NME to Sell 47 Psychiatric Units to Rival for $200 Million

In a big step toward disposing of its troubled psychiatric care business, National Medical Enterprises said Wednesday that it has agreed to sell 47 hospitals to rival Charter Medical Corp. for $200 million.

The Santa Monica-based hospital operator said it is also discussing with “other parties” the sale of most of a dozen other free-standing psychiatric facilities. It said it plans to keep five psychiatric clinics that are located at its general surgical hospital campuses.

NME shares rose 12.5 cents to close at $16.50 on the New York Stock Exchange, bucking the broad market decline Wednesday.

For the past two years, NME has faced a bevy of costly lawsuits from patients, insurers and shareholders involving activities at some of its psychiatric hospitals. Since September, the company has resolved about two-thirds of more than 100 patient lawsuits alleging billing fraud, false imprisonment and conspiracy. It also has paid more than $200 million to settle lawsuits filed by major insurance companies accusing the company of submitting hundreds of millions of dollars in bogus bills.

But the company’s biggest legal hurdle is the investigation by the Justice Department and Department of Health and Human Services into alleged criminal conduct at its psychiatric and other hospital operations.

Chairman Jeffrey C. Barbakow said discussions aimed at resolving the criminal investigation are continuing with federal officials.

Charter, the Macon, Ga.-based operator of the nation’s biggest chain of psychiatric hospitals, is buying hospitals in 20 states, mostly in the South and Northeast. The sale includes seven California hospitals, including Los Altos Hospital in Long Beach, Yorba Hills Hospital in Yorba Linda and New Beginnings in Lakewood.