Despite pricing pressures on managed care, healthcare companies posted a double-digit increase in earnings in the second quarter of 1996, albeit a smaller increase than in the previous two quarters.
That's according to the latest information from WDI Capital Markets and KPMG Peat Marwick's Health Ventures division.
Adjusted earnings grew 14% in the second quarter vs. the year-ago quarter. This compared with earnings growth of 17% in the first quarter of the year and 16% in the fourth quarter of 1995, the companies reported. Second-quarter results reflect the performance of 750 public healthcare companies. The information comes from WDI's database and KPMG Peat Marwick's annual healthcare industry report.
"From a provider side, I think you might have a dip in the next quarter," predicted John Cumming, chief executive officer of WDI, a Hilton Head Island, S.C.-based investment banking firm. While hospital companies' quarterly performance remained steady, "managed care's numbers have been significantly impacted by pricing pressures from their clients," he said.
Providers posted a 14% increase in adjusted earnings-earnings excluding extraordinary, one-time gains or expenses-on a 27% gain in revenues. Within the providers group, hospitals' adjusted earnings rose 18% on a 14% increase in revenues. Nashville, Tenn.-based OrNda HealthCorp led the group with a 36% gain in adjusted earnings, followed by Tenet Healthcare Corp., Santa Barbara, Calif., up 25%, and Columbia/HCA Healthcare Corp., Nashville, up 16%.
In recent years, hospital companies' performance has improved with "the specter of healthcare reform" leading hospitals to become more efficient, Cumming said. "Everybody watched the (profit and loss statement) a lot closer."
Those pressures have "come full circle" to managed-care companies, Cumming observed. In the second quarter, the group's adjusted earnings declined 9% on a 44% rise in revenues. That's the first decrease in managed-care earnings since WDI began tracking individual healthcare segment results five years ago. Louisville, Ky.-based Humana reported a 22% decrease in earnings.
Meanwhile, the information services group remained a "high flier," posting an adjusted earnings increase of 88% in the second quarter on a 29% increase in revenues. Home health's adjusted earnings jumped 84% on a 16% rise in revenues.