-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MHLdi6Yk8TvBYpu6PCo1shmiUCctu5fBNV7AJubZI0cZY8sx0jaLdvpRmwAarf8g ZcbNV6CiY8wviqfGy2UMhw== 0000019411-95-000025.txt : 19951229 0000019411-95-000025.hdr.sgml : 19951229 ACCESSION NUMBER: 0000019411-95-000025 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951228 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARTER MEDICAL CORP CENTRAL INDEX KEY: 0000019411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 581076937 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06639 FILM NUMBER: 95604823 BUSINESS ADDRESS: STREET 1: 577 MULBERRY ST STREET 2: PO BOX 209 CITY: MACON STATE: GA ZIP: 31298 BUSINESS PHONE: 9127421161 10-K 1 - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-6639 MAGELLAN HEALTH SERVICES, INC. (Exact name of Registrant as specified in its charter) Delaware 58-1076937 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3414 Peachtree Road, N.E. Suite 1400 Atlanta, Georgia 30326 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (404) 841-9200 See Table of Additional Registrants below. --------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which registered Title of each class Common Stock ($0.25 par value) American Stock Exchange 11 1/4% Series A Senior Subordinated Notes due 2004 American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None --------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any mendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant at November 30, 1995 was approximately $510 million. Indicate by check mark whether the Registrant has filed all documents and eports required to be filed by Section 12, 13 or 15(d) of the Securities xchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No The number of shares of the Registrant's Common Stock outstanding as of November 30, 1995 was 28,415,081. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy Statement for the annual meeting of stockholders (which Proxy Statement will be filed with the Securities and Exchange Commission on or before January 29, 1996) are incorporated by reference in Part III hereof. - ------------------------------------------------------------------------------ PAGE>
ADDITIONAL REGISTRANTS(1) State or Address including zip code, Exact name of jurisdiction I.R.S. Employer including area code, registrant as specified of incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ----------------------- Beltway Community Texas 58-1324281 3414 Peachtree Rd., N.E. Hospital, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 C.A.C.O. Services, Inc. Ohio 58-1751511 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 CCM, Inc. Nevada 58-1662418 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 CMCI, Inc. Nevada 88-0224620 1061 East Flamingo Road Suite One Las Vegas, NV 89119 (702) 737-0282 CMFC, Inc. Nevada 88-0215629 1061 East Flamingo Road Suite One Las Vegas, NV 89119 (702) 737-0282 CMSF, Inc. Florida 58-1324269 3550 Colonial Boulevard Fort Myers, FL 33912 (813) 939-0403 CPS Associates, Inc. Virginia 58-1761039 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Alvarado California 58-1394959 7050 Parkway Drive Behavioral Health La Mesa, CA 91942-2352 System, Inc. 619) 465-4411 Charter Appalachian Hall North Carolina 58-2097827 60 Caledonia Road Behavioral Health Asheville, NC 28803 System, Inc. (704) 253-3681 Charter Arbor Indy Indiana 35-1916340 11075 N. Pennsylvania Behavioral Health Indianapolis, IN 46280 System, Inc. (317) 575-1000 Charter Augusta Georgia 58-1615676 3100 Perimeter Parkway Behavioral Health P.O. Box 14939 System, Inc. Augusta, GA 30909 (404) 868-6625 i ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ----------------------- Charter Bay Harbor Behavioral Florida 58-1640244 3414 Peachtree Rd., N.E. Health System, Inc. Suite 1400 Atlanta, Georgia 30326 (404) 841-9200 Charter Beacon Behavioral Indiana 58-1524996 1720 Beacon Street Health System, Inc. Fort Wayne, IN 46805 (219) 423-3651 Charter Behavioral Health New Jersey 58-2097832 19 Prospect Street System at Fair Oaks, Inc. Summit, NJ 07901 (908) 277-9102 Charter Behavioral Health Maryland 52-1866212 522 Thomas Run Road System at Hidden Brook, Inc. Bel Air, MD 21014 (410) 879-1919 Charter Behavioral Health California 33-0606642 3340 Los Coyotes Diagonal System at Los Altos, Inc. Long Beach, CA 90808 (310) 421-9311 Charter Behavioral Health Florida 65-0519663 1324 37th Avenue, East System at Manatee Adolescent Bradenton, FL 4208 Treatment Services, Inc. (813) 746-1388 Charter Behavioral Health Maryland 52-1866221 14901 Broschart Road System at Potomac Ridge, Inc. Rockville, MD 20850 (301) 251-4500 Charter Behavioral Health Georgia 58-1513304 240 Mitchell Bridge Road System of Athens, Inc. Athens, GA 30606 (404) 546-7277 Charter Behavioral Health Texas 58-1440665 8402 Cross Park Drive System of Austin, Inc. Austin, TX 78754 (512) 837-1800 Charter Behavioral Health Texas 76-0430571 3414 Peachtree Rd., N.E. System of Baywood, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health Florida 58-1527678 4480 51st Street, West System of Bradenton, Inc. Bradenton, FL 34210 (813) 746-1388 Charter Behavioral Health Georgia 58-1408670 3500 Riverside Drive System of Central Georgia, Inc. Macon, GA 31210 (912) 474-6200 Charter Behavorial Health Virginia 54-1765921 1500 Westbrook Avenue System of Central Virginia, Inc. Richmond, VA 23227 (804) 266-9671 ii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ----------------------- Charter Behavioral Health South Carolina 58-1761157 2777 Speissegger Drive System of Charleston, Inc. Charleston, SC 29405-8299 (803) 747-5830 Charter Behavioral Health Virginia 58-1616917 2101 Arlington Boulevard System of Charlottesville, Inc. Charlottesville, VA 22903-1593 (804) 977-1120 Charter Behavioral