," she said.
OrNda's chairman Charles Martin called the deal a "logical step" that will help the Nashville, Tenn.-based company build "critical mass" in its markets. OrNda is the fifth-largest investor-owned hospital chain, with 46 facilities in 15 states. It owns one psychiatric hospital, 93-bed Ross Hospital, Kentfield, Calif.
Atlanta-based Charter, the nation's largest chain of psychiatric hospitals, has been transforming itself into a psychiatric health system by purchasing behavioral group practices. It has 102 facilities in 31 states.
OrNda and Charter own hospitals in similar markets. For example, OrNda has 14 hospitals and is buying another in Southern California, where Charter operates five. In addition, in southern Florida, OrNda operates four hospitals and Charter has two. Other overlapping markets include Phoenix and Tucson, Ariz., and Las Vegas.
In addition, Charter is buying 11 other psychiatric hospitals from National Medical Enterprises, which is divesting its psychiatric operations.
In June, Charter completed the purchase of 27 NME psychiatric facilities for $129 million. It had intended to buy 17 others, but the Federal Trade Commission held up those deals because of antitrust reviews. Charter officials recently said they'll likely only complete the purchase of 11 of those 17.