SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 19, 1996
MEDCATH INCORPORATED
(Exact name of registrant
as specified in its charter)
North Carolina 33-85458 56-1635096
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7621 Little Avenue, Suite 106, Charlotte, North Carolina 28226
(Address of principal executive offices)
Registrant's telephone number, including area code (704) 541-3228
Page 1 of 7
<PAGE>
Item 5. Other Events
On August 19, 1996, MedCath Incorporated announced that it had formed a venture
to construct a new heart hospital in Bakersfield, California. This will be
MedCath's fifth heart hospital project. The venture plans to complete the
hospital by fall 1998.
On August 26, 1996, MedCath Incorporated announced that collections and accounts
receivable performance had been running ahead of plan at its new McAllen Heart
Hospital located in McAllen, Texas. The hospital, which opened on January 18,
1996, had an average of 52 days in patient accounts receivable as of June 30,
1996. This number compares with 1996 industry estimates of 50 days published by
the Center for Healthcare Industry Performance Studies (CHIPS) in its 1995
Almanac of Hospital Financial and Operating Indicators. The McAllen Heart
Hospital average of 52 days was comprised of 38 days in Medicare accounts and 76
days in non-Medicare accounts.
On August 28, 1996, MedCath Incorporated announced that it disagreed with
several points made in an article which appeared in the Southeastern Edition of
The Wall Street Journal on August 28, 1996. The Company also announced that it
has entered into agreements with the two cardiology groups that practice at its
McAllen Heart Hospital that will further integrate and strengthen the working
relationship between the Company and its physician partners. In addition, the
Company announced that another cardiologist has acquired an interest in the
limited partnership that owns the McAllen Heart Hospital.
Exhibits:
99.1 - Press Release dated August 19, 1996
99.2 - Press Release dated August 26, 1996
99.3 - Press Release dated August 28, 1996
Page 2 of 7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MEDCATH INCORPORATED
Date: August 30, 1996 By: /s/ Daniel L. Belongia
---------------------------
Daniel L. Belongia
Secretary and Chief Financial
Officer
Page 3 of 7
Exhibit 99.1
MEDCATH TO BUILD FIFTH HEART HOSPITAL
COMPLETION OF FACILITY IN BAKERFIELD, CALIFORNIA,
SCHEDULED FOR FALL 1998
Charlotte, North Carolina (August 19, 1996) - MedCath Incorporated
(Nasdaq/NM:MCTH) today announced that it has formed a venture to construct a new
heart hospital in Bakersfield, California. This will be MedCath's fifth heart
hospital project. The venture plans to complete the hospital by fall 1998. The
Company presently operates one heart hospital, the McAllen Heart Hospital,
McAllen, Texas, which opened in January of this year, and is developing three
additional heart hospitals, the Arkansas Heart Hospital, Little Rock, Arkansas;
and the Tucson Heart Hospital, Tucson, Arizona, both of which are expected to
open in 1997; and the Heart Hospital of Austin, Texas, expected to open in late
1997 or early 1998.
The hospital, to be named the Bakersfield Heart Hospital, will be owned
and operated by Heart Hospital of BK, LLC, in which MedCath owns a majority
interest and serves as managing partner. Other investors currently include a
significant number of Bakersfield area physicians who will be actively involved
in the design, development and management of medical matters in the hospital.
When completed, the facility will allow cardiologists, vascular and
cardiovascular surgeons to perform a comprehensive range of diagnostic,
interventional and surgical services. MedCath has entered into an option to
purchase an 11-acre site in Bakersfield on which the hospital will be located.
The Company is not required to obtain a Certificate of Need to construct or
operate the hospital, although various other licenses and certifications must be
secured before the facility can begin operation.
Stephen R. Puckett, president of MedCath Incorporated, said, "We are
excited to be a part of the healthcare community in Bakersfield. The area is one
of California's most rapidly growing cities, with a population growth rate
approaching 3% per year. With a growing population that currently approximates
600,000 in the service area, of which 384,000 are in the metro Bakersfield area,
we consider the Bakersfield community to be an excellent market which enables us
to take advantage of our cardiology carve-out strategy."
