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COMMUNITY PSYCHIATRIC CENTERS REACHES VOLUNTARY AGREEMENT WITH THE STATE OF TEXAS

 Company Is Not Sued, Not Required to Settle and Pay State's
 Investigative Costs, or Give Up Claims to Crime Victims Fund
 LAGUNA HILLS, Calif., Jan. 15 /PRNewswire/ -- Community Psychiatric Centers (NYSE: CMY) today announced that it has reached a voluntary consent agreement with the State of Texas, in which the company willingly agrees to industry reforms which have been applied to three competing companies through previous settlements of lawsuits. The agreement contains no admission or finding of wrongdoing and was willingly negotiated between the State and CPC without the filing of any complaint. Unlike the other three agreements, CPC was the only company not required to compensate the State for the costs of its investigation and the only company which will be allowed to have claims to the Texas Crime Victims Compensation Fund arbitrated by a third party instead of waived. The agreement appears to conclude a statewide investigation of the psychiatric industry launched after the State Attorney General brought suit against a competitor in 1991.
 According to Richard L. Conte, chairman and chief executive officer, "This is an important victory for CPC, the Attorney General, and the people of Texas, who are entitled to receive high quality and appropriate psychiatric care without fear of abuse. CPC cooperated fully with the Attorney General throughout the investigation and willingly agreed to his proposal in order to cement the agreements with the other companies and ensure the implementation of important industry reforms which closely parallel CPC's policies and practices. A number of the reforms are not even applicable to CPC; for example, restrictions on advertising and paying commissions or bonuses for admissions will not affect us since the company does not engage in these practices.
 "Moreover, we are satisfied that the terms of our agreement clearly distinguish our company from major industry competitors," Conte continued. "The outcome of this investigation vindicates CPC as an ethical company providing appropriate, reasonably priced quality care."
 There are significant differences between CPC's voluntary agreement and the other three settlements. Under the terms of the settlement reached in June 1992 with National Medical Enterprises, key provisions of the agreement would have expired unless the State reached similar agreements with or filed suit against three other multihospital psychiatric firms. In recent weeks, both Charter Medical Corp. and Hospital Corporation of America agreed to settlements, and all three settlements were in jeopardy of expiring unless a fourth company also agreed to settle. CPC's voluntary consent agreement allows the other three settlements to remain intact and the industry reforms to be implemented.
 The agreement with CPC calls for just $165,000 in claims to the crime victims fund to be negotiated and then arbitrated, if necessary. This contrasts with a settlement of about $8.6 million with NME, which included $1.1 million in State investigative costs, withdrawal of an estimated $3.4 to $4.9 million in claims to the crime victims fund, and the mandated provision of approximately $2.6 million worth of charity care. Charter Medical's settlement amounted to approximately $3.2 million, which included $550,000 in investigative costs and waiving $1.1 million in claims to the crime victims fund. The cost of HCA's settlement was just $475,000. Unlike NME and Charter, neither CPC nor HCA are being required to commit to a certain level of State-supervised charity care or to fund and participate in a compliance review program, also supervised by the State.
 "The reforms set new industry standards that should demonstrate to the people of Texas that they are protected by strict regulations and the highest ethical principles," said Conte. "We feel strongly that these reforms should be applied not just to the four major companies, but to every psychiatric provider in Texas -- both freestanding hospitals and psychiatric units located in general hospitals -- so that all patients receiving psychiatric care can benefit from them."
 The company's outside legal counsel, John L. Hill, Jr., former Texas Attorney General and former Chief Justice of the Texas Supreme Court, said, "I applaud CPC for putting their reputation on the line for the sake of restoring faith in their industry. From our extensive research into CPC's policies, procedures and personnel, we have found the company to be an ethical, high-quality organization."
 Loren B. Shook, CPC president and chief operating officer, said, "I'm very pleased with this outcome in as much as it reflects the ethical performance and commitment long exhibited by the employees and medical staffs of our Texas hospitals."
 CPC has played an important role in providing psychiatric services in Texas since 1981. The company's Texas hospitals are Millwood Hospital in Arlington, Capital Hospital in Austin, Oak Bend Hospital in Ft. Worth, Cypress Point Hospital in Houston and Afton Oaks Hospital in San Antonio. In 1992, these five hospitals contributed nearly $7 million in uncompensated charity care, representing approximately 9 percent of CPC's gross revenues in the State.
 Community Psychiatric Centers delivers psychiatric services through 51 facilities in the United States, Puerto Rico and the United Kingdom. The company's Transitional Hospitals Corp. subsidiary operates two transitional health care facilities which provide long-term acute care. The company's stock is traded on the New York, Boston, Midwest and Pacific exchanges.
 -0- 1/15/93
 /CONTACT: Suzanne Hovdey of Community Psychiatric Centers, 714-831-1166, or 714-363-8513 (home)/
 (CMY)


SU: Community Psychiatric Centers ST: California, Texas IN: HEA SU:

JL -- LA035 -- 5614 01/15/93 19:43 EST
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Date:Jan 15, 1993
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