Health Illinois 58-1315760 4700 North Clarendon Avenue System of Chicago, Inc. Chicago, IL 60640 (312) 728-7100 Charter Behavioral Health California 58-1473063 3414 Peachtree Rd., N.E. System of Chula Vista, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health Missouri 61-1009977 200 Portland Street System of Columbia, Inc. Columbia, MO 65201 (314) 876-8000 Charter Behavioral Health Texas 58-1513305 3126 Rodd Field Road System of Corpus Christi, Inc. Corpus Christi, TX 78414 (512) 993-8893 Charter Behavioral Health Texas 58-1513306 6800 Preston Road System of Dallas, Inc. Plano, TX 75024 (214) 964-3939 Charter Behavioral Health Maryland 52-1866214 3680 Warwick Road, Route 1 System of Delmarva, Inc. East New Market, MD 21631 (410) 943-8108 Charter Behavioral Health Indiana 35-1916338 7200 East Indiana System of Evansville, Inc. Evansville, IN 47715 (812) 476-7200 Charter Behavioral Health Texas 58-1643151 3414 Peachtree Rd., N.E. System of Fort Worth, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health Mississippi 58-1616919 3531 Lakeland Drive System of Jackson, Inc. Jackson, MS 39208 (601) 939-9030 Charter Behavioral Health Florida 58-1483015 3947 Salisbury Road System of Jacksonville, Inc. Jacksonville, FL 32216 (904) 296-2447 Charter Behavioral Health Indiana 35-1916342 2700 River City Park Drive System of Jefferson, Inc. Jeffersonville, IN 47130 (812) 284-3400 iii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Behavioral Health Kansas 58-1603154 8000 West 127th Street System of Kansas City, Inc. Overland Park, KS 66213 (913) 897-4999 Charter Behavioral Health Louisiana 72-0686492 302 Dulles Drive System of Lafayette, Inc. Lafayette, LA 70506 (318) 233-9024 Charter Behavioral Health Louisiana 62-1152811 4250 Fifth Avenue, South System of Lake Charles, Inc. Lake Charles, LA 70605 (318) 474-6133 Charter Behavioral Health Indiana 35-1916343 3714 S. Franklin Street System of Michigan City, Inc. Michigan City, IN 46360 (219) 872-0531 Charter Behavioral Health Alabama 58-1569921 3414 Peachtree Rd., N.E. System of Mobile, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health New Hampshire 02-0470752 29 Northwest Boulevard System of Nashua, Inc. Nashua, NH 03063 (603) 886-5000 Charter Behavioral Health Nevada 58-1321317 7000 West Spring Mountain Rd. System of Nevada, Inc. Las Vegas, NV 89117 (702) 876-4357 Charter Behavioral Health New Mexico 58-1479480 5901 Zuni Road, SE System of New Mexico, Inc. Albuquerque, NM 87108 (505) 265-8800 Charter Behavioral Health California 58-1857277 101 Cirby Hills Drive System of Northern California, Roseville, CA 95678 Inc. (916) 969-4666 Charter Behavioral Health Arkansas 58-1449455 4253 Crossover Road System of Northwest Arkansas, Fayetteville, AR 72703 Inc. (501) 521-5731 Charter Behavioral Health Indiana 58-1603160 101 West 61st Avenue System of Northwest Indiana, State Road 51 Inc. Hobart, IN 46342 (219) 947-4464 Charter Behavioral Health Kentucky 61-1006115 435 Berger Road System of Paducah, Inc. Paducah, KY 42002-7609 (502) 444-0444 Charter Behavioral Health Georgia 66-0523678 Caso Bldg., Suite 1504 of Puerto Rico, Inc. 1225 Ponce de Leon Avenue Santurce, PR 00907 iv ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Behavioral Health California 58-1747020 455 Silicon Valley Boulevard System of San Jose, Inc. San Jose, CA 95138 (408) 224-2020 Charter Behavioral Health Georgia 58-1750583 1150 Cornell Avenue System of Savannah, Inc. Savannah, GA 31406 (912) 354-3911 Charter Behavioral Health Florida 58-1616916 4004 North Riverside Drive System of Tampa Bay, Inc. Tampa, FL 33603 (813) 238-8671 Charter Behavioral Health Arkansas 71-0752815 3414 Peachtree Rd., N.E. System of Texarkana, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health California 95-2685883 2055 Kellogg Drive System of the Inland Empire, Corona, CA 91719 Inc. (714) 735-2910 Charter Behavioral Health Ohio 58-1731068 1725 Timberline Road System of Toledo, Inc. Maumee, Ohio 43537 (419) 891-9333 Charter Behavioral Health Arizona 86-0757462 3414 Peachtree Rd., N.E. System of Tucson, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health California 33-0606644 3414 Peachtree Rd., N.E. System of Visalia, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Behavioral Health Minnesota 41-1775626 109 North Shore Drive System of Waverly, Inc. Waverly, MN 55390 (612) 658-4811 Charter Behavioral Health North Carolina 56-1050502 3637 Old Vineyard Road System of Winston-Salem, Inc. Winston-Salem, NC 27104 (919) 768-7710 Charter Behavioral Health California 33-0606646 16850 Bastanchury Avenue System of Yorba Linda, Inc. Yorba Linda, CA 92686 (714) 993-3002 Charter Behavioral Health Georgia 58-1900736 811 Juniper St., N.E. Systems of Atlanta, Inc. Atlanta, GA 30308 (404) 881-5800 v ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ----------------------- Charter Brawner Behavioral Georgia 58-0979827 3414 Peachtree Rd., N.E. Health System, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter By-The-Sea Georgia 58-1351301 2927 Demere Road Behavioral Health System, St. Simons Island, GA 31522 Inc. (912) 638-1999 Charter Canyon Behavioral Utah 58-1557925 3414 Peachtree Rd., N.E. Health System, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Canyon Springs California 33-0606640 69696 Ramon Road Behavioral Health System, Cathedral City, CA 92234 Inc. (619) 321-2000 Charter Centennial Peaks Colorado 58-1761037 2255 South 88th Street Behavioral Health System, Louisville, CO 80027 Inc. (303) 673-9990 Charter Community Hospital, California 58-1398708 21530 South Pioneer Boulevard Inc Hawaiian Gardens, CA 90716 (310) 860-0401 Charter Contract Services, Georgia 58-2100699 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Cove Forge Behavioral Pennsylvania 25-1730464 New Beginnings