Quorum Health Group hasn't moved any closer to resolving a civil whistleblower fraud lawsuit joined by the federal government in October 1998, the company said last week.
The suit alleges widespread Medicare fraud at some of Quorum's owned and managed hospitals.
In a press release announcing Quorum's declining year-end and fourth-quarter earnings, President and Chief Executive Officer James Dalton Jr. reiterated his company's position that the allegations are false and that the firm will fight them.
Also coinciding with Quorum's earnings report, released last week, investment firm Welsh, Carson, Anderson & Stowe announced it has entered an agreement to increase its investment in Quorum through the purchase of $150 million of subordinated convertible debentures.
Russ Carson, general partner at Welsh, Carson, is chairman of Quorum's board of directors.
If converted to equity at the price announced, the debentures announced last week would bring Welsh, Carson's investment in Quorum to 24%. The firm has agreed to limit its ownership to 30% of Quorum, unless the board approves additional investments.
Quorum intends to use the proceeds to pay down debt.
"We've been looking at this for months and looking for some way to improve our capital position," said Shea Davis, Quorum spokeswoman.
Davis said the Welsh, Carson investment made more sense than making an offering in the high-yield bond market.
For its fourth quarter ended June 30, Quorum's net income dropped nearly in half to $13.8 million, or 19 cents per share, compared with net income of $27.3 million, or 35 cents per share, in the year-ago period. Revenues rose 15% to $428.8 million. The fourth-quarter results include a $1.5 million charge for litigation costs associated with the whistleblower suit.
For the year, the company reported net income of $38.9 million, or 51 cents per share, down 55% from net income of $86.7 million, or $1.12 per share, last year. Revenues rose 6% to $1.7 billion.