Threatened with possible legal action by a group of five insurance companies, Charter Medical Corp. is repaying $31 million plus interest in psychiatric hospital collections during the 1980s.
The disclosure was made last week when the nation's largest psychiatric hospital firm released its financial results for the fourth quarter and year ended Sept. 30. The results included $71.3 million in unusual charges.
The company reported a net loss of $46.4 million, or $1.72 per share, for the quarter, compared with a net loss of $20 million, or 80 cents per share, in the year-ago period. Revenues grew 27% to $262.4 million.
For the year, Charter reported a net loss of $59.6 million, or $2.26 per share, compared with a net loss of $52.2 million, or $2.10 per share, last year. Revenues grew less than 1% to $904.6 million.
The insurance settlement is reminiscent of legal action by 16 insurance companies last year against National Medical Enterprises. NME settled those lawsuits by paying insurers $215 million.
The Charter settlement is with some of the same companies that sued NME. They include Travelers Insurance Co., Prudential Insurance Co., Massachusetts Mutual Life Insurance Co., Northwestern National Life Insurance Co. and Metropolitan Life Insurance Co.
"We learned the carriers had concerns about billing a few months ago," said Charter spokesman Robert Mead. It soon became clear that "contentious litigation would have ensued if we didn't work together to resolve the disputes," he added.
Charter will pay the insurers $37.5 million, which includes interest, over a three-year period.
In addition, the company took a $33.8 million charge to write down the value of some of its psychiatric hospitals and for expenses in moving the corporate office from Macon, Ga., to Atlanta.