Road Health System, Inc. Williamsburg, PA 16693 (814) 832-2121 Charter Fairbridge Maryland 52-1866218 14907 Broschart Road Behavioral Health System, Rockville, MD 20850 Inc. (301) 251-4565 Charter Fairmount Behavioral Pennsylvania 58-1616921 561 Fairthorne Avenue Health System, Inc. Philadelphia, PA 19128 (215) 487-4000 Charter Fenwick Hall South Carolina 57-0995766 3414 Peachtree Rd., N.E. Behavioral Health System, Suite 1400 Inc. Atlanta, GA 30326 (404) 841-9200 Charter Financial Offices, Georgia 58-1527680 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 vi ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Forest Behavioral Louisiana 58-1508454 9320 Linwood Avenue Health System, Inc. Shreveport, LA 71106 (318) 688-3930 Charter Grapevine Behavioral Texas 58-1818492 2300 William D. Tate Ave. Health System, Inc. Grapevine, TX 76051 (817) 481-1900 Charter Greensboro Behavioral North Carolina 58-1335184 700 Walter Reed Drive Health System, Inc. Greensboro, NC 27403 (919) 852-4821 Charter Health Management Texas 58-2025056 6800 Park Ten Blvd. of Texas, Inc. Suite 275-W San Antonio, TX 78213 (210) 699-8585 Charter Hospital of Ohio 58-1598899 3414 Peachtree Rd., N.E. Columbus, Inc. Suite 1400 Atlanta, GA 30326 404) 841-9200 Charter Hospital of Denver, Colorado 58-1662413 3414 Peachtree Rd., N.E. Inc Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Hospital of Ft. Colorado 58-1768534 3414 Peachtree Rd., N.E. Collins, Inc Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Hospital of Laredo, Texas 58-1491620 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Hospital of Miami, Florida 61-1061599 11100 N.W. 27th Street Inc. Miami, FL 33172 (305) 591-3230 Charter Hospital of Mobile, Alabama 58-1318870 5800 Southland Drive Inc. Mobile, AL 36693 (334) 661-3001 Charter Hospital of Santa New Mexico 58-1584861 3414 Peachtree Rd., N.E. Teresa, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Hospital of St. Louis, Missouri 58-1583760 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 vii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Hospital of Torrance, California 58-1402481 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Indianapolis Indiana 58-1674291 5602 Caito Drive Behavioral Health System, Indianapolis, IN 46226 Inc. (317) 545-2111 Charter Lafayette Behavioral Indiana 58-1603158 3700 Rome Drive Health System, Inc. Lafayette, IN 47905 (317) 448-6999 Charter Lakehurst New Jersey 22-3286879 3414 Peachtree Rd., N.E. Behavioral Health System, Suite 1400 Inc. Atlanta, GA 30326 (404) 841-9200 Charter Lakeside Behavioral Tennessee 62-0892645 2911 Brunswick Road Health System, Inc. Memphis, TN 38134 (901) 377-4700 Charter Laurel Heights Georgia 58-1558212 3414 Peachtree Rd., N.E. Behavioral Health System, Suite 1400 Inc. Atlanta, GA 30326 (404) 841-9200 Charter Linden Oaks Illinois 36-3943776 852 West Street Behavioral Health System, Naperville, IL 60540 Inc. (708) 305-5500 Charter Little Rock Behavioral Arkansas 58-1747019 1601 Murphy Drive Health System, Inc. Maumelle, AR 72113 (501) 851-8700 Charter Louisville Behavioral Kentucky 58-1517503 1405 Browns Lane Health System, Inc. Louisville, KY 40207 (502) 896-0495 Charter Meadows Maryland 52-1866216 730 Maryland, Route 3 Behavioral Health System, Gambrills, MD 21054 Inc. (410) 923-6022 Charter Medfield Behavioral Florida 58-1705131 12891 Seminole Blvd. Health System, Inc. Largo, FL 34648 (813) 581-8757 Charter Medical - California, Georgia 58-1357345 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 viii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Medical - Clayton Georgia 58-1579404 3414 Peachtree Rd., N.E. County, Inc. Suite 1400 Atlant30326 (404) 841-9200 Charter Medical - Cleveland, Texas 58-1448733 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlant30326 (404) 841-9200 Charter Medical - Dallas, Texas 58-1379846 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlant30326 (404) 841-9200 Charter Medical - Long California 58-1366604 3414 Peachtree Rd., N.E. Beach, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Medical - New York, New York 58-1761153 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlant30326 (404) 841-9200 Charter Medical (Cayman Cayman Islands, BWI 58-1841857 Caledonian Bank & Trust Islands) Ltd. Swiss Bank Building Caledonian House Georgetown-Grand Cayman Cayman Islands (809) 949-0050 Charter Medical Executive Georgia 58-1538092 3414 Peachtree Rd., N.E. Corporation Suite 1400 Atlanta, Ga 30326 (404) 841-9200 Charter Medical Information Georgia 58-1530236 3414 Peachtree Rd., N.E. Services, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Medical International, Cayman Islands, BWI N/A Caledonian Bank & Trust Inc Swiss Bank Building Caledonian House Georgetown-Grand Cayman Cayman Islands (809) 949-0050 Charter Medical International, Nevada 58-1605110 3414 Peachtree Rd., N.E. S.A., Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 ix ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Medical Management Georgia 58-1195352 3414 Peachtree Rd., N.E. Company Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Medical of East Arizona 58-1643158 2190 N. Grace Boulevard Valley, Inc. Chandler, AZ 85224 (602) 899-8989 Charter Medical of England, United Kingdom N/A 111 Kings Road Ltd. Box 323 London SW3 4PB London, England 44-71-351-1272 Charter Medical of Florida, Florida 58-2100703 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Medical of North Arizona 58-1643154 6015 W. Peoria Avenue Phoenix, Inc. Glendale, AZ 85302 (602) 878-7878 Charter Medical of Puerto Commonwealth of 58-1208667 Caso Building, Suite 1504 Rico, Inc. Puerto Rico 1225 Ponce De Leon Avenue Santurce, P.R. 00907 (809) 723-8666 Charter Mental Health Florida 58-2100704 3414 Peachtree