Charter Behavioral Health Systems is all but gone. It's shedding its remaining assets and not getting much of a return, according to filings in U.S. Bankruptcy Court in Wilmington, Del.
Earlier this month the Alpharetta, Ga.-based psychiatric hospital company began closing all hospitals it has been unable to sell. For those it is selling, Charter is receiving as little as $1 each, records show.
That's not the case for Crescent Real Estate Equities, the Fort Worth, Texas-based real estate investment trust that leases land and property to Charter for 30 of its 36 hospitals. That firm is reaping millions of dollars from the sales. Crescent has rejected bids on several Charter facilities as too low and plans to sell them as real estate once they close.
Crescent originally paid $387 million for the real estate of about 83 Charter facilities in 1997, and it has leased them to Charter since, court papers indicate. Charter, once the nation's largest psychiatric chain, has closed about 50 hospitals since last fall.
On June 5, Charter stopped accepting patients at 111-bed Charter Behavioral Health System of Winston-Salem (N.C.); 104-bed Charter Glade Behavioral Health System, Fort Meyers, Fla; 92-bed Charter Springs Behavioral Services in Ocala, Fla.; and 66-bed Charter Rivers Hospital in West Columbia, S.C. Patients are being transferred to other facilities or discharged once treatment is completed.
Charter, Crescent and an undisclosed buyer have agreed to terms for the sale of Charter-by-the-Sea, a 101-bed hospital on St. Simons Island, Ga.; the bankruptcy court has yet to approve the deal.
Five other hospitals are joint ventures that Charter manages. These have not been part of the bankruptcy auction, although some may be sold to new operators, hospital officials said.
Court-approved agreements reached in May on the sale of 24 facilities will net $115 million for Crescent. Charter will receive $8.4 million for the operating assets, court papers indicate.
Officials at Charter and Crescent declined to comment on the disparities.
Many buyers wouldn't disclose what they've agreed to pay for the hospitals, citing a confidentiality pact with Crescent.
Parkview Health System, Fort Wayne, Ind., will pay $7.5 million for the land, buildings and operating assets of the 97-bed Charter hospital in that city, a Parkview spokesman said. Charter will receive $1 million for the hospital.
Charter has agreed to a $1 purchase price for each of five hospitals in Atlanta; Bradenton, Fla.; Charleston, S.C.; La Mesa, Calif.; and Largo, Fla.
Dramatically low prices indicate the hospitals are losing money, observers said.
In a court report mandated by Charter's Chapter 11 bankruptcy protection filing, Charter said it lost $10.9 million on net revenue of $43.7 million in the 45 days ended March 31.
Charter's hospitals will go to a wide range of operators, court papers and interviews with buyers indicate.
Universal Health Services, the biggest buyer of Charter hospitals, is an experienced operator of inpatient psychiatric hospitals. Also experienced is publicly traded Ramsay Youth Services, which agreed to buy Charter's Bradenton facility.
Ramsay, which has not announced the purchase, sold Charter four hospitals in late 1998 as part of its plan to exit the hospital business.
Other buyers are smaller. Salem Service Co., a management company headquartered in Redford, Mich., will buy Charter hospitals in Covina, Calif., and San Diego. Charter will receive $50,000 for each hospital in that deal. Salem manages a psychiatric hospital in Detroit.
Neil Campbell, president and chief executive officer of Nashville-based Keystone Education and Youth Services, is buying the Savannah, Ga., hospital. Charter will receive $10 in the deal.
"We will maintain the adult services at the hospital," Campbell said. Keystone specializes in youth services.
Devyani Desai, M.D., is a consultant to the Largo, Fla., facility she and other investors plan to buy. "I thought I could make a difference by acquiring it. We need to build staff morale. They've been in limbo for the last six months."
In a similar deal, three psychiatrists, led by David Bergman, M.D., plan to buy the La Mesa, Calif., Charter hospital.
Some observers doubt whether small operators will be successful, despite their clinical experience. "Certainly you have to be able to provide the services," said Jan Pyrce, a River Forest, Ill.-based consultant. "But (the reimbursement environment) has gotten more fluid and more complicated over the past 10 years."