Another health insurer is getting out of the hospital business. This time it's Sierra Health Services, a Las Vegas-based managed-care company.
As part of a broader plan to improve the company's finances, Sierra closed its only hospital, 12-bed Mohave Valley Hospital in Bullhead City, Ariz., late last month.
That follows a similar move by Foundation Health Systems, the Woodland Hills, Calif.-based health insurer, which is selling its only two hospitals as part of a restructuring program (March 15, p. 16).
Like Foundation, Sierra got into the hospital business as an afterthought.
Sierra bought Mohave Valley in 1996 for an undisclosed sum from the hospital's then-chief executive officer and owner, Gordon Ritter. Sierra's primary motivation for the deal was the hospital's affiliated eight-physician medical clinic.
Sierra wants to convert the closed hospital into an ambulatory surgery center, said spokeswoman Ria Marie Carlson.
In 1997 Mohave Valley lost $693,000 on revenues of $7.8 million, compared with a profit of $1.1 million on revenues of $9.3 million in 1996, according to HCIA, a Chicago-based healthcare information company.
In addition to closing the hospital, Sierra outlined other steps to whip the 1.3 million-enrollee publicly traded managed-care company into better financial shape.
Sierra posted nearly $50 million in net income, or $1.80 per share, for the fiscal year ended Dec. 31, 1998, compared with $43.2 million, or $1.58 per share, a year earlier. Revenues last year grew 44% to a little more than $1 billion.
Even though Sierra is profitable, CEO Anthony Marlon, M.D., indicated late last month that he is not satisfied with its financial results. "I am firmly committed to increasing shareholder value," he said in a written statement. "As Sierra's largest shareholder, I am personally dedicated to increasing the value of this company."
Sierra has asked the Bear, Stearns & Co. investment bank to advise it on its options, which may include a leveraged buyout or a more limited recapitalization.
Meanwhile, at year-end Sierra will drop a 5,000-enrollee Medicare HMO that serves Mohave County, Ariz., and Laughlin, Nev., across the Colorado River from Bullhead City, Carlson said.