The name's the same, but most former executives of the old Paracelsus Healthcare Corp. are gone, as are some of the financial problems that once plagued the company.
So say Paracelsus' latest annual 10K filing with the Securities and Exchange Commission and financial analysts who track the company.
The filing, made late last month, suggests that most of the woes facing the new Paracelsus, created in August 1996 through the merger with Champion Healthcare Corp., had their roots on the Paracelsus side.
Ron Messenger, Paracelsus' chief executive officer, is out, and Charles Miller, CEO of Champion until Paracelsus acquired it last year, is running the company as president and chief operating officer.
"This 10K has wiped clean the company's balance sheet and put the Champion management team firmly in control of operations," said Peter Costa, an analyst with the Boston office of Chicago Corp. "These developments, along with the fact that the company's creditors have waived covenant violations, lead us to believe that Paracelsus has made solid progress on their turnaround."
As part of its planned about-face, the company is in the process of selling, closing or consolidating one-third of its hospitals. The company didn't disclose the amount it expects to save by closing the facilities.
The company had 30 hospitals at the beginning of the year, but is shopping all its psychiatric facilities and some of its acute-care hospitals, including all its Los Angeles-area operations. In all, Paracelsus has sold or plans to sell 10 hospitals.
Paracelsus' six Los Angeles-area hospitals for sale include 99-bed Hollywood (Calif.) Community Hospital; 30-bed Hollywood Community Hospital in Van Nuys, a psychiatric hospital; 186-bed Los Angeles Community Hospital; 49-bed Monrovia (Calif.) Community Hospital; 50-bed Norwalk (Calif.) Community Hospital; and Orange County Community Hospital of Buena Park (Calif.), a 159-bed psychiatric facility. Paracelsus closed the Norwalk facility's emergency room and intensive-care unit last December.
In January, Paracelsus closed Orange County Community Hospital in Orange, Calif., a 104-bed psychiatric facility, and consolidated its operations with the Buena Park hospital.
Last month, Paracelsus restated its financial results for the past six years and reported it plans to sell two acute-care facilities, 125-bed PHC Regional Medical Center in Salt Lake City and 76-bed Senatobia (Miss.) Community Hospital (April 21, p. 16).
An internal committee cited "accounting errors and irregularities" as the reason for the restated figures.
Last week, the company sold two psychiatric hospitals-149-bed Lakeland Regional Hospital in Springfield, Mo., and 70-bed Crossroads Regional Hospital in Alexandria, La.-to Youth and Family Center Services, an Austin, Texas-based behavioral healthcare company.
Paracelsus' problems initially came to light last October when the company, in its first quarterly earnings statement as a publicly traded company, revealed it would be reporting a significantly higher-than-expected loss. That news prompted a barrage of suits by shareholders.
Since that report, eight complaints against the company have been filed in state and federal courts in California and Texas.
At the time, company officials believed the problems were related to accounting and came from hospitals that had been owned by Paracelsus (Oct. 21, 1996, p. 10).
"The company believes the outcome of a certain number of the claims will probably be unfavorable to the company," the company said. "The company also believes that the stockholder class actions asserted against the company are likely to settle rather than proceed to trial*.*.*.*.*The terms of the settlement would be structured in a manner to avoid causing the company to seek protection under the federal bankruptcy reorganization laws."
At least one of the suits claimed certain executives earned excessive payments as a result of the merger. According to the 10K, the company paid Manfred Krukemeyer, M.D., chairman of the board and the company's former sole shareholder, cash dividends of $24.9 million and $5.4 million in 1996 and 1995, respectively. Krukemeyer lives in Germany.
"As a publicly traded company, the company has not declared any cash dividends and does not anticipate the payment of any cash dividends in the foreseeable future," the 10K states.
Little was known about Paracelsus and its executives before merging with Houston-based Champion.
Paracelsus, formerly of Pasadena, Calif., was privately held from its founding in 1981 until its merger with publicly traded Champion. Paracelsus has been based in Houston since the merger.
Even after the companies' merger, the Paracelsus side of the equation remains somewhat of a mystery. The company wouldn't say much about Messenger's departure and wouldn't disclose how he could be reached for comment.
Two other executives who worked with Paracelsus when it was privately held also are no longer with the company. The 10K disclosed that "during 1996, James T. Rush, chief financial officer of pre-merger Paracelsus, and David Topper, senior vice president, development, resigned as executive officers of the company." There was no company comment on their departures.