TWST: Provide our readers with an overview of MHM Services, Inc., including origins, some history, development, markets, and your own view of the firm's future potential.

Mr. Pinkert: Our company was founded more than 20 years ago when I was working as a consultant to general hospitals. I saw that there were distinct differences between delivering mental health services and physical health services and that there was a market for a company to specialize in providing only mental health services. We started out developing mental health units in general hospital settings and quickly grew to become the country's largest provider of inpatient psychiatric care in general hospitals. We then grew by adding freestanding psychiatric hospitals, and ultimately sold the company in 1986 to Mediq, Inc. The company was subsequently spun out by Mediq to its shareholders in 1994, which was how we became a publicly traded company today. Since then we've sold off all of our inpatient operations, including our freestanding hospitals, and are now focused solely on providing mental health services in correctional institutions.

TWST: How many states are you in?

Mr. Pinkert: We currently operate in four states and we are in active discussions with several other states across the country.

TWST: How is the competition? What sets MHM Services apart from your competitors?

Mr. Pinkert: Most of our competitors are local organizations. These are groups of psychiatrists or psychologists that enter into contracts with individual prisons. Our biggest national competition comes from the physical health providers such as Correctional Medical Services, CMS, or Prison Health Services, PHS, which also do mental health services along with their physical health programs. To my knowledge, we're the only national company providing mental health services to the corrections market.

TWST: Where would you like to see the company in three years?

Mr. Pinkert: Our goal is to double our size every year for the next three years, so in three years, if we meet our targets, we ought to be at a $100-million run-rate.

TWST: How about earnings?

Mr. Pinkert: We should see the earnings and the margins start to increase as our corporate overhead is basically covered. We have been profitable for the past four quarters, and with additional contracts we ought to see our operating margins start to increase.

TWST: What major changes do you expect in your markets over the next several years?

Mr. Pinkert: We're seeing an increase in the outsourcing of health care in general by correctional facilities. Currently, about 38% of all health care in correctional facilities is being outsourced and this is increasing every year. We're also seeing an increased trend to outsource mental health care in response to the rising costs of psychotropic medications and the difficulty that states have in hiring mental health clinical personnel.

TWST: That's a real challenge, isn't it?

Mr. Pinkert: It is for them, yes. Recruiting mental health professionals in difficult situations is one of our corporate strengths, however.

TWST: How is the company taking advantage of the Internet?

Mr. Pinkert: We of course have a Website, but most of our business is still done the old-fashioned way. We are starting to use tele-psychiatry using Internet protocols.

TWST: What is that, interactive?

Mr. Pinkert: Yes. This is where the psychiatrist and the patient interact using a television camera connected to the Internet.

TWST: Is there a privacy problem there?

Mr. Pinkert: We usually use encryption on both ends. Tele-medicine is just recently coming into its own in corrections, and this doesn't seem to be a problem.

TWST: How about acquisitions, mergers, joint ventures, partnerships, and so forth? Are they a part of your future?

Mr. Pinkert: Yes, but first we have to straighten out our balance sheet. We have just completed a 500-to-1 reverse split and we're about to start a shareholder rights offering. As soon as we complete the raising of an additional $2.5 million of capital, we'll be looking at companies that specialize in substance abuse in the corrections market, as well as regional companies that will allow us to grow a little quicker than we can by selling one contract at a time.

TWST: What are the risks or general concerns regarding MHM Services? Is there anything about the company that keeps you awake at night?

Mr. Pinkert: The usual: the loss of a major contract, although all of our contracts have been renewed many times and we don't see that as a near-term possibility. The loss of key management, of course, is another problem. Our contracts are all capitated, so we always stand the risk of increased utilization or dramatic increases in psychotropic medication costs, which would, of course, considerably increase our cost of doing business.

TWST: How is your management team doing? Do you have the management in place to accomplish your ambitious goals?

Mr. Pinkert: Yes, we've got a very solid management team and a lot of depth on our 'bench.' We've managed to systematize most of our operations to allow us to grow very rapidly. We experienced the same kind of growth when we were in the hospital unit management business. In the 1980s we grew from one or two units to 60 units very quickly by systematizing our procedures and policies and instituting corporate-wide training programs that allow us to go into a new situation and ramp up quickly. When we started our program in Georgia, which is 40,000 inmates with 72 professionals, we were able to start that program within a matter of weeks.

TWST: What kinds of incentive programs do you have to attract and keep people?

Mr. Pinkert: Besides the usual stock option and bonus plans, we're able to provide mental healthcare professionals in the corrections field a career path that they can't get anywhere else. Many of our employees come out of state or government positions and they find that they can advance very quickly with us as well as be financially compensated for a job well done.

TWST: What should investors look at, or focus on, in your financial reports?

Mr. Pinkert: I think they need to look at three things. First is an improvement of our balance sheet when we complete our shareholder-rights offering. Second is top-line revenue increases quarter-over-quarter. We have a rather full deal pipeline at the moment and we've just hired a new Vice President of Marketing, which should accelerate our closing rate. If our marketing plan is achieved, we'll start to see some dramatic revenue increases on a quarter-to-quarter basis. And then lastly, as I mentioned earlier, increasing margins due to the fact that our fixed-overhead costs are currently being covered.

TWST: How do you feel about your current stock price?

Mr. Pinkert: The stock really hasn't traded since we did the reverse stock split last May. At that time, it was at $3/16, which we think is very undervalued.

TWST: What two or three reasons would you give long-term investors to buy stock in MHM Services today?

Mr. Pinkert: We're a niche player in a very big market. The total healthcare services market for the over two million people who are being incarcerated in jails and prisons today is about $4.5 billion to $5 billion. Mental health costs are about 20% of that. So we're looking at a potential market of anywhere from $600 million to $1 billion, which makes our current run-rate of $20 million look pretty puny. I think that being a niche player in a market that has no Medicare reimbursement, no fee for service revenues, and relatively little competition should present an attractive picture to investors.

TWST: Is there anything I've overlooked or missed that you would like to bring up?

Mr. Pinkert: As I mentioned earlier, we're a big fish in a small pond, although the pond is not exactly small in terms of dollar potential. When we complete our recapitalization plan, we should be poised for some very rapid growth. In short we see a lot of blue skies ahead.

TWST: Thank you. (RF)

MICHAEL S. PINKERT President & CEO MHM Services, Inc. 8605 Westwood Center Drive Suite 400 Vienna, VA 22182 (703) 749-4600 (703) 749-4604 - FAX Investor Relations e-mail:

Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company.

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