UHS completes $3.1 billion Psychiatric Solutions acquisition

Universal Health Services Inc., in King of Prussia, closed its $3.1 billion deal to buy rival Psychiatric Solutions Inc. on Monday.

Universal Health Services said the purchase would make it a $7 billion company and the country's largest owner of freestanding inpatient psychiatric facilities. PSI is based in Franklin, Tenn.

In a news release, Alan B. Miller, chief executive officer and chairman of UHS, called the deal "transformative" and said it "establishes an industry leader with the scale and scope to impact mental health issues at the national level."

Under an agreement with the Federal Trade Commission, UHS must sell four PSI facilities, including one in Delaware: MeadowWoodBehavioral Health in New Castle.

"There are only two substantial freestanding facilities in Delaware," Miller said in an interview. "We own one, and they didn't want us to own the other one." UHS operates the Rockford Center in Newark.

Miller said UHS would make quality a priority. "We have a substantial clinical quality group that goes through our hospitals, and we pay a great deal of attention to that," he said.

Miller said UHS had no trouble raising money for the acquisition, which was funded with bonds and bank loans. "We're oversubscribed," he said. "Everybody likes this deal very much."

He said the company would benefit from a recent federal law that requires insurers to cover treatment of mental illnesses.

About half of UHS's revenue will now come from its nearly 200 behavioral-health facilities and schools. Miller says he wants a company that has acute-care and psychiatric hospitals. "That was my strategy," he said. "It's like having two good horses." When one isn't running well, he said, "the other one is doing better."

Miller said some top PSI leaders would lose their jobs, but he wouldn't say how many. There will not be layoffs at hospitals, he said. There will be hiring in this region, but Miller would not say how much. UHS expanded its corporate headquarters two years ago but now has maxed out that space and has had to move some employees into rented offices.

UHS said it expected "annual cost synergies" of $35 million to $40 million from the purchase.