When your top management goes to the competition, it's never a good sign.
But when Charter Behavioral Health Systems lost its chief operating officer to Nashville-based Behavioral Healthcare, it was only the most recent indicator of turmoil at the giant psychiatric hospital system.
On Jan. 1, Charter COO Vernon Westrich became BHC's senior vice president of hospital operations. He declined to comment on his departure.
Behavioral Healthcare owns 42 mental health facilities in 18 states and Puerto Rico.
Atlanta-based Charter, which runs 92 facilities, is owned equally by Atlanta-based Magellan Health Services and Fort Worth, Texas-based Crescent Operating. Last August, Magellan called off the sale of its half of Charter to Crescent (Aug. 24, 1998, p. 12).
Both parent companies have said they are losing money on Charter.
Lori Price, an analyst at the New York investment firm Oppenheimer & Co., said losses at Charter's hospitals and the industrywide trend toward shorter lengths of stay are hurting Charter's bottom line. High turnover among hospital administrators and changes in corporate management may not be helping, she said.
Michael French, appointed as Charter's president and chief executive officer soon after the scuttled sale, said he expects to make Charter profitable in six to 18 months.
"My role and responsibility are to give the organization a new focus on patient care, operating performance and financial performance," French said. Charter will focus on developing outpatient services and growing its patient base, he said.
Charter has "no immediate plans" to sell or close hospitals, French said. But John Goff, who resigned as chairman of Charter's board of directors in November, called the company's 92-hospital network "unmanageable." Goff said he is helping Charter with a "potential downsizing to a core group of facilities that we feel have a lot of promise."
Goff remains a vice chairman at Crescent Operating.
Charter's parents have revealed a disagreement over the cancellation of the Charter sale. Magellan contends Crescent owes it about $5 million and owes Charter about $2 million to cover the costs of the aborted transaction, said Kevin Helmintoller, Magellan's vice president of investor relations.
Crescent disputes both claims. Helmintoller said the two companies are seeking arbitration on the issue.