Rd., N.E. Options, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Milwaukee Behavioral Wisconsin 58-1790135 11101 West Lincoln Avenue Health System, Inc. West Allis, WI 53227 (414) 327-3000 Charter Mission Viejo California 58-1761156 23228 Madero Behavioral Health System, Mission Viejo, CA 92691 Inc. (714) 830-4800 Charter MOB of Virginia 58-1761158 1023 Millmont Avenue Charlottesville, Inc. Charlottesville, VA 22901 (804) 977-1120 Charter North Behavioral Alaska 58-1474550 2530 DeBarr Road Health System, Inc. Anchorage, AK 99508-2996 (907) 258-7575 Charter Northbrooke Wisconsin 39-1784461 46000 W. Shroeder Drive Behavioral Health System, Brown Deer, WI 53223 Inc. (414) 355-2273 x ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter North Counseling Alaska 58-2067832 2530 DeBarr Road Center, Inc. Anchorage, AL 99508-2996 (907) 258-7575 Charter Northridge Behavioral North Carolina 58-1463919 400 Newton Road Health System, Inc. Raleigh, NC 27615 (919) 847-0008 Charter Oak Behavioral California 58-1334120 1161 East Covina Boulevard Health System, Inc. Covina, CA 91724 (818) 966-1632 Charter of Alabama, Inc. Alabama 63-0649546 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Palms Behavioral Texas 58-1416537 1421 E. Jackson Avenue Health System, Inc. McAllen, TX 78502 (512) 631-5421 Charter Peachford Behavioral Georgia 58-1086165 2151 Peachford Road Health System, Inc. Atlanta, GA 30338 (404) 455-3200 Charter Petersburg Behavioral Virginia 58-1761160 3414 Peachtree Rd., N.E. Health System, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Pines Behavioral North Carolina 58-1462214 3621 Randolph Road Health System, Inc. Charlotte, NC 28211 (704) 365-5368 Charter Plains Behavioral Texas 58-1462211 801 N. Quaker Avenue Health System, Inc. Lubbock, TX 79408 (806) 744-5505 Charter-Provo School, Inc. Utah 58-1647690 4501 North University Ave. Provo, UT 84604 (801) 227-2000 Charter Real Behavioral Texas 58-1485897 8550 Huebner Road Health System, Inc. San Antonio, TX 78240 (512) 699-8585 Charter Regional Medical Texas 74-1299623 3414 Peachtree Rd., N.E. Center, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Ridge Behavioral Kentucky 58-1393063 3050 Rio Dosa Drive Health System, Inc. Lexington, KY 40509 (606) 269-2325 xi ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Rivers Behavioral South Carolina 58-1408623 2900 Sunset Boulevard Health System, Inc. West Columbia, SC 29169 (803) 796-9911 Charter San Diego Behavioral California 58-1669160 11878 Avenue of Industry Health System, Inc. San Diego, CA 92128 (619) 487-3200 Charter Sioux Falls Behavioral South Dakota 58-1674278 2812 South Louise Avenue Health System, Inc. Sioux Falls, SD 57106 (605) 361-8111 Charter South Bend Behavioral Indiana 58-1674287 6704 N. Gumwood Drive Health System, Inc. Granger, IN 46530 (219) 272-9799 Charter Springs Behavioral Florida 58-1517461 3130 S.W. 27th Avenue Health System, Inc. Ocala, FL 32674 (904) 237-7293 Charter Springwood Virginia 58-2097829 Route 4, Box 50 Behavioral Health System, Leesburg, VA 22075 Inc. (703) 777-0800 Charter Suburban Hospital Texas 75-1161721 3414 Peachtree Rd., N.E. of Mesquite, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Terre Haute Behavioral Indiana 58-1674293 1400 Crossing Boulevard Health System, Inc. Terre Haute, IN 47802 (812) 299-4196 Charter Thousand Oaks California 58-1731069 150 Via Merida Behavioral Health System, Thousand Oaks, CA 91361 Inc. (805) 495-3292 Charter Treatment Center of Michigan 58-2025057 3414 Peachtree Rd., N.E. Michigan, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Charter Westbrook Behavioral Virginia 54-0858777 1500 Westbrook Avenue Health System, Inc. Richmond, VA 23227 (804) 266-9671 Charter White Oak Maryland 52-1866223 1441 Taylors Island Road Behavioral Health System, Woolford, MD 21677 Inc. (410) 228-7000 Charter Wichita Behavioral Kansas 58-1634296 8901 East Orme Health System, Inc. Wichita, KS 67207 (316) 686-5000 xii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ Charter Woods Behavioral Alabama 58-1330526 700 Cottonwood Road Health System, Inc. Dothan, AL 36301 (205) 794-4357 Desert Springs Hospital, Inc. Nevada 88-0117696 414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Employee Assistance Services, Georgia 58-1501282 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Florida Health Facilities, Florida 58-1860493 21808 State Road 54 Inc. Lutz, FL 33549 (813) 948-2441 Gulf Coast EAP Services, Alabama 58-2101394 3414 Peachtree Rd., N.E. Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Hospital Investors, Inc. Georgia 58-1182191 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, Ga 30326 (404) 841-9200 Illinois Mentor, Inc. Illinois 36-3643670 45 Milk Street Boston, MA 02109 (617) 654-0500 Magellan Public Solutions, Delaware 04-3250732 45 Milk Street Inc. Boston, MA 02109 (617) 654-0500 Mandarin Meadows, Inc. Florida 58-1761155 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Massachusetts Mentor, Inc. Massachusetts 04-2799071 45 Milk Street Boston, MA 02109 (617) 654-0500 National Mentor, Inc. Delaware 04-2794857 45 Milk Street Boston, MA 02109 (617) 654-0500 National Mentor Healthcare, Massachusetts 04-2893910 45 Milk Street Inc. Boston, MA 02109 (617) 654-0500 xiii ADDITIONAL REGISTRANTS(1) Address including zip code, State or other and telephone number Exact name of jurisdiction of I.R.S. Employer including area code, registrant as specified incorporation Identification of registrant's principal in its charter or organization Number executive offices - -------------------- -------------- -------------- ------------------------ NEPA - Massachusetts, Inc. Massachusetts 58-2116751 #6 Courthouse Lane Chelmsford, MA 01863 (508) 441-2332 NEPA - New Hampshire, Inc. New Hampshire 58-2116398 29 Northwest Boulevard Nashua, NH 03063 (603) 886-5000 Ohio Mentor, Inc. Ohio 31-1098345 45 Milk Street Boston, MA 02109 (617) 654-0500 Pacific-Charter Medical, Inc. California 58-1336537 3414 Peachtree Rd., N.E. Suite 1400 Atlanta, GA 30326 (404) 841-9200 South Carolina Mentor, Inc. South Carolina 57-0782160 45 Milk Street Boston, MA 02109 (617) 654-0500 Southeast Behavioral Systems, Georgia 58-2100700 3414 Peachtree Rd., N.E. Inc Suite 1400 Atlanta, GA 30326 (404) 841-9200 Schizophrenia Treatment and Georgia 58-1672912 209 Church Street Rehabilitation, Inc. Decatur, GA 30030 (404) 377-1986 Sistemas De Terapia Georgia 58-1181077 3414 Peachtree Rd., N.E. Respiratoria, S.A., Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200 Western Behavioral California 58-1662416 3414 Peachtree Rd., N.E. Systems, Inc. Suite 1400 Atlanta, GA 30326 (404) 841-9200
