Primary Health Systems, a Wayne, Pa.-based healthcare company that once aspired to build community healthcare networks in the East, Midwest and North, has retained a national turnaround firm to help the faltering company get back on its feet.
Primary has hired Crossroads Capital Partners, a Newport Beach, Calif.-based firm that specializes in reviving troubled and underperforming companies.
Dennis Simon, the firm's managing partner, has been named chief executive officer of Primary, replacing Dennis Lehman, who will be leaving PHS after a period of transition. He has held the post since September 1997. Michael Autry, Crossroads' healthcare practice director, was appointed president of PHS of Ohio, a Primary affiliate, and CEO of Mount Sinai Medical Center-University Circle, the flagship of PHS of Ohio's four-hospital network.
The Cleveland operation represents Primary's only hospital operations. Attempts to acquire hospitals in the Philadelphia and New York markets failed.
Crossroads replaces the St. Petersburg, Fla.-based Hunter Group, which had been running Mount Sinai under an interim management contract since January.
Steve Volla, one of Primary's founders, remains chairman of the private healthcare concern. But a number of other founders have resigned in recent weeks. According to Crain's Cleveland Business, a sister publication of MODERN HEALTHCARE, Robert Fleming, Primary's chief development officer, retired May 19, and William Kiser, chief medical officer, announced his retirement June 1.
In an interview with MODERN HEALTHCARE, Autry said Crossroads is working closely with Primary's major creditors, First Union of Charlotte, N.C., and Key Bank of Cleveland.
As a privately held company, Primary is not required to publicly disclose its finances. But sources say one reason it was unable to close a deal in the Philadelphia market was the company's lack of financial resources.
In September 1996 the company completed a $190 million debt and equity financing for additional hospital acquisitions (Sept. 23, 1996, p. 4). Primary now carries about $150 million of debt, Autry says. He says the company is current on its obligations.
A spokeswoman for PHS of Ohio says the company has not disclosed specifics of the Cleveland network's financial condition.
According to HCIA, a Baltimore-based provider of healthcare financial data, Mount Sinai-Primary's flagship-posted an operating loss of $6.5 million last year.
"In all candor, they didn't watch expenses like they should have," Autry says.
PHS also didn't anticipate the level of competition it would face in the market, he says. The market's two dominant players are Cleveland Clinic Hospital and University Hospitals of Cleveland.
Autry says a turnaround plan will be established in the coming weeks. "We basically come in with a clean slate. We haven't determined which way we're going to go," he says. "We'd like to keep it out of Chapter 11 (bankruptcy)."
In addition to providing a management team, Crossroads has $200 million in debt and equity capital to invest in companies that it turns around. Autry says it's too soon to say whether Crossroads will be investing in Primary.