NME to Earmark $250 Million for Costs Related to Lawsuits

National Medical Enterprises Inc. said Friday that it will set aside an additional $250 million to pay legal costs stemming from various lawsuits involving activities at its psychiatric hospitals.

As a result, the Santa Monica-based hospital concern restated its first-quarter results for the period ended Aug. 31 to show a loss of $100.9 million, or 61 cents a share, before accounting changes, instead of income of $42 million, or 25 cents a share. NME’s shares fell by 12.5 cents each Friday to close at $11.75 on the New York Stock Exchange.

The $250 million reserve includes $125 million to settle two civil lawsuits filed by insurance companies that accused NME’s psychiatric hospital division of submitting $740 million in false claims. NME and the insurers announced a proposed settlement on Sept. 29.

NME said the remaining $125 million is its estimate of the costs of settling a third insurance lawsuit, several shareholder suits and hundreds of malpractice lawsuits filed by former patients.

NME also faces a federal criminal investigation into activities at its hospital operations, primarily its psychiatric facilities. Company Chairman Jeffrey C. Barbakow has said that the company is in discussions with the federal government to resolve that investigation.

The company said the $250-million reserve does not include any possible financial liability resulting from government investigations.