CPC Plans to Buy Hospital, Health Firm : Acquisitions: Company also announces that admissions at two of its facilities declined 2% in first quarter.
Community Psychiatric Centers said Tuesday that it has tentatively agreed to buy Brea Neuropsychiatric Hospital and a West German mental health management company, and also disclosed that admissions at its hospitals dipped slightly in its first quarter.
Terms of both proposed acquisitions were not disclosed.
The news concerning the nearly 2% decline in hospital admissions prompted a 4.7% decline in the Laguna Hills-based company’s stock amid unusually heavy trading, analysts said. CPC’s stock fell $1.125 to close Tuesday at a 52-week low of $21.875 per share, with 1.2 million shares changing hands.
“I think CPC is the best-managed company in the hospital services industry. They have a proven record of over 20 years of posting improved earnings,” said Peter Sidoti, an analyst with the investment banking firm of County NatWest in New York. “The question now is whether they will be able to keep it up. It’s my belief they will have a tough time.”
CPC Chairman James Conte vehemently disagreed Tuesday, saying the company is successfully fending off such industrywide problems as increasing competition and a crackdown by insurers on costs, particularly those attached to mental health. CPC is additionally facing a decline in admissions in adolescent drug treatment programs because of a recent spate of negative publicity surrounding such programs at other companies.
He said CPC recently raised its rates approximately 8% and is predicting another year of improved earnings.
Beyond a slight industry downturn, Conte blamed the admissions decline at CPC on an increase in the number of hospitals and a slowdown in specific markets.
The increase in admissions at CPC’s established hospitals--those open for more than a year--has been declining for nearly a year. The growth in admissions has fallen from a high of 16.4% in the first quarter of fiscal 1989 to a 1.8% decline in fiscal 1990.
Conte said Tuesday that he expects the acquisition of Harvard Medical Services to offset the decline in new patients at existing hospitals.
The Frankfurt, West Germany, firm contracts with U.S. armed forces and corporations in Western Europe as a psychiatric referral service. The company arranges psychiatric care in the United States for individuals returning home because of illness.
CPC expects to pick up 90% of Harvard’s referrals, which would increase admissions.
Meanwhile, Comprehensive Care Corp., the ailing alcohol- and drug-treatment company formerly headquartered in Irvine, has agreed to sell to CPC its newly constructed 152-bed Brea Neuropsychiatric Hospital.
Conte said he would install CPC management there and probably change the hospital’s name.
Some former administrators at Brea Neuropsychiatric have alleged in lawsuits filed against Comp Care that deep budget cuts had ravaged patient care there. The suits--filed within the last three years--claimed that cost-cutting was responsible for one unattended patient’s death from a drug overdose, an attempted suicide and a homosexual gang rape of a teen-ager.
Comp Care has denied all of the charges in the past and defended the quality of patient care provided at the Brea facility.
ADMISSIONS AT CPC HOSPITALS
Here, in percentages, are the figures showing the quarterly change in admissions at established Community Psychiatric Centers in relation to the comparable year-ago period.
Feb. 1989: 16.4%. May 1989: 13.2%. Aug. 1989: 5.4%. Nov.: 1989: 3.6%. Feb. 1990: -1.8%.
Source: Community Psychaitric Centers
