Managed-care companies, other healthcare providers and investor-owned hospital companies are expected to post another year of double-digit earnings increases in 1994, according to a new forecast from WDI Capital Markets.
The Hilton Head Island, S.C.-based firm has based its predictions on the financial performance of about 700 publicly held healthcare companies.
John Cumming, WDI's president, described 1993 as a "watershed year for the healthcare industry," noting it had posted revenue and income growth increases of Finance
13% to 16% since 1988. "It is a safe assumption the industry as a whole will never return to the double-digit growth rates it enjoyed for so long," he said.
However, double-digit earnings increases will continue for one segment of the industry-providers and managed-care companies. Even so, WDI predicted those increases won't be as lofty as in 1993.
The report didn't compare the healthcare industry's financial performance with that of other industries.
The WDI analysis also adjusted results to account for restructurings and writeoffs.
WDI projected that providers will report an average 11.5% increase in earnings in 1994, down from 13.6% in 1993. The providers group includes hospitals, but not managed-care companies.
Hospital companies reported an average 26% increase in earnings in 1993, and that's expected to drop to 15% in 1994. Still, that's strong growth, and WDI is counting on newly formed Columbia/HCA Healthcare Corp. to fuel it. The company accounts for nearly half of the revenues in the investor-owned hospital group.
Managed-care companies' profits will outpace the industry again, WDI predicted. In 1993, that group reported average earnings increases of 56%, and that's expected to be tempered slightly to 40% this year. Mr. Cumming said he believes earnings increases will be slightly lower because of regulators' efforts to control price increases.
The only group expected to record a larger increase in earnings is the pharmaceutical group. Those companies are expected to post combined earnings increases of 3% in 1994. Earnings for those firms rose just 0.2% in 1993, WDI reported. "Pricing pressure will continue from every direction," Mr. Cumming said.
Also facing pressure will be medical device manufacturers, which reported earnings increases of 6% in 1993; they're expected to report profit rises of 4% in 1994, WDI said.