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<br />Ibll <br /> <br /> <br />There exists a general decrease in the availability of reimbursement for <br />the longer-term psychiatric market. CHAMPUS length of stay is being decreased <br />while the review process is increasing. State and local agency funding is <br />cyclical. While there are some opportunities with agencies that have adequate <br />state funds, funding is generally limited. Recently agencies have begun to <br />hire professional review organizations to assist them in managed mental health <br />care. <br /> <br />Managed care organizations have decreased the length of stay and the <br />reimbursement for the stay. For long term care, most want a 3-6 month length <br />of stay at a rate of approximately $350 per day. Employers have cut mental <br />health benefits. Internal managed care (employee assistant programs) are <br />: increasing direct. contracting for alternative care settings and are seeking <br />avenues for families to use state and federal assistance. <br /> <br />Referrals and admissions currently come from the following: <br /> <br />Professional/Clinical 74% <br />Family 19% ' <br />Àgency 11% <br />Third Party/Employers 2% <br /> <br />C. Events Leading to Bankruptcv Filinq - <br /> <br />In order to capitalize on what was the believed to be the growing demand <br />for the psychiatric and rehabilitation markets, Healthcare's psychiatric and <br />rehabilitation facilities. grew from three facilities with 506 licensed" beds l.n <br />1979 to sixteen facilities with 1,847 licensed beds by March, 1992. <br /> <br />Simultaneously, Healthcare's ambitious expansion into the medical/surgical <br />hospital business with a capital investment of $367.3 million was not <br />profitable and caused a burdensome drain on cash. The hospitals suffered from <br />increased competition, negative press and limitations imposed by payors, such <br />as insurance companies and the government, on patient costs eligible for <br />reimbursement. Healthcare's head injury rehabilitation hospitals were <br />negatively affected by recent industry-wide trends similar to those being <br />expedenced by the psychiatric hospitals. These industry trends resulted in <br />steadily declining revenues. <br /> <br />I <br />During fiscal year 1989, Healthcare began experiencing severe liquidity <br />problems, primarily as a result of the cash requirements of the development <br />program and lower than anticipated growth from existing operations. <br />Healthcare had very little cash to support its operations and a substantial <br />working capital deficit. Healthcare began a restructuring program designed to <br />stabilize Healthcare's operations through asset sales, reductions in operating <br />costs and a return to Healthcare's core psychiatric and rehabilitation <br />businesses. <br /> <br /> <br /> <br /> <br /> <br /> <br />- 7 - <br />a-zeISS <br />