The chairman and major shareholder of Paracelsus Healthcare Corp. agreed to have his "services agreement" slashed by 75% as the company deals with its financial problems, according to the Houston-based company's latest proxy filing with the Securities and Exchange Commission.
Manfred George Krukemeyer, M.D., a little-known German physician, will get $250,000 annually rather than the $1 million-a-year fee that was part of the original merger agreement between the old Paracelsus, which was based in Pasadena, Calif., and Champion Healthcare Corp. of Houston.
Prior to the pair's August 1996 merger, Paracelsus was privately held.
The reduction in Krukemeyer's fee comes amid a turnaround plan instituted by the company's new president and chief executive officer, Charles Miller. Miller recently announced the elimination of 20 management positions, which is expected to save the company about $5.5 million annually (May 19, p. 6).
The 35-year-old Krukemeyer, of Osnabruck, Germany, has served as chairman of the board since his father, Harmut Krukemeyer, the company's founder and previous chairman of the board, died in 1994.
Paracelsus paid Krukemeyer, who owns 54.3% of the company's shares, $375,000 in 1996.
Krukemeyer is also the CEO and sole shareholder of Paracelsus Klinik Osnabruck, which owns and operates 37 hospitals in Europe.
In hopes of rebounding from its woes, the company is selling, closing or consolidating about one-third of its hospitals. After selling two psychiatric hospitals last month, the company now operates 28 hospitals (May 5, p. 36).
Paracelsus last month restated its financial results from the past six years, citing "accounting errors and irregularities" as the reason for the restated figures. Analysts have blamed much of the merged company's woes on the Paracelsus side. Ron Messenger, former CEO of Paracelsus before and after the merger, is no longer with the company. Miller, who replaced Messenger, is the former CEO of Champion.
The proxy indicated the company is continuing to negotiate a severance agreement with Messenger. The company wouldn't comment further.
"When Mr. Messenger ceased to be CEO and director in April 1997, the company had an employment agreement with him providing for an initial base salary of $750,000 and a minimum annual bonus of 100% of his base salary," the proxy states. Messenger also received "a car, a personal liability insurance policy in the face amount of not less than $10 million and club membership dues."
For 1996, Messenger received $429,651 in "other annual compensation" that included his "perquisites and personal benefits, including among other things, club dues in the amount of $21,532 and . . . automobile-related expenses."
In an unrelated matter, Paracelsus earlier this month regained control of two properties once owned by Champion. Paracelsus subsidiary PHC Finance paid $3 million in foreclosure to acquire what was once a 148,000-square-foot hospital and connecting 62,000-square-foot medical office building. The hospital, formerly HCA Gulf Coast Hospital, and the building were sold to Primary Medical of Midland, Texas, in June of 1994.
However, the arrangement wasn't "working out" for the physicians group, so Paracelsus is "foreclosing on the property," said Deborah Frankovich, Paracelsus vice president and treasurer. The company will use the medical office building and clinic space in the hospital.