Apparently desperate to liquidate its holdings, bankrupt Charter Behavioral Health Systems plans to pay $800,000 to landlord Crescent Real Estate Equities to facilitate the sale of two hospitals it says would otherwise have to close.
Charter President and Chief Executive Officer Michael French said, "All these sales were intended to keep facilities open and employees employed."
"It does sound odd at face-value, but you have to accept that there is a cost of carrying a closed facility," said Jan Pyrce, a River Forest, Ill.-based consultant for the psychiatric hospital industry.
Charter, the nation's largest psychiatric hospital chain, closed 51 of its hospitals in the months before it filed for Chapter 11 bankruptcy protection in February.
The Alpharetta, Ga.-based company has secured court approval for the sales of 24 of its remaining 37 hospitals, accepting as little as $1 for each (June 19, p. 20). Under separate agreements, buyers will pay Crescent at least $115 million for the land and buildings.
In June Charter closed five hospitals when the bids fell short of what Crescent wanted.
But in two other cases, records show Charter plans to make up the difference between the top bids and Crescent's sales prices so the deals can go through.
United Medical Corp. will pay $4.6 million for Charter's 66-bed Louisville, Ky., hospital and a physician practice there. The Windermere, Fla.-based company operates three psychiatric and one acute-care hospital.
Crescent wanted $5 million. Arguing that shutting the facility would cost $540,000, Charter gained court approval to pay $400,000 to Crescent so that United can complete its deal.
Charter is seeking court approval to pay another $400,000 to Crescent to meet its $6.2 million price for the 101-bed facility on St. Simon's Island, Ga. Crescent had originally asked for $6.7 million. The purchaser, investor-owned Focus Health Care, has agreed to pay Crescent $5.8 million for the real estate, court records show.
Sales are to be completed this month, French said, after Charter reaches an agreement with HCFA and the U.S. Justice Department to protect buyers from civil fraud charges or other government claims.
Charter is working to dispose of its five joint ventures. In San Antonio, Texas, for-profit, 149-bed Nix Health Care System will pay $400,000 for the assets of Covenant Behavioral Health, formed last July by Charter and the San Antonio unit of Irving, Texas-based Christus Health. The sale, expected to be completed by Sept. 30, will result in the closure of the Covenant facility, 90-bed Charter Real, and the addition of 46 beds to Nix's 20-bed off-site psychiatric unit.