(1) The Additional Registrants listed are wholly-owned subsidiaries of the Registrant and are guarantors of the Registrant's 11 1/4% Series A Senior Subordinated Notes due 2004. The Additional Registrants have been conditionally exempted, pursuant to Section 12(h) of the Securities Exchange Act of 1934, from filing reports under Section 13 of the Securities Exchange Act of 1934. xiv
MAGELLAN HEALTH SERVICES, INC. ANNUAL REPORT ON FORM 10-K For the Fiscal Year Ended September 30, 1995 Table of Contents Page PART I Item 1. Business 1 Item 2. Properties 12 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 12 PART II Item 5. Market Price for Registrant's Common Equity and Related 13 Stockholder Matters 13 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 23 PART III Item 10. Directors and Executive Officers of the Registrant 24 Item 11. Executive Compensation 24 Item 12. Security Ownership of Certain Beneficial Owners and Management 24 Item 13. Certain Relationships and Related Transactions 24 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K 25
PART I Item 1. Business General Magellan Health Services, Inc. (the "Company") (formerly Charter Medical Corporation) , which was incorporated in 1969, is a behavioral healthcare company. As of September 30, 1995, the Company operated 98 acute care psychiatric hospitals and four residential treatment centers with an aggregate capacity of 8,939 licensed beds. Ninety-three of the Company's hospitals operate partial hospitalization programs, and the Company operates 144 outpatient centers, staffed by mental health professionals. In this report, the Company uses the term "psychiatric hospitals" or "hospitals" to refer to the 98 facilities licensed as acute care psychiatric hospitals and the four facilities licensed as residential treatment centers. A residential treatment center offers less intensive and longer stay services than acute care psychiatric hospitals. The Company's business strategy is to develop and operate fully integrated behavioral healthcare delivery systems in certain markets in which it presently operates one or more hospitals and in selected other markets in which the Company does not presently operate a hospital. The fully integrated delivery systems that the Company is developing offer a comprehensive range of behavioral healthcare services including inpatient treatment, day and partial hospitalization services, group and individual outpatient treatment, residential treatment programs and other less intensive behavioral healthcare services. The Company is establishing such systems by using its hospitals as a base and by arranging for other services through acquisitions, contracts or affiliations with physicians, psychologists and other mental health professionals and, in some markets, with general acute care hospitals and other institutional healthcare providers. Recent Developments Green Spring Health Services Acquisition On December 13, 1995, the Company acquired a 51% ownership interest in Green Spring Health Services, Inc. ("Green Spring") for approximately $73.2 million in cash and Common Stock and the contribution of Group Practice Affiliates ("GPA"), a wholly-owned Magellan subsidiary, which became a wholly-owned subsidiary of Green Spring. GPA was organized by the Company for the purpose of acquiring and managing professional group practices and has acquired five group practices through September 30, 1995. Green Spring is a leading provider of managed behavioral healthcare services, which includes utilization management, care management and employee assistance programs through a 50-state provider network for approximately 12 million people nationwide. The Green Spring acquisition creates the first fully integrated national behavioral healthcare system and gives the Company the capability to provide case management and delivery services to large private organizations and a public sector marketplace seeking increased privatization of services. The Company changed its name to Magellan Health Services, Inc. on December 21, 1995 to reflect the broader range of services it expects to provide as a result of the Green Spring acquisition. The Company will operate its integrated national behavioral healthcare system through three principal subsidiaries beginning in fiscal 1996 engaging in (i) the provider business, (ii) the managed care business and (iii) the public sector business. Each principal subsidiary will operate autonomously and enter into contractual arrangements with the other subsidiaries as necessary. The minority shareholders of Green Spring consist of four Blue Cross/Blue Shield organizations (the "Blues") that are key customers of Green Spring. In addition, two other Blues organizations that formerly owned a portion of Green Spring will continue as customers of Green Spring. The minority shareholders of Green Spring will have the option, under certain circumstances, to exchange their ownership interests ("exchange option") in Green Spring for approximately 3.6 million shares of Magellan Common Stock or $81.8 million in subordinated notes. The Company may elect to pay cash in lieu of issuing the subordinated notes. The exchange option expires December 13, 1998. On December 20, 1995, the Company acquired an additional 10% ownership interest in Green Spring for approximately $16.7 million in cash as a result of an exchange option exercised by certain of the minority shareholders of Green Spring. The Company has a 61% ownership interest in Green Spring subsequent to the exercise of the aforementioned exchange option. Fiscal 1994 and Prior Developments NME Acquisition During fiscal 1994, the Company agreed to acquire 40 psychiatric hospitals (the "Acquired Hospitals") from National Medical Enterprises, Inc. ("NME"). The purchase price for the Acquired Hospitals was approximately $120.4 million in cash plus an additional cash amount of approximately $51 million, subject to adjustment, for the net working capital of the Acquired Hospitals (the "Hospital Acquisition".) The Acquired Hospitals had an aggregate capacity of 2,873 licensed beds when acquired and were located in 19 states. For their fiscal year ended May 31, 1994, the Acquired Hospitals had net revenue of approximately $315.1 million. On June 30, 1994, the Company completed the purchase of 27 of the Acquired Hospitals for a cash purchase price of approximately $129.6 million, which included approximately $39.3 million, subject to adjustment, for the net working capital of the facilities. On October 31, 1994, the Company completed the purchase of three additional Acquired Hospitals for a cash purchase price of approximately $5 million, which included approximately $2.2 million related to the net working capital of the facilities. On November 30, 1994, the Company completed the purchase of the remaining ten Acquired Hospitals for a cash purchase price of approximately $36.8 million, including approximately $9.5 million related to the net working capital of the ten Acquired Hospitals. During the year ended September 30, 1995, the Company received approximately $3.5 million from NME as a partial payment related to the settlement of the working capital portion of the purchase price. The Company accounted for the Hospital Acquisition using the purchase method of accounting. Debt Refinancing In order to finance the Hospital Acquisition and to refinance substantially all of the Company's outstanding long-term debt, on May 2, 1994, the Company entered into a Second Amended and Restated Credit Agreement with certain financial institutions for a five-year reducing, revolving credit facility in an aggregate committed amount of $300 million (the "Revolving Credit Agreement") and issued $375 million of 11 1/4% Series A Senior Subordinated Notes which mature on April 15, 2004 (the "Notes") and are general unsecured obligations of the Company. (See Note 6 of the Company's Consolidated Financial Statements.) Sale of General Hospitals On September 30, 1993, the Company sold its general hospitals and related assets to Quorum, Inc. for approximately $338 million. The Company retained the assets and liabilities relating to these hospitals for professional liability claims incurred and cost report settlements for periods prior to September 30, 1993. For fiscal 1993, the general hospitals had net revenue of approximately $347 million, a net loss of approximately $15 million, and admissions and patient days of 39,669 and 205,843, respectively. In 1993, the Company restated its consolidated financial statements to reflect the sales of the general hospitals and its interest in a non-hospital subsidiary as discontinued operations. Financial Restructuring In its 1992 fiscal year, the Company completed a restructuring of its debt and equity capitalization (the "Restructuring") pursuant to a prepackaged plan of reorganization filed under Chapter 11 of the United States Bankruptcy Code (the "Plan"), which became effective on July 21, 1992. As a result of the Restructuring, the Company's long-term debt was reduced by approximately $700 million and its redeemable preferred stock of $233 million was eliminated. The holders of the debt and preferred stock that were reduced or eliminated received approximately 97% of the Company's common stock outstanding on July 21, 1992. Psychiatric Hospital Operations The Company's psychiatric hospitals in operation on September 30, 1995 are located in well-populated urban and suburban locations in 32 states and two foreign countries. Five of the Company's hospitals are affiliated with medical schools for residency and other post-graduate teaching programs. Most of the Company's hospitals offer a full continuum of behavioral care in their service area. The continuum includes inpatient hospitalization, partial hospitalization, intensive outpatient services and, in some markets, residential treatment services. The Company's hospitals provide structured and intensive treatment programs for mental health and alcohol and drug dependency disorders in children, adolescents and adults. The specialization of programs enables the clinical staff to provide care that is specific to the patient's needs and facilitates monitoring the patient's progress. A typical treatment program of the Company integrates physicians and other patient-care professionals with structured activities, providing patients with testing, adjunctive therapies (occupational, recreational and other), group therapy, individual therapy and educational programs. A treatment program includes one or more of the types of treatment settings provided by the Company's continuum of care. For those patients who do not have a personal psychiatrist or other specialist, the hospital refers