TORONTO and HOUSTON, Feb. 9 /CNW/ - Northstar Healthcare Inc. (TSX:NHC)
today announced that the Company's Board of Directors has initiated a process
to identify and evaluate strategic alternatives available to maximize
shareholder value. In addition, the Board has completed a process of
leadership renewal undertaken last September and has appointed Steve Linehan,
a highly experienced healthcare executive, as Chief Executive Officer of the
THE STRATEGIC REVIEW PROCESS
The strategic review process is being undertaken in response to recent
events including concern of the Board with the current valuation of the
Company and an indication by Donald Kramer, M.D., founder and director of the
Company, that he is considering making an offer to purchase all of the
outstanding common shares of the Company. In light of this latter development,
Dr. Kramer has tendered his resignation as a director of the Company, which
the Board has accepted.
Northstar's Board has constituted a committee of independent directors to
oversee the Company's process of reviewing strategic alternatives. The
committee is comprised of Robert P. Kanee, John Rogers, V. James Sardo, Barry
A. Tissenbaum and Victor A. Wells, each of whom is independent of management.
Mr. Kanee will serve as Chair of the committee and Mr. Wells will serve as
The independent committee of the Board has engaged Genuity Capital
Markets as its financial advisor to assist it with the evaluation of strategic
alternatives that may be available to maximize value for the Company and its
shareholders. The strategic review will encompass an evaluation of the
Company's business plan, growth strategy, market valuation and future
prospects, and consider the appropriateness of Northstar's business structure
in the current environment, the sale of the Company or its businesses, the
recapitalization of the Company, or any other alternatives identified by its
advisors. However, the Company emphasizes there can be no assurance that the
strategic review process will result in any transaction.
"We are clearly disappointed with the current share price and the Board
is taking steps to address the challenges facing the Company, including
through the formation of an independent committee, the appointment of a new
CEO and the initiation of this strategic review process," said Mr. Kanee. "We
are undertaking this strategic review process to help ensure that a full and
fair value can be reflected in our share price. The independent committee will
assess the findings of the strategic review process along with any formal
offers received to ensure that all available options to maximize shareholder
value have been explored."
APPOINTMENT OF NEW CEO
The Company also announced the appointment of Steve Linehan as Chief
Executive Officer, effective February 9, 2009.
Mr. Linehan's most recent experience includes founding Soporex, Inc.,
which consisted of a network of 70 hospital-based sleep centres; President and
CEO of Radiologix, Inc., (AMEX: RGX), a leading U.S. national operator of 100
diagnostic imaging centres that generated (prior to its acquisition) $250
million in annual revenues; and President and CEO of Rotech Healthcare, Inc.,
a leading provider of home respiratory care, equipment and services, listed on
NASDAQ (ROHI) from 2000 to 2002.
He also served as President and CEO of Blue Cross and Blue Shield of
Kentucky's Alternative Health Delivery Systems business, which included a
health management organization ("HMO") with hospital and physician equity
partners and President and CEO of MetLife Healthcare Networks, a subsidiary of
Metropolitan Life Insurance.
"Steve Linehan brings to Northstar extensive public company experience in
the U.S. healthcare delivery system in which Northstar operates," said Mr.
Kanee. "He has proven senior management leadership capabilities and
significant experience with young companies in the early stages of their
development, which he acquired with a range of free-standing, hospital-based
and in-home medical service providers, as well as with HMOs."
"I'm excited to be joining the Northstar team at this important point in
the Company's development," said Mr. Linehan. "Northstar has outstanding
facilities, a great team of surgeons and a strong reputation in the Houston
market. I welcome the opportunity to work to re-build revenue and cash flow."
Mr. Kanee also expressed his thanks to Mr. Syl Ghirardi for his time
spent as interim CEO over the past four months. "On behalf of the board, I'd
like to thank Mr. Ghirardi for all his efforts," said Mr. Kanee. "We wish him
well in his future endeavours."
UPDATE ON PRIOR ANNOUNCEMENT OF PAYMENT ISSUES
Further to Northstar's press release of January 12, 2009, the Company
continues to experience difficulties with payments by one of its key third
party payors at the Company's Palladium-Houston Surgical Center. Management
estimates that, for the year ended December 31, 2008, cases and net patient
service revenues at Palladium-Houston for this payor, a large healthcare
insurance provider, represented approximately 16% of Northstar's total cases
and approximately 28% of Northstar's total direct or indirect net patient
service revenues. Management estimates that, as of December 31, 2008, the
unpaid amounts from this payor at Palladium-Houston are approximately $5
As noted in the January 12 press release, one issue relates to payments
on cases performed by non-partner surgeons operating at Palladium-Houston
under use agreements. This payor has recently refused to make payment for
facility charges on certain cases, indicating that future claims for such
charges will not be paid and that past claims are subject to recovery.
Notwithstanding that the Company's use agreements were reviewed by this payor
and by the Texas ambulatory surgery center licensing authority, the payor is
alleging that non-partner surgeons are prohibited from billing the surgery
centre facility fee under Texas law.
The Company, while strongly disputing this position, is taking active
steps to resolve this issue with the payor. The Company is concurrently
exploring a re-syndication of partnership interests in the Centre as an
alternative means of addressing this problem, although there can be no
assurance that such a re-syndication will occur. Until these matters have been
resolved, the Company intends to bill this payor directly for facility charges
on all cases rather than under the use agreements.
Northstar owns and/or manages ambulatory surgery centers in the United
States, focusing initially on Houston and other metropolitan areas in Texas.
Northstar currently holds interests in two ambulatory surgery centers in
Houston - a 70% partnership interest in The Palladium for Surgery - Houston
and a 60% partnership interest in Medical Ambulatory Surgical Suites. In
addition, Northstar manages an ambulatory surgery center in Dallas, which it
has an option to acquire, and three pain management clinics in Houston.
Northstar was founded and sponsored by Donald Kramer, M.D. and Stewart A.
Feldman. Mr. Feldman also served as the co-principal and Chairman and Chief
Executive Officer of Healthcare Ventures, Ltd., which sponsored Northstar,
with Dr. Kramer serving as its President.
Forward Looking Statements
This press release may contain forward-looking statements (within the
meaning of applicable securities laws) relating to business of Northstar and
the environment in which it operates. Forward-looking statements are
identified by words such as "believe", "anticipate", "expect", "intend",
"plan", "will", "may", and other similar expressions. These statements are
based on the Company's expectations, estimates, forecasts and projections.
They are not guarantees of future performance and involve risks and
uncertainties that are difficult to control or predict. These risks and
uncertainties are discussed in the Company's regulatory filings available on
the Company's web site at www.Northstar-Healthcare.com or at www.sedar.com.
There can be no assurance that forward-looking statements will prove to be
accurate as actual outcomes and results may differ materially from those
expressed in these forward-looking statements. Readers, therefore, should not
place undue reliance on any such forward-looking statements. Further, a
forward-looking statement speaks only as of the date on which such statement
is made. The Company undertakes no obligation to publicly update any such
statement or to reflect new information or the occurrence of future events or
For further information:
For further information: Philip Koven, Tel: (416) 447-4740 Ext. 235,