With Columbia/HCA Healthcare Corp.'s acquisition activity shifted into low gear and its home-care operations on the selling block, observers of the Nashville-based company are wondering where the chain's future revenue increases will come from.
According to the company's December 1996 10-K filing with the Securities and Exchange Commission, most of Columbia's increased revenues came from newly acquired hospitals, rising utilization at its home-care facilities and higher charges because of more severly ill patients.
Columbia's revenues increased $2.2 billion last year to $19.9 billion. More than half the increase, or $1.5 billion, came from newly acquired facilities.
Even though Columbia's main revenue-growth ventures are being divested or put on hold, its executives said the company is not in danger.
Columbia Senior Vice President Victor Campbell said although the company doesn't project revenue growth, he believes it will provide decent returns to shareholders (See related story, p. 66). "Revenue growth is not required to provide a fair return to shareholders," Campbell said.
Growth would have to come from greater utilization of or higher charges at the Columbia facilities left after it completes its restructuring. The restructuring accompanies an ongoing federal fraud investigation of the company, which operates 342 hospitals, 150 outpatient sites and more than 570 home-care outlets.
Peter Emch, analyst at Alex. Brown & Sons, Baltimore, called it "far-fetched" to think other for-profit companies will gobble up the industry while Columbia restructures.
"Columbia is going to be out of the acquisition market for the foreseeable future, but I don't think it puts them in trouble," he said.
And while Columbia is having more than its share of problems, at least one issue can be explained, said Josh Nemzoff, a Nashville, Tenn.-based hospital consultant.
The 1% decline in hospital admissions reported by Columbia earlier this month is acceptable because August is typically a slow month, said Nemzoff, who has worked with Columbia on potential acquisitions of not-for-profit hospitals.
In its third-quarter estimates, Columbia reported admissions up 2.3% during the first seven months of this year and up 1.6% in July compared with July 1996. In 1996 inpatient volume increased 3.8%, the December 10-K said.
One of the few pending deals left on Columbia's plate is its lease of the two-hospital University of Oklahoma system in Oklahoma City. Altogether, the company has six hospital deals pending.
Last week the University Hospitals Authority in Oklahoma City unanimously approved the lease of the system to Columbia. The five-member authority is a public body governing the university hospitals.
Under the agreement, Columbia will lease the hospitals for 50 years, initially paying $20 million to the University of Oklahoma and $19.2 million to a hospital-authority trust. Later payments will be based on profits.
The target date for the lease to take effect is Jan. 1. It still requires approval, however, from the state Supreme Court and a review board made up of the governor and legislative leaders.