the patient to a member of its medical staff. A significant portion of hospital admissions are provided by referrals from former patients, local marketplace advertising, managed care organizations and physician referrals. Professional relationships are an important aspect of the Company's ongoing business. Management believes the quality of the Company's treatment programs, staff employees and physical facilities are important factors in maintaining good professional relationships. The Company's hospitals work closely with mental health professionals, non-psychiatric physicians, emergency rooms and community agencies that come in contact with individuals who may need treatment for mental illness or substance abuse. A portion of the Company's marketing efforts is directed at increasing general awareness of mental health and addictive disease and the services offered by the Company's hospitals. Seasonality The Company's business is seasonal in nature, with a reduced demand for certain services generally occurring in the first fiscal quarter around major holidays, such as Thanksgiving and Christmas, and during the summer months comprising the fourth fiscal quarter. Related Businesses As part of the Company's business strategy during the past three fiscal years, the Company (i) acquired a company that develops information systems relating to the financing and delivery of behavioral healthcare services, (ii) acquired a company that provides outpatient treatment for schizophrenia patients, and (iii) acquired a company that provides specialized health services in mentor homes. To date, the activities of these subsidiaries have not been material to the Company. Hospital Properties The following table provides information relating to the 102 hospitals operated by the Company as of September 30, 1995.
State/Country Number of Hospitals Number of Licensed Beds ------------- ------------------- ----------------------- Alabama 2 169 Alaska 1 74 Arizona 2 170 Arkansas 2 125 California 11 889 Colorado 1 72 England 2 123 Florida 10 833 Georgia 8 840 Illinois 2 215 Indiana 10 746 Kansas 2 160 Kentucky 3 256 Louisiana 3 259 Maryland 6 350 Massachusetts 2 215 Minnesota 1 40 Mississippi 1 111 Missouri 1 96 Nevada 1 84 New Hampshire 1 100 New Jersey 1 150 New Mexico 2 172 North Carolina 4 398 Ohio 1 38 Pennsylvania 2 265 South Carolina 3 260 South Dakota 1 60 Switzerland 1 69 Tennessee 1 204 Texas 8 662 Utah 1 212 Virginia 3 362 Wisconsin 2 160 ----- ----- Total 102 8,939 ===== =====
All of the Company's hospitals located in the United States have been accredited by the Joint Commission on Accreditation of Healthcare Organizations (the "Joint Commission"). The Joint Commission is a national commission which establishes standards relating to the physical plant, administration, quality of patient care, governing body and medical staffs of hospitals. The Company operates 13 leased hospitals, including one 150-bed general hospital, not listed above, which is managed by an unaffiliated third party. The leases for such hospitals have terms expiring between 1996 and 2069. The leases for two hospitals contain options to purchase these hospitals for nominal consideration at the end of their respective lease terms. Sixty-two of the Company's hospitals listed above are subject to mortgages. The stock of substantially all of the domestic subsidiaries of the Company has been pledged as collateral for the Company's secured bank financing. The Company owns 16 medical office buildings and leases an additional 19 such buildings. Five of the Company's medical office buildings are subject to mortgages. The Company leases office space for its outpatient centers. The leases generally have terms of less than five years. Divestitures During fiscal 1995, the Company sold the following facilities:
Location Size/Type of Facility Date -------- --------------------- ---- Chesapeake, VA Outpatient psychiatric hospital December 1994 Norfolk, VA 65-bed psychiatric hospital December 1994 Virginia Beach, VA 61-bed psychiatric hospital December 1994
In addition, the Company leases, with options to purchase by the lessees, three facilities which it previously operated prior to fiscal 1991. The Company is also attempting to sell or lease 11 other previously operated hospitals and related medical office buildings and certain unimproved real estate. Competition Each of the Company's hospitals competes with other hospitals, some of which are larger and have greater financial resources. Some competing hospitals are owned and operated by governmental agencies, others by nonprofit organizations supported by endowments and charitable contributions and others by proprietary hospital corporations. The hospitals frequently draw patients from areas outside their immediate locale and, therefore, the Company's hospitals may, in certain markets, compete with both local and distant hospitals. In addition, the Company's hospitals compete not only with other psychiatric hospitals, but also with psychiatric units in general hospitals, and outpatient services provided by the Company may compete with private practicing mental health professionals. The competitive position of a hospital is, to a significant degree, dependent upon the number and quality of physicians who practice at the hospital and who are members of its medical staff. The Company has entered into joint venture arrangements with other healthcare providers in certain markets to promote more efficiency in the local delivery system. In recent years, the competitive position of hospitals has been affected by the ability of such hospitals to obtain contracts with Preferred Provider Organizations ("PPO's"), Health Maintenance Organizations ("HMO's") and other managed care programs to provide inpatient and other