Unison HealthCare Corporation
Unison HealthCare Corporation
Sales: $148.7 million (1996)
Stock Exchanges: NASDAQ
SICs: 8051 Skilled Nursing Care Facilities; 8052 Intermediate Care Facilities; 8059 Nursing and Personal Care, Not Elsewhere Classified; 8093 Specialty Outpatient Clinics, Not Elsewhere Classified; 8099 Health and Allied Services, Not Elsewhere Classified
Since its inception in 1992, Unison HealthCare Corporation has been among the leading providers of comprehensive long-term and specialty healthcare services in the United States. The company provides a broad range of comprehensive long-term and specialty healthcare services (such as nursing care, rehabilitation, infusion, and respiratory therapy). The company provides, either directly or through third-party providers, certain other ancillary services (such as pharmaceutical services; physical, speech, and occupational therapy; and medical supplies and laboratory testing). The company maintains facilities in 12 states.
In 1989, Jerry M. Walker, Phillip Rollins, and Paul Contris were hired as troubleshooters by Samaritan Senior Services Inc., which formerly operated the subacute and long-term healthcare divisions of Samaritan Health System. Their job was to rescue the financially ailing nursing homes of that company. After they brought Samaritan back into profitability, those nursing homes were sold to competitor GranCare, another leading publicly-traded, long-term-care company.
Three years later, in July 1992, Rollins and Contris convinced Walker, a former certified public accountant who was working as the Chief Executive Officer (CEO) of Samaritan Senior Services, to leave Samaritan in order to found SunQuest HealthCare Corp. SunQuest’s goal was to be the operation of long-term and specialty healthcare centers.
SunQuest HealthCare Corp.: 1992–1995
Also joining the group as Director of Professional Services at the company’s inception was Samaritan’s Director of Professional Services, Terry Troxnell. Troxnell was formerly a program manager of health care facility licensure and enforcement for The Arizona Department of Health, where she oversaw the licensing certification of all healthcare facilities in the state.
SunQuest HealthCare Corp. started when the three founders donated $100 each to the cause, in order to get the company off the ground. They incorporated the company in the State of Delaware as SunQuest HealthCare Corporation in July of 1992, and immediately began acquiring financially-strapped healthcare facilities. One of their first acquisitions was a one-year management contract charging them to oversee the operations of two profitable nursing homes on the campuses of the Good Samaritan Regional Medical Center in Phoenix, Arizona and the Desert Samaritan Medical Center in Mesa, Arizona.
It was a wide-eyed group that led the new company to achieve total revenue for the first year of $4.5 million, with a net income of $238,000. Total revenue growth skyrocketed from there, although profits were low the following year; total revenue for 1993 nearly doubled to $8 million, but the net income was a mere $109,000. By the end of 1994, SunQuest Health-Care owned and/or operated some 20 facilities located throughout 11 states, with total revenue on that year reaching $12.4 million, with a net income of $340,000. Troxell was promoted to vice-president of Clinical Operations in November 1994, and senior vice-president of Clinical Operations in September 1996.
Needing access to a fresh influx of capital if it was going to continue to grow, the company began searching for private investors and venture capital firms in Spring 1995. In March 1995, the company organized its Quest Pharmacies Inc. subsidiary, bringing pharmaceutical services to the company’s portfolio and facilities in Longview, Texas and Bloomington, Indiana. L. Robert Oberfield, formerly President of Sunscript Pharmacy Corp., a subsidiary of Sun Healthcare Company, was brought in as President of the subsidiary.
In August of that year, shortly before its initial public offering (IPO), the company acquired Dallas, Texas-based BritWill Healthcare Corp. for a total fixed purchase price of $26 million, plus contingent amounts of approximately $9.8 million. At the time, the company had grown to own and/or operate 24 facilities located in 11 states, and added to its repertoire BritWill’s 28 facilities located in two states. The acquisition doubled the number of facilities and employees under the SunQuest umbrella, and made the company big enough to go public. BritWill Healthcare chairman Bruce Whitehead was named the new chairman of the combined company, which retained the name SunQuest Healthcare.
Unison HealthCare Corporation Is Born
In October 1995, the company filed a registration statement with the Securities and Exchange Commission to become a publicly-held company. The following month, the company changed its name to Unison HealthCare Corporation. It had grown to own and/or operate 53 facilities, including 47 long-term and specialty-care facilities and six independent-living and assisted-living facilities. By that December, the company was trading under the symbol UNHC on the NASDAQ Stock Market at $9 a share. The IPO raised $18 million for the company. Total revenue for 1995 jumped to $68.5 million, but the company’s net income remained low, at only $117,000.
In February 1996, the company purchased the remaining 10 percent minority ownership in the Sunbelt Therapy Management Services Inc. group of companies. The acquisition gave the company a full therapy services stronghold, providing pharmacy services and physical, occupational, and speech therapy. The acquisition also brought the company Paul G. Henderson as President of the subsidiary.
In a June 1996 article in The Business Journal—Serving Phoenix & the Valley of the Sun, CEO Walker was quoted as saying, “The single greatest risk is controlling the growth. We are a growing company and will continue to grow. With growth comes the benefits we’re seeking. Rapid growth is one of the frequent reasons why businesses fail.” Unfortunately, the article and Walker’s words seemed to foreshadow a pitfall for the company, as it headed down the very path its CEO had hoped to avoid: too many acquisitions in too short a period of time.
In July 1996, the company acquired—for a combination of common shares, cash, and promissory notes totaling approximately $38.2 million—privately-owned Signature Health Care Corp. Also included in the deal were four of the Signature’s affiliated companies, which operated 13 long-term care facilities located in Colorado and Arizona, including 11 skilled-nursing facilities and two assisted-living facilities. Former owner David Kremser joined Unison’s board at the time of the acquisition.