MedCath Incorporated is a provider of cardiology and cardiovascular
services through the operation of specialized facilities and the management of
physician practices. The Company operates one specialty heart hospital and has
three additional heart hospitals under development, manages two medical
practices comprised of a total of 66 physicians, manages fixed-site cardiac
diagnostic and therapeutic centers, and owns and operates mobile cardiac
catheterization laboratories serving networks of hospitals.
Page 4 of 7
Exhibit 99.2
MEDCATH'S McALLEN HEART HOSPITAL
COLLECTIONS AHEAD OF PLAN
Charlotte, North Carolina (August 26, 1996) - MedCath Incorporated
(Nasdaq/NM:MCTH) today announced that collections and accounts receivable
performance have been running ahead of plan at its new McAllen Heart Hospital
located in McAllen, Texas. The hospital, which opened on January 18, 1996, had
an average of 52 days in patient accounts receivable as of June 30, 1996. This
number compares with 1996 industry estimates of 50 days published by the Center
for Healthcare Industry Performance Studies (CHIPS) in its 1995 Almanac of
Hospital Financial and Operating Indicators. The McAllen Heart Hospital average
of 52 days was comprised of 38 days in Medicare accounts and 76 days in
non-Medicare accounts.
Stephen R. Puckett, president of MedCath Incorporated, said, "We are
extremely pleased with this collection performance. Not only are collections of
receivables at our new hospital ahead of our internal ramp-up projections and in
line with industry standards for mature hospitals, but the trends are positive
as well. Average patient days in accounts receivable at June 30, 1996, of 52 is
down from 63 days at March 31, 1996, the end of the hospital's first quarter of
operations. As the hospital continues to ramp-up and become more efficient, we
are confident that these numbers will continue to improve."
Mr. Puckett also said, "It should be noted that average days
outstanding for our company in its entirety has risen from 43 days at December
31, 1995, to 54 days at June 30, 1996. This increase was due to the opening of
the hospital and the acquisition of our second physician practice, both of which
occurred during the quarter ended March 31, 1996. Typically, physician practice
management companies have a higher number of days in accounts receivable than do
hospitals."
The Company recently announced that it has formed a venture to construct its
fifth heart hospital, Bakersfield Heart Hospital, in Bakersfield, California.
The hospital is expected to be completed by fall 1998. Mr. Puckett said, "I
believe that this market offers exceptional opportunity for our company. The
higher penetration rate of managed care in California is an ideal proving ground
to demonstrate how our cost-effective, specialized heart hospitals will be
attractive to HMO's and other payors."
MedCath Incorporated is a provider of cardiology and cardiovascular
services through the operation of specialized facilities and the management of
physician practices. The Company operates one specialty heart hospital and has
four additional heart hospitals under development, manages two medical practices
comprised of a total of 66 physicians, manages fixed-site cardiac diagnostic and
therapeutic centers, and owns and operates mobile cardiac catheterization
laboratories serving networks of hospitals.
Page 5 of 7
Exhibit 99.3
MEDCATH RESPONDS TO ARTICLE IN SOUTHEAST EDITION
OF THE WALL STREET JOURNAL
ALSO ANNOUNCES TWO ADDITIONAL AGREEMENTS
WITH CARDIOLOGISTS IN MCALLEN TEXAS
Charlotte, North Carolina (August 28, 1996) - MedCath Incorporated
(Nasdaq/NM:MCTH) today announced that it disagreed with several points made in
an article which appeared in today's Southeastern Edition of The Wall Street
Journal.
Stephen R. Puckett, President of MedCath, said, "The article discusses
our recently announced plan to construct a fifth heart hospital in Bakersfield,
California. It appears that The Wall Street Journal believes there is too much
competition in this market. In addition, to support this questionable
contention, the Journal then utilized our future competitors as supposedly
objective sources. That's a bit like asking Burger King to comment on McDonald's
restaurant location strategy."
