HEALTH : Regulators Block Sale of 6 NME Hospitals to Charter Medical

The Federal Trade Commission on Thursday blocked, for antitrust reasons, National Medical Enterprises’ proposed sale of six psychiatric hospitals to Charter Medical Corp.

The FTC said the sale would have an anti-competitive effect because Macon, Ga.-based Charter, the nation’s largest operator of psychiatric hospitals, would control too large a share of the market in the cities where the hospitals are located.

The six hospitals are in Atlanta; Memphis, Tenn.; Orlando, Fla., and Richmond, Va. Both Charter and NME have substantial shares of the market in those cities.

Charter acquisition of the hospitals, the FTC said, would “increase the likelihood that Charter would unilaterally exercise market power in the relevant markets . . . (denying) patients, physicians, third-party payers and other consumers the benefits of free and open competition based on price, quality and service.”

Santa Monica-based National Medical agreed in March to sell 47 psychiatric hospitals to Charter for $200 million. Thirty of those hospitals have already changed hands, and National Medical is in the final transferring stages of 11 more that already have FTC approval, company spokeswoman Diana Takvam said.

National Medical must find another buyer for the remaining six because it is required to get out of the psychiatric hospital business in its June agreement with the Justice Department. The firm, which remains one of the nation’s largest operators of acute-care hospitals, agreed to pay $380 million to settle fraud charges related to the operation of its psychiatric business.

In addition to the federal inquiry, the company had also been the target of several lawsuits filed by insurers and claims by 150 to 200 patients of fraud and abuse. Most have been settled.

National Medical had operated 61 psychiatric hospitals. It is now actively seeking buyers for 20 facilities, Takvam said.