services. Such contracts normally involve a discount from the hospital's established charges, but provide a base of patient referrals. These contracts also frequently provide for pre-admission certification and for concurrent length of stay reviews. The importance of obtaining contracts with HMO's, PPO's and other managed care companies varies from market to market, depending on the individual market strength of the managed care companies. The Company's acquisition of Green Spring creates opportunities to increase its revenues through managed care contracts utilizing the continuum of care described above, information systems that support care management and at-risk pricing mechanisms. State certificate of need laws place limitations on the Company's and its competitors' ability to build new hospitals and to expand existing hospitals. Protection from new competition is reduced in those states where there is no certificate of need law. The Company operates 44 hospitals in 12 states (Arizona, Arkansas, California, Colorado, Indiana, Kansas, Louisiana, Nevada, New Mexico, South Dakota, Texas and Utah) which do not have certificate of need laws applicable to hospitals. In most cases, these state laws do not restrict the ability of the Company or its competitors to offer new outpatient services. Industry Trends The Company's hospitals have been adversely affected by factors influencing the entire psychiatric hospital industry. Factors which affect the Company include (i) the imposition of more stringent length of stay and admission criteria by payors; (ii) the failure of reimbursement rate increases from certain payors that reimburse on a per diem or other discounted basis to offset increases in the cost of providing services; (iii) an increase in the percentage of its business that the Company derives from payors that reimburse on a per diem or other discounted basis; (iv) a trend toward higher deductible and co-insurance for individual patients; and (v) a trend toward limiting employee health benefits, such as reductions in annual and lifetime limits on mental health coverage. In response to these conditions, the Company has (i) strengthened controls to reduce costs and capital expenditures, (ii) reviewed its portfolio of hospitals and sold, closed or leased hospitals or consolidated operations in certain locations, (iii) developed strategies to increase outpatient services and partial hospitalization programs to meet the demands of the marketplace, and (iv) created a national, fully integrated behavioral healthcare system upon acquiring Green Spring in December 1995, thereby improving the Company's ability to obtain contracts with large private and public payors. Governmental Budgetary Constraints and Healthcare Reform In the 1995 session of the United States Congress, the focus of healthcare legislation has been on budgetary and related funding mechanism issues. A number of reports, including the 1995 Annual Report of the Board of Trustees of the Federal Hospital Insurance Program (Medicare) have projected that the Medicare "trust fund" is likely to become insolvent by the year 2002 if the current growth rate of approximately 10% per annum in Medicare expenditures continues. Similarly, federal and state expenditures under the Medicaid program are projected to increase significantly during the same seven-year period. In response to these projected expenditure increases, and as part of an effort to balance the federal budget, both the Congress and the Clinton Administration have made proposals to reduce the rate of increase in projected Medicare and Medicaid expenditures and to change funding mechanisms and other aspects of both programs. Congress has passed legislation that would reduce projected expenditure increases substantially and would make significant changes in the Medicare and the Medicaid programs. The Clinton Administration has proposed alternate measures to reduce, to a lesser extent, projected increases in Medicare and Medicaid expenditures. As of the date of this filing, neither proposal has become law. The Medicare legislation that has been adopted by Congress would, with some differences, reduce projected expenditure increases by a variety of means, including reduced payments to providers (including the Company), increased beneficiary premiums for physician and certain other services, and creation of incentives for Medicare beneficiaries to enroll in managed care plans or to accept Medicare coverage with a substantially increased deductible, with the savings being available to the beneficiaries to pay non-covered expenses. Changes in the Medicaid program would reduce the number and extent of federal mandates concerning how state Medicaid programs operate (including levels of benefits provided and levels of payments to providers) and would change the funding mechanism from a sharing formula between the federal government and a state to "block grant" funding. The Company cannot predict the effect of any such legislation, if adopted, on its operations; but the Company anticipates that, although overall Medicare and Medicaid funding may be reduced from projected levels, the changes in such programs may provide opportunities to the Company to obtain increased Medicare and Medicaid business through risk-sharing or partial risk-sharing contracts with managed care plans and state Medicaid programs. Although the United States Congress, in 1995, has not considered healthcare reform proposals, the Company anticipates that numerous healthcare reform proposals will continue to be introduced in future sessions of Congress. The Company cannot predict whether any such proposal will be adopted or the effect on the Company of any proposal that does become law. -----END PRIVACY-ENHANCED MESSAGE-----