Arcon Healthcare, the Nashville-based chain of rural outpatient clinics founded by former Healthtrust Chief Operating Officer W. Hudson Connery Jr., has shut down its operations.
Arcon failed to find a capital partner to bail it out of bankruptcy.
"Arcon is done," said Arcon attorney Wally Dietz. He said Connery, the company's chief executive officer, is "disappointed because he continues to believe the Arcon model was the right one for healthcare."
And while it's too early to tell, Dietz said Connery may try to revive the national chain of rural outpatient clinics in the future.
Connery was not available for comment.
A privately held, for-profit company, Arcon operated nine clinics in five states. Under its liquidation plan, Arcon will close its clinics and return its leased equipment and facilities to their owners. The liquidation is expected to be completed within the next two weeks, Dietz said.
Arcon leased the clinics from two real estate investment trusts: Birmingham, Ala.-based Capstone Capital Corp. and Newport Beach, Calif.-based Nationwide Health Properties. The REITs own the land and buildings.
Arcon, which began operations in 1995, filed in September for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Nashville, citing poorly negotiated contracts with the REITs (Sept. 14, p. 18).
Arcon wanted to change its contracts to graduated monthly lease payments that mirrored the percentage at which each facility was operating. Connery said last month that Arcon owed the REITs about $50 million.
Arcon also was unable to raise additional funds from its stable of investors, Dietz said, but he declined to disclose the amount needed to keep the company afloat.
Dietz would say only that "a lot of money" is owed to the REITs and other creditors.
Investors included Connery, New York City-based investment firm Warburg Pincus and two venture capital firms: Baltimore-based New Enterprise Associates and Franklin, Tenn.-based Coleman Swenson Hoffman Booth.
The bankruptcy court dismissed the filing on Oct. 13.
None of the clinics' employees will receive severance packages, Dietz said.
"Everyone at Arcon will be looking for something else to do," Dietz said.