Texas Probe of O.C. Psychiatric Firm Concludes

Community Psychiatric Centers, a chain of psychiatric hospitals, said Friday that it has been vindicated in a 2-year-old Texas attorney general’s probe of alleged insurance fraud.

Community Psychiatric, based in Laguna Hills, had operated under a cloud of suspicion since Texas Atty. Gen. Dan Morales opened an investigation in 1991 into alleged wrongdoing by the psychiatric industry in that state, where Community Psychiatric has five facilities.

The probe began with National Medical Enterprises Inc., based in Santa Monica. It eventually widened to include three other psychiatric chains, including Community Psychiatric, which has 51 hospitals in the United States, Puerto Rico and the United Kingdom. Texas authorities said they were working to uncover wrongdoing and to reform the industry.

After settling with National Medical Enterprises, Charter Medical Corp. in Macon, Ga., and Hospital Corp. of America in Nashville, Tenn., authorities said, they signed an agreement Friday with Community Psychiatric in which the company agreed to abide by new industry regulations that call for more restrictive marketing and admission policies.

The pact, they said, means that no legal action is necessary.

Community Psychiatric’s chairman, Richard L. Conte, said in a statement released Friday night, “The outcome of this investigation vindicates us as an ethical company providing appropriate, reasonably priced, quality care.”

Community Psychiatric spokeswoman Suzanne Hovedey emphasized that the company has not been fined. As part of its settlement, National Medical Enterprises paid fines totaling $8.6 million. Charter Medical paid fines of $3.2 million, and Hospital Corp. of America paid $475,000.

“We are satisfied with the terms of the agreement,” Hovedey said. “We felt very much victimized by just being in the industry.”