Make room on the couch for another competitor

From The Portland Business Journal, September 13, 1998

A California behavioral health company will debut in Portland by year-end as part of a national expansion plan targeting West Coast markets first.

The Laguna Niguel, Calif.-based OptimumCare Corp. plans to add 18 new, freestanding clinics within the next three years. Portland will be the 12th site for the for-profit OptimumCare, which is publicly traded on the Over The Counter Bulletin Board.

OptimumCare offers a type of behavioral health service known as partial hospitalization. That means patients will go and remain at the clinic site most of the day and receive intensive mental health therapy, but don’t stay overnight.

OptimumCare’s presence would add another competitor to Portland’s mental health services sector, which includes several outpatient clinics in addition to hospitalization, residential care and crisis triage services. Most existing offerings are nonprofit ventures.

Ed Johnson, OptimumCare chief executive officer and chairman, said the partial hospitalization service is a particular niche that won’t compete with the traditional mental health services offered in Portland on an outpatient basis. He described the service as a bridge for those with mental illness, allowing them to live unhospitalized, yet still receive needed help.

“We look at areas that don’t have too many services,” said Johnson. “We generally get referrals from other services.”

OptimumCare already has arranged a site for its program at 2040 S.W. Powell Blvd. and is in the process of hiring a handful of psychiatrists and counselors to staff the 5,000-square-foot center. Optimum’s program capacity will be about 40 patients at the Portland site, said Johnson. He said OptimumCare hasn’t yet contracted with local insurers, but didn’t anticipate difficulties since his company’s focus is intended to reduce more costly hospitalization.

OptimumCare went public in 1987. Last year it was the second fastest-growing publicly traded company in Orange County, Calif. It reported $12 million in revenue in 1997, up from $3.8 million in 1993 and $6 million in 1995. It has shown modest annual profits: $454,350 in 1997, or 6 cents per diluted share.

Optimum’s share price is just less than $1. Company officials recently repurchased 500,000 shares of its stock in open market transactions because they felt it was undervalued, said Johnson. Another 500,000 share repurchases have been authorized for the next year.

Although OptimumCare is offering only the partial hospitalization program in Portland, elsewhere its services are more extensive, including both inpatient and outpatient behavioral health services either offered through OptiumumCare facilities or its affiliated medical centers and community health centers.

It has sites in California, Arizona and Nevada, with plans to expand in Washington, Florida and Tennessee in addition to Oregon. OptimumCare’s most recent addition was a partial hospitalization program in Las Vegas, Nev.

Johnson predicted that company revenue would top $25 million to $30 million once expansion plans are completed in the next three years. Each site brings in about $1 million revenue. Eventually OptimumCare wants to have a presence in every major metropolitan market.

Johnson said OptimumCare is hoping to ride the wave of expanded mental health services in the wake of new federal legislation in 1998 that requires insurers to cover mental health services on parity with medical services. He acknowledged that parity won’t necessarily happen quickly, however, despite the controversial legislation.

“Everybody’s not going to have equal benefits overnight,” said Johnson. Nonetheless, OptimumCare officials say they’re going after a bite of what they claim is a $100 billion-and-growing annual behavioral health service market.