Medaphis Corp. recorded a $13.5 million net loss, or 71 cents per share, for the first quarter ended March 31, compared with net income of $3.9 million, or 21 cents per share, in the year-ago period. Revenues for the quarter grew 68% to $99.4 million. Services to hospital clients accounted for just shy of 25% of its revenues; physician services generated the bulk of its revenues. The Atlanta-based billing and accounts receivable firm said the results reflect a $25 million charge related to its re-engineering and office consolidation plan, acquisition costs and other one-time charges. Excluding the effects of those costs, the company would have posted a 74% increase in net income to $6.8 million, or 33 cents per share, for the quarter. Medaphis' first-quarter results included $3.8 million in interest expense. During a teleconference on the company's earnings performance, Michael R. Cote, Medaphis' chief financial officer, said he expects interest expense to decline because of the company's recent public offering. Medaphis will use $121 million in net proceeds from the common stock offering to repay debt under its credit facility. Medaphis said it serves some 13,500 physicians and 1,500 hospitals in 50 states.
HBO & Co. reported a 66% increase in net income for the first quarter ended March 31 to $9 million, or 27 cents per share, from net income of $5.4 million, or 17 cents per share, in the year-ago quarter. Revenues rose 34% to $90.7 million. The Atlanta-based company attributed the increases to sales and installation of its Star, Pathways 2000 and Trendstar information systems, as well as increased maintenance revenues, primarily related to the June 1994 acquisition of Ibax Healthcare Systems.
Moody's Investors Service, New York, downgraded three Pennsylvania hospitals as part of a review of hospital credits in the state. A comprehensive report on Pennsylvania hospital ratings will be completed shortly. The Ba rating of Armstrong County Memorial Hospital in Kittanning, Pa., was lowered to B1, reflecting high management turnover and changes to its Medicare reimbursement classification. The rating affects $14.3 million in debt. Community General Osteopathic Hospital in Harrisburg, Pa., saw its rating on $16.1 million in debt lowered to Baa from Baa1 because of losses on the employment of physicians and market competition. Erie, Pa.-based Metro Health Center also experienced losses on the employment of physicians. Its rating was downgraded to Ba from Baa, affecting $11.2 million in debt.
Franklin Venture Capital, based in Franklin, Tenn., has closed a $75.7 million healthcare fund, its third venture capital fund devoted to healthcare since 1987. The partners in the new fund, called Franklin Capital Associates III, represent a broad range of institutional investors. The fund already has invested in Health Resources Management, a Nashville, Tenn.-based manager of inpatient radiology departments, and Primary Health, a Boise, Idaho-based company involved in consolidating physician practices. Franklin also is eyeing investment opportunities in a "bedless hospital" and an elderly day-care center. Those deals could be completed by June. With the new fund, Franklin manages a total of $113.9 million in capital.