Pressed by a cash-flow crunch, Mental Health Management last week agreed to sell five of its seven freestanding hospitals to Behavioral Healthcare Corp., Nashville, Tenn., and a sixth hospital to an unnamed buyer.
In exchange, McLean, Va.-based Mental Health will receive $10 million in cash and a note for $2 million. The company's shareholders will be asked to approve the sale at a special meeting within the next 60 days.
The six hospitals represented 87% of the company's revenues and 77% of its assets in 1995.
After the sale, the company will focus on its extended-care services division, which provides practice management services for psychologists, optometrists, podiatrists and dentists, said Michael Pinkert, the company's president and chief executive officer.
Also last week, Mental Health reported a net loss of $3.1 million, or 93 cents per share, for its fourth quarter ended Sept. 30, 1995, compared with a net loss of $524,000, or 16 cents per share, in the year-ago quarter. Revenues dropped 9% to $10.3 million. For the year, the company reported a net loss of $4 million, or $1.22 per share, compared with a net loss of $2 million, or 63 cents per share, in the previous year. Revenues declined 16% to $40.6 million.
Behavioral, a nine-hospital chain, will acquire 26-bed Aspen Hill Hospital, Flagstaff, Ariz.; 30-bed Pacific Shores Hospital, Oxnard, Calif.; 40-bed Pinon Hills Hospital and 36-bed Pinon Hills Residential Treatment Center, Santa Fe, N.M.; and 51-bed Windsor Hospital, Chagrin Falls, Ohio.
Mental Health also is selling Oakview Treatment Center, Ellicott City, Md., to a separate buyer, which was not disclosed.
The divestitures leave Mental Health with one facility, Mountain Crest Hospital, Fort Collins, Colo., which Pinkert said remains profitable.
Pinkert said the hospitals had been hurt by a slowdown in government payments, particularly from the Indian Health Service. As of Jan. 3, the company had $1.6 million in cash and $115,000 available under its revolving credit facility.