Healthcare companies again posted double-digit earnings growth in the fourth quarter of 1996, with physician practice management firms rebounding to contribute strongly to the performance of the provider segment.
Earnings for investor-owned healtcare companies in the fourth quarter rose 14.2% on a 14% increase in revenues compared with the year-ago quarter, according to an analysis conducted for MODERN HEALTHCARE by WDI Capital Markets, a Hilton Head, S.C.-based healthcare advisory and investment banking firm, and KPMG Peat Marwick's Health Ventures practice, based in New York.
Those gains compare with an earnings increase of 17.7% on a 26.4% jump in revenues during the third quarter of 1996. Earnings are adjusted for accounting variations and one-time write-offs. WDI uses data from its analysis of 837 public healthcare companies in 34 market segments.
"There were very solid across-the-board earnings with a lot of companies in the physician practice (management sector) prospering from multiple acquisitions," said John Cumming, WDI's chief executive officer.
Teh provider segment reported earnings gains of 16.1% on a 20.6% increase in revenues.
Physician practice management was the most robust segment of healthcare provider services. Adjusted earnings for practice management companies increased 50.9% on a 45.1% increase in revenues. By comparison, third-quarter earnings decreased 20.5% on a 35.7% increase in revenues.
Another strong segment of the provider sector was home health, which posted a 49.1% increase in earnings on a 16.7% increase in revenues. In the third quarter, home health earnings soared 99.8% on a 19.7% increase in revenues.
The outpatient-care sector saw earnings rise 34.9% on a 48.1% increase in revenues, compared with the third quarter's 27% earnings increase on a 42% increase in revenues.
Hospitals' earnings increased 17.2% on a 13.6% gain in revenues. In the third quarter, earnings climbed 18.5% on a 14.4% increses in revenues.
Managed-care companies continued to watch their margins deteriorate, with earnings decreasing 6.5% on a 22.8% increase in revenues. But that's an improvement compared with the third quarter, when earnings dropped 15.5% on a 43% rise in revenues.