Originally created 02/20/00

Hospital system will shut doors



Employees and doctors at Charter Behavioral Health Systems hospital in Augusta say they were warned that some of the company's facilities would be closed. They just never expected theirs to be among them.

The decision, Charter employees in Augusta say, is baffling.

"I don't know why it is closing," said Dinesh Doshi, a private-practice child and adolescent psychiatrist who admits patients at Charter hospital. "It was a shock to a lot of people who worked there."

Alpharetta, Ga.-based Charter announced that 33 hospitals -- including three in Georgia -- would stop taking new patients Jan. 27. The hospitals would shut their doors soon afterward, the company said. The closings affect 4,890 employees -- 191 of them in Augusta.

On Wednesday, Charter filed for Chapter 11 reorganization, announcing it would sell its core business in bankruptcy court. The likely buyer will be COPI Healthcare, a wholly-owned subsidiary of Crescent Operating Inc., which has entered into an agreement to buy the business.

Crescent Real Estate Equities Co. is a principal owner of Charter.

Charter, the largest private provider of behavioral health services nationwide, said the filing would not affect operations or the payment of salaries, wages and benefits for employees at its remaining 37 core facilities. The closings prompted at least one lawsuit.

Thirty-eight employees of the Charter Behavioral Health System in Greensboro, N.C., are suing Charter. The company should pay them for 60 days' worth of work based on the 1989 Worker Adjustment and Retraining Act, the workers say.

The federal law requires businesses to give 60 days' warning before closing under most circumstances. If the company fails to give sufficient notice, workers have the right to sue, said Seth Cohen, the North Carolina attorney representing the Greensboro employees.

Charter, however, says it is uncertain the law applies in this case.

Lawsuits have been filed in other cities where Charter has hospitals, too. Several local Charter employees are considering a suit, Augusta lawyer Shawn Hammond said. The workers are waiting to find out what kind of severance packages the company is offering.

Charter says it has not decided what, if any, compensation will be made.

Packing it in

The Charter hospital in Augusta is expected to close by mid-March.

Patients now undergoing treatment at the Perimeter Parkway hospital will be transferred to other facilities, Charter officials in Alpharetta say. When all the patients leave the hospital, it will shut down.

Area employees say they do not understand why the hospital is closing. It filled an important need in the community, they say. It did not have problems with state or federal regulators. And it was profitable.

"This is a tremendous loss," said Nan Michelin, local chief executive officer. "Society needs behavioral health services more and more."

Charter spokeswoman Karen Keiser-Jenkins declined to explain why the 63-bed hospital in Augusta is closing. She said the decision is part of a long-range plan shaped by operational, strategic and financial considerations.

Stock prices of Charter's principal owner -- Fort Worth, Texas-based Crescent Real Estate Equities Co. -- have been lagging at less than $16 a share, close to its 52-week low and far below a $25.50-a-share high. Crescent is one of the nation's largest real estate investment trusts, with interests in office buildings, hotels and hospitals.

Area employees say they are feeling the effects of a financial squeeze. The home office has not paid some of the local hospital's bills, employees say. When a worker went to Staples to get packing boxes, he was told that there were problems with the company account. He had to go elsewhere.

The closing, one employee has said, is like "watching a slow death."

Declining profits

At one time, Charter boasted that it had more than 90 hospitals in 32 states, nearly one-third of all the private mental hospitals in the nation. It was, and still is, the largest single provider of behavioral care. But after the most recent round of closings, Charter will operate only 37 hospitals.

There have been other changes, too.

In September, Columbia, Md.-based Magellan Health Services transferred all but 10 percent of its interest in Charter to Crescent. The hospitals presented a conflict of interest for Magellan, now a managed-care company, and had become a "significant distraction" to the company's top management, Magellan spokesman Kevin Helmintoller says.

Ultimately, Magellan wants to free itself of the venture, he added.

Managed-care restrictions on what treatments will be paid for have forced many mental health facilities to watch costs more carefully and offer more nonhospital services, doctors and hospital administrators say.

Almost two years ago, Doctors Hospital -- formerly Columbia-Augusta Medical Center -- closed its psychiatric department because it was not making money. The problem, Doctors Hospital Vice President Jeff Simless said, is that governments and insurance companies are paying less and less for medical services, which eats away at the hospital's profit margins. Many hospitals are turning to other services.

"It may be harder and harder to find places to go," he said.

Nonprofit and government organizations are being affected, too.

The Community Mental Health Center of East Central Georgia has offset cutbacks in state Medicaid funding by boosting worker productivity and efficiency, Chief Operating Officer Mike Brockman says.

"That's part of being in health care -- being able to adapt and be fruitful at the same time," he said.

Otis Corbitt, a social worker at Georgia Regional Hospital in Augusta, said hospital budgets are being scaled back. It is becoming more and more difficult to treat patients with limited funds.

Dr. Corbitt said he fears that patients who don't get help may end up in jail.

"It's hard when money becomes the primary focus, not care," he said.

A new course

As early as 1997, Charter's then-Chief Executive Officer John DeStefanis recognized that behavioral health services were moving away from inpatient care -- overnight hospital stays -- to more outpatient care. He said in published interviews that Charter would move in that direction, too.

The company's most recent moves, Charter's new Chief Executive Officer Mike French said last month, reflect this. But Charter's recent problems also stem from other issues.

In 1998, North Carolina investigated the death of 16-year-old Tristan Sovern. According to reports, he suffocated after staffers at the Charter hospital in Greensboro covered his mouth and nose with a sheet.

In April, a CBS News hidden-camera investigation at a Charter hospital in Charlotte, N.C., reported that the company had falsified records and mistreated patients. After the report aired on 60 Minutes II, three other managed-care companies suspended referrals to Charter hospitals.

In June, the Justice Department began investigating Charter facilities in New England after uncovering problems at a Charter hospital in Nashua, N.H. The hospital was the focus of a Health Care Finance Administration report.

Last week, Crescent announced that it sold four Charter hospitals generating about $10 million for the company. The announcement also said that the company entered into a new $850 million debt agreement with USB AG, which will reduces Crescent's exposure to rising interest rates and will allow the company to borrow up to $150 million.

Crescent, Standard & Poor's Stock Reports said, has attempted to resolve issues surrounding its Charter properties, reduce its exposure to a variable debt rate and sell off noncore assets. But growth in funds from operations still are expected to be below most other real estate investment trusts.

Reach Frank Witsil at 823-3352.

Charter Behavioral Health Systems

Headquarters: Alpharetta, Ga.

Founded: 1969 in Macon, Ga.

Augusta hospital: 3100 Perimeter Parkway

Hospitals left: 37

Local employees: 191

Principal owner: Crescent Real Estate Equities Inc.