Columbia/HCA Healthcare Corp.'s stock price took another big hit Friday after the nation's largest hospital chain said it expects to post more than a $1 billion loss for the fourth quarter ended Dec. 31.
The anticipated loss for the quarter represents roughly 6% of all the money Columbia took in the entire year of 1996.
Columbia stock closed at $24.38 per share Friday, down $1.68 from the previous day's close of $26.06. It had traded as high as $44.88 per share over the past year. The 52-week low had been $24.75.
Speaking during a phone-in news conference, Columbia Senior Vice President Victor Campbell said the second half of last year was a time of tremendous change for employees and the company's management team.
That's when federal agents raided several dozen Columbia facilities and offices as part of a massive federal fraud investigation, the company's top two executives resigned and three mid-level executives were indicted by a federal grand jury for allegedly trying to defraud Medicare and other federal insurance programs.
Columbia has since embarked on a major restructuring effort that includes divesting many ancillary businesses and at least one-third of its about 335 hospitals.
"Fourth-quarter financial results will be somewhat weaker than what was anticipated by some," he said.
The Nashville-based company is expected to release its final fourth-quarter and year-end results this week.
Of the anticipated fourth-quarter losses, $870 million will come from restructuring charges. Another $375 million to $425 million will come from anticipated operating losses.
All told, the fourth-quarter loss could hit nearly $1.35 billion.
Columbia said it expects revenues to drop about 10% from its 1996 fourth-quarter revenues of $5.1 billion. The company blamed the decline on a change in its estimates of reserves for discounts and contractual allowances from managed-care and government payers.
Columbia also said it incurred higher-than-anticipated costs in the fourth quarter, including increases in salaries, wages and benefits.
"People are surprised to see declining revenue and still no control on costs," said Barney Rosen, an analyst at Argus Research, which owned 667,000 Columbia shares in September. "They wonder when that's going to change, and I'm under the impression Columbia doesn't know."
In addition, Columbia expects to pay $60 million for lawyers and consulting fees associated with the ongoing internal investigation of the company's billing practices, which also are under federal scrutiny.
Campbell would not say when the audit would be completed, but he said he expects such expenses to decline once the internal audit is wrapped up.
with Bloomberg News Service