Mr. Puckett added, " We are excited about the Bakersfield market. Our
objective in that market is consistent with the Company strategy of improving
quality outcomes and lowering the costs to the patients and payors. We believe
that managed care will be interested in any healthcare company that can deliver
on this goal. Bakersfield is an attractive market because of the size of the
market, the market growth rate, the cost structure we can deliver to the market
and the physician relationships we have formed. Today, we have 16 of 22
cardiologists in the Bakersfield region as partners as well as 5 of 6
cardiovascular surgeons. These physicians cover the entire geographic area of
Kern County and several of these physicians reside in communities outside of
Bakersfield."
Mr. Puckett also said, " We welcome competition and managed care. In
the Bakersfield market, we regard these forces as positive. Our strategy is to
be the low cost provider in each of our heart hospital markets. We have already
demonstrated the success of that strategy in our first operating heart hospital
in McAllen, Texas. Data from the Center for Healthcare Industry Performance
Studies indicate that today we have significant pricing flexibility when
comparing our McAllen pricing to the existing pricing in Bakersfield. As an
example, our average charge for a Medicare patient in McAllen having a PTCA (DRG
112) of $12,800 compares very favorably to the two hospitals in Bakersfield with
open heart surgery programs which, for the same procedure, charge an average of
$17,000 or 33% higher than our McAllen charges."
The article also raises questions about stock sales in June by MedCath
management. In response, the Company's director of investor relations commented,
"MedCath's policy, like most public companies, has always been to allow its
employees, officers, and directors to purchase or sell the Company's stock
during certain window periods established by the Company's policies. These
window periods begin shortly after the Company makes an earnings announcement
and run for about four weeks. The June sales were the result of a process that
began in mid-May at which time these shareholders decided to sell a limited
number of shares in accordance with the Company's guidelines. The outside
directors of MedCath have reviewed these transactions and are comfortable that
the sales were made in compliance with Company policies. The number of shares
which were sold by each individual represents a small portion of the total
shares and vested options which continue to be held by each person. These
individuals believe in the future of the Company which is evidenced by their
remaining substantial stock holdings."
Page 6 of 7
<PAGE>
The Company also announced that it has entered into agreements with the
two cardiology groups that practice at its McAllen Heart Hospital that will
further integrate and strengthen the working relationship between the Company
and its physician partners. In addition, the Company announced that another
cardiologist has acquired an interest in the limited partnership that owns
McAllen Heart Hospital.
In the first transaction, the Company announced it has entered into a
long term management contract with Heart Clinic, P.A. As part of the agreement,
the physicians of the Heart Clinic will enter into long-term exclusive
employment and non-competition contracts. Heart Clinic is composed of seven
cardiologists, six of whom are also investors in the Company's heart hospital
located in McAllen, Texas. Heart Clinic has four offices located in McAllen,
Harlingen, Weslaco and Brownsville, Texas. This transaction is scheduled to
close on October 1, 1996, subject only to the satisfaction of customary closing
conditions.
In a separate transaction, the Company announced that it has signed a
multi-year professional services agreement between the McAllen Heart Hospital
and its other major cardiology group, Valley Cardiology P.A. Under the terms of
this agreement, physicians at Valley Cardiology have contracted with the McAllen
Heart Hospital to provide additional marketing and operational support services
for the benefit of the heart hospital and have entered into appropriate
non-competition covenants which ensure that the Heart Hospital will enjoy the
benefits of this agreement. Valley Cardiology is located in McAllen, Texas,
includes seven cardiologists, and has recently established an affiliated surgery
practice consisting of a cardiovascular surgeon and a vascular surgeon.
In addition to the above transactions, the Company also announced that,
this week, one additional cardiologist has acquired an interest in the
partnership that owns McAllen Heart Hospital. This is in addition to the two
cardiologists and one primary care physician that acquired an interest in the
heart hospital in July 1996, and brings the total number of physician investors
to 57.
MedCath Incorporated is a provider of cardiology and cardiovascular
services through the operation of specialized facilities and the management of
physician practices. The Company operates one specialty heart hospital and has
four additional heart hospitals under development, manages two medical practices
comprised of a total of 66 physicians, manages fixed-site cardiac diagnostic and
therapeutic centers, and owns and operates mobile cardiac catheterization
laboratories serving networks of hospitals.
Page 7 of 7
