Hospital telephone and TV firm Patientline enters administration

The tortured tale of Patientline, the company that provides telephone and entertainment systems to patients in hundreds of hospitals, reached its final chapter yesterday, with the company placed into administration. Shareholders in the company, which has been plagued by huge debts and a series of controversies, will lose their entire investment.

The group's hospitals business was immediately bought out of administration by Hospedia, a new company that will initially be owned by the four banks that are owed £90m by Patientline.

The syndicate, comprising Royal Bank of Scotland, HSBC, Bank of Scotland and IKB of Germany, has agreed to write off £35m of the debt in return for its stake in Hospedia and will invest £12m in new equipment.

In addition, the private equity group Milestone will take an undisclosed stake in the business, assuming that the Office of Fair Trading approves Hospedia's purchase of Premier Telesolutions, a similar business to Patientline which operates in about 100 hospitals nationwide.

Tim Weil, the chief executive of Premier, in which Milestone is the majority shareholder, will take the same role at Hospedia once that deal is completed. The company has also recruited the former Vodafone director Tim Sherwood as its chairman.

Patientline was launched seven years ago and spent £170m installing entertainment systems in NHS hospitals. However, the company has not been able to earn enough to pay down its debts, not least because NHS trusts have declined to take up its other services, such as electronic patient record systems.

The company was also targeted by patient groups over the high cost of its telephone charges and was ordered to cut prices by the telecoms regulator, Ofcom. Many NHS trusts are now much more relaxed about the use of mobile phones by in-patients, reducing demand for Patientline's phones.

But a spokesman for Hospedia said the new company would have a much greater chance of success with its lower debts. Once the Premier acquisition is completed, Hospedia will begin a programme of upgrading the 80,000 terminals already installed by it and Patientline in more than 200 NHS hospitals.

Patientline's 1,000 employees will keep their jobs, though Nick Winks, the company's current chief executive, is to move on.