About the same time, the company also acquired Rehab West for approximately $5.4 million in cash, giving the company rehabilitation therapy services to the Signature centers and other facilities in Colorado. Additionally in October of that year, the company acquired American Professional Holding Inc. and Memphis Clinical Laboratory Inc. in a pooling of interests cash, stock, and promissory note transaction valued at approximately $487,000. The latter acquisition was combined and renamed Ampro, and began operating as a Unison subsidiary.
The acquisitions helped occupancy levels in the company’s beds in 1996 climb from 77 percent to 81 percent, and total revenue for the year soared to $148.7 million. But the company lost a staggering $23.4 million that year, having spent more than the heightened earnings could cover. Thus began a decline into debt.
By March 1997, the company ranked among the 25 largest long-term care operators in the United States, owning and/or operating facilities located in 12 states clustered in the Midwest, Southwest, and Southeast. Nonetheless, the company was having operational problems.
An early indication of trouble came when the company released a restatement of the results for the nine months ending September 30, 1996, which showed the company posting a huge loss. Quickly on the heels of the restatement came the resignations of Chief Financial Officer Craig Clark and co-founder and Executive Vice-President of Acquisitions, Paul Contris. A class-action lawsuit was filed against Unison, alleging that the company had misled investors about its financial results. The following month, Kremser’s Elk Meadows Investments LLC (with 23.8 percent of the company) and Whitehead’s BritWill Investments Co. Ltd. (with 7.8 percent of the company) jointly loaned Unison $2.95 million for general working capital purposes, according to Securities and Exchange Commission records.
Executive changes commenced when Clayton Kloehr—former Manager of Treasurer Operations for Placid Oil Company (a privately held oil exploration and production company based in Dallas Texas), and Treasurer for BritWill Healthcare—joined the company in July 1997 as senior vice-president and treasurer. He later added director to his title in February 1998.
Unison HealthCare Corporation seeks to operate its businesses as an interrelated network of services to provide a full continuum of cost-effective long-term and specialty healthcare.
Problems continued to beset Unison through late 1998, as the company, plagued by heavy debt, missed the deadline to file its quarterly report. This resulted in the company’s stock being bumped down from trading on the NASDAQ Stock Market to the NASDAQ small caps market, and the company’s board of directors stepped in, putting co-founder and President/CEO Jerry Walker on administrative leave, and eventually terminating him. Kremser was named interim president/CEO. The following month, Kremser brought in Michael A. Jefferies—who had extensive management experience in the healthcare field—aboard as President and CEO of the struggling company.
Further administration changes brought Nir E. Margalit in as an executive vice-president, general counsel, secretary, and director. Jimmy L. Fields also came aboard as executive vice-president and chief financial officer in April 1998.
Also in 1998, three units of the company—Britwill Investments I Inc., Britwill Investments II Inc., and Britwill Indiana Partnership L.P.—filed for Chapter 11 Bankruptcy protection. At that time, Unison was still ranked as one of the 30 largest long-term care operators in the United States. But the company was struggling financially, and moved from its posh North Gainey Center Drive location in Scottsdale, Arizona, to a smaller, nondescript office space. Finally, Unison filed for Chapter 11 Bankruptcy protection and tried to reorganize as an attempt at continuing to stay in business. Heading into the end of the century, Unison undoubtedly faced many challenges and uncertainties; most notably, whether or not it would successfully weather the hard times and emerge to reclaim its standing as one of the largest companies in the industry.
Ampro; Quest Pharmacies Inc.; Sunbelt Therapy Management Services Inc.
“The Arizona Republic Earnings Arizona Column,” Knight-Ridder/Tribune Business News, May 19, 1998, p. OKRB9813901E.
Gilbertson, Dawn, “Unison Healthcare Corp. Takes Account of Damage from Accounting Problems,” Knight-Ridder/Tribune Business News, May 28, 1997, p. 528B0941.
Gonzales, Angela, “Men’s Room Meetings Lead on to Success,” The Business Journal—Serving Phoenix & the Valley of the Sun, June 7, 1996, p. 31.
——, “Unison Healthcare Misses Filing Deadline,” The Business Journal—Serving Phoenix & the Valley of the Sun, August 29, 1997, p. 8.
——, “Awash in Debt, Unison Healthcare Owes Chairman: Millions Owed on Loans, Acquisition,” The Business Journal—Serving Phoenix & the Valley of the Sun, July 11, 1997, p. 1.
“Interest Payment is Missed; Financing Plan is Weighed,” The Wall Street Journal, November 12, 1997, p. B5.
“Investors Sue Unison HealthCare Corp. of Scottsdale, Ariz.,” Knight-Ridder/Tribune Business News, March 26, 1997, p. 326B0987.
“Tentative Agreement is Set for Restructuring of Debt,” The Wall Street Journal, June 16, 1998, p. B4.
“Three Units Seek Protection with Chapter 11 Filings,” The Wall Street Journal, January 9, 1998, p. B4.
“Unison Healthcare Corp.,” The Business Journal—Serving Phoenix & the Valley of the Sun, June 28, 1996, p. 100B.
“Unison Healthcare Corp.,” The New York Times, January 9, 1998, p.C5.
“Unison Healthcare Corp.,” The Wall Street Journal, May 29, 1998, p. B4.
“Unison Healthcare Corp.,” The Wall Street Journal, October 7, 1997, p. B8.
“Unison Healthcare Corp. Agrees to Acquire Signature Health,” Knight-Ridder/Tribune Business News, July 29, 1996, p. 7290225.
“Unison Healthcare Taps Michael Jefferies as President and CEO,” The Wall Street Journal, September 10, 1997, p. B2.
—Daryl F. Mallett