B. Lee Karns Officially Steps Down as Chairman of Ailing Comp Care

Comprehensive Care Corp., the financially ailing alcohol and drug treatment company that recently moved its headquarters from Irvine to St. Louis, said Monday that B. Lee Karns has stepped down as chairman.

The resignation accomplishes Karns’ previously announced plans to withdraw from company affairs. Karns, 60, resigned in October as Comp Care’s chief executive officer. Karns had been chairman since 1972 and will remain on the company board of directors.

“Mr. Karns decided it is time for him to take a less active role in the business,” said William James Nicol, Comp Care’s president and new chief executive officer.

Several industry observers said they believe Karns’ resignations will advance efforts to reverse the failing fortunes of the company.

“It is part of the management reorganization plan: taking control away from the entrepreneurial founders of the company and giving it to people who can deal with the operational decisions facing the company today,” said Richard Carpe, health care partner in the Costa Mesa office of Laventhol and Horwath.

While Karns was not a founder of the company (he joined it in 1972 when it was three years old), he is credited with the creation of the CareUnit system for the treatment of chemical dependency under contract management programs offered in hospitals. That was a key to the company’s success. Replacing him as chairman is Stanley R. Nelson, who has been a Comp Care director since March, 1988. Nelson also has served on the board of a Comp Care subsidiary, RehabCare Corp. since 1987 and on the company’s advisory board since 1983.

Nelson retired from the Henry Ford Health Corp. in 1988 after a 17-year stint as chief executive officer. He is past chairman of the American Hospital Assn. and was the founding president of Voluntary Hospitals of America.

David Langness, vice president of communications for the Hospital Council of Southern California and spokesman for Comp Care from 1980 to 1986, said Nelson’s appointment as chairman will lend greater prestige to the company. But he said he isn’t certain Nelson’s expertise will solve Comp Care’s problems.

“I think the salvation of Comp Care is definitely desirable. But I don’t know at this point anybody can do it. It will be a very difficult task,” Langness said.

Comp Care, formed in 1969, gained early publicity for the treatment of alcohol and drug dependency problems of celebrities and experienced rapid growth. In recent years, however, the company has struggled because of greater competition and changes in insurance-reimbursement programs. The company reported a third quarter loss of $4.7 million and is in the process of selling its California facilities to pay off its debt.

Last October the company announced that a crucial plan to merge with First Hospital Corp. of Norfolk, Va., had fallen through after one of First Hospital’s bankers refused to provide financing for the deal because of Comp Care’s deteriorating condition.

Also, in November several CompCare shareholders said they were banding together to elect a new board of directors willing to consider a variety of options to solve the company’s financial problems, including a large sale of assets.

Les Livingston, spokesman for the group, refused to comment Monday on Karns’ resignation.