NME to Sell 80% of Rehab Center Unit to Alabama Firm

National Medical Enterprises, facing huge financial liabilities from its ongoing legal problems, said Friday that it has agreed to sell 80% of its physical rehabilitation hospital business to Healthsouth Rehabilitation Corp. for at least $300 million.

Healthsouth, based in Birmingham, Ala., is acquiring 28 rehabilitation hospitals and 45 outpatient centers across the country at what the firm’s chairman, Richard M. Scrushy, called a “very fair price.” The deal makes Healthsouth the nation’s largest provider of rehab services, with 265 hospitals and clinics in 32 states.

NME Chairman Jeffrey Barbakow said the sale is in line with the company’s strategy of focusing on its core business of acute care hospitals. The Santa Monica firm has also put its troubled psychiatric division on the sales block.

The rehab business generated revenue of $600 million, or 16% of NME’s total sales of $3.7 billion for its fiscal year ended May 31. It also generated operating profit of $61 million.

Scrushy said the deal positions Healthsouth to take advantage of national health reform, which has been spurring a wave of hospital mergers. On Thursday, Nashville-based Ornda Healthcorp said it agreed to acquire Summit Health Ltd., a Burbank hospital company, in a deal valued at $375 million.

Scrushy suggested that NME was motivated to sell the rehab unit because it needed the money to pay legal costs.

“NME did not want to sell these hospitals,” he said. “But they needed to get on with their lives and settle these lawsuits.”

But Christi R. Sulzbach, NME’s senior vice president, said the company was not forced to sell the rehab hospitals.

“We are cash-flow-positive,” she said. “We didn’t feel that we had to sell them in any sort of fire sale.”

NME said it will retain rehab hospitals in Modesto; San Ramon, Calif.; San Diego; Delray, Fla.; New Orleans, and El Paso that are on the campuses of acute care hospitals.