They're back: Ortenzios buy hospitals in 8 states from Beverly chain

Central Penn Business Journal, Jun 12, 1998

Local businessmen Rocco Ortenzio and son Robert are back in the health care business in a big way.

Select Medical Corp. of Mechanicsburg, which they founded last year, has agreed to purchase the American Transitional Hospitals (ATH) subsidiary of Beverly Enterprises Inc., a nursing-home chain. Select provides long-term acute hospital services and rehabilitation services on an inpatient and outpatient basis.

ATH has been a Beverly subsidiary since 1994 and currently operates 15 long-term acute hospitals in eight states, primarily handling highly involved treatment programs. None are in Pennsylvania.

Robert Ortenzio had resigned from the board of directors of Albuquerque, N.M.-based Horizon Healthcare Corp. in July 1996, four months after Horizon admitted it was being investigated for possible billing fraud by the U.S. departments of Justice and Health and Human Services. Three other Horizon Healthcare board members resigned at the same time.

The investigation was in connection with about $3.4 million in Medicare and co-insurance bills that Horizon had retroactively submitted for Newton, Mass.-based Greenery Rehabilitation Group Inc. after acquiring that company in 1994.

According to Dow Jones News Service, Robert Ortenzio was one of several Horizon insiders who sold about $37 million in company shares early in the year, just weeks before the company announced disappointing first-quarter earnings and the existence of the federal investigation. The value of Horizon's shares fell after the announcement.

Although neither of the Ortenzios could be reached for comment, Angela Miller, assistant to the chairman and CEO at Select Medical Corp., did speak on the record, saying she could not provide any details of the proposed transaction.

In a Beverly press release from earlier this month, Rocco Ortenzio is quoted as saying Select was pleased to be working with Beverly to complete the ATH transaction.

Rocco Ortenzio founded Continental Medical Systems Inc. of Mechanicsburg in 1986. The company was sold to Horizon Healthcare Corp. in July 1995.

David Banks, Beverly's chairman and CEO, said in the release that Beverly wanted to divest. "The decision to sell this subsidiary is part of Beverly's plans to focus ... on the growth of our core businesses," he said. Beverly's core businesses provide health care services through nursing centers, rehabilitation therapy facilities and ancillary services.

Jim Griffith, Beverly's vice president for investor relations at the company's headquarters in Fort Smith, Ark., said ATH did not fit in with the company's long-term strategy.

ATH does, however, fit in with Select's long-term plans, he said. Griffith also said he expected the deal would close by the end of this month after passing federal antitrust scrutiny.

Like the Ortenzios, Beverly has had its share of troubles in the past.

In 1996, Beverly Health and Rehabilitation Services Inc., a division of Beverly Enterprises Inc., faced a bitter battle with a nursing-home workers' union in Pennsylvania over alleged unfair labor practices in 1996.

Robert Sutton, vice president for corporate services at Balanced Care Corp. in Mechanicsburg, said he was unable to comment on the deal because he wasn't familiar with its details. Although Balanced Care competes with Beverly in the United States, it does not compete with the company in Pennsylvania, he said.

Balanced Care Corp. has become one of the largest providers of assisted-living services in the United States. The company is currently publicly traded and has operations in Pennsylvania, Wisconsin and Missouri.