Several for-profit hospital chains last week reported flat or lower earnings, but Wall Street was pleased because companies met or exceeded analysts' expectations.
Meanwhile, a rural hospital operator that showed a healthy earnings spike barely raised an eyebrow among analysts because its quarterly profit increases have become routine.
Nashville-based Columbia/HCA Healthcare Corp., the nation's largest for-profit chain, led the pack, exceeding analysts' expectations by 7 cents per share.
Columbia's overall profits slid 8% to $296 million in the first quarter ended March 31, down from $322 million in the same quarter a year ago. But excluding gains on facility sales, impairment charges and investigation-related costs, the company's first-quarter net income rose to $306 million, or 53 cents per share, from $271 million, or 42 cents per share, in the first quarter of last year.
Analysts had predicted the company would hit 46 cents per share, according to First Call/Thomson Financial.
The company's first-quarter revenue fell 8.2% to $4.3 billion from $4.7 billion, primarily because its hospital roster shrank by nearly a third over the past year, officials said.
Admissions at hospitals Columbia owned during both first quarters increased 2.2%, while same-facility revenue increased 6.4%. Revenue per admission increased 3.8%. Company officials said these figures show that the slimmed-down company's remaining hospitals are strong within their markets.
"Our focus on our core group is paying off," Thomas Frist Jr., M.D., chairman and chief executive officer, said in a conference call with analysts last week.
Analysts viewed the results as signs that Columbia has been able to gain higher rates in its renegotiated contracts with managed-care companies, an initiative the company undertook more than a year ago.
"More and more, people are increasingly looking at the volumes and revenue per admission to get comfort that the pricing is coming through, and Columbia has been at the forefront of that in the industry," said Matthew Ripperger, a healthcare analyst at Warburg Dillon Read in New York.
The company said it incurred $10 million in expenses related to restructuring and investigations, down from $20 million last year. Columbia is still under the cloud of a federal criminal fraud investigation of the chain and its executives and a civil fraud investigation stemming from dozens of whistleblower fraud lawsuits against it.
Columbia, which now has 205 hospitals compared with 297 a year ago, plans to spend $150 million to $250 million within the next two months to acquire several hospitals in London, where it already has an ownership stake in four hospitals, Frist told analysts.
Although Columbia will continue to make strategic acquisitions, it is focusing its investments primarily on capital expenditures in existing markets and repurchases of its own stock, Frist said.
Also last week Columbia agreed to pay $650,000 to provide indigent care in six counties as part of a settlement with the North Carolina attorney general. The state's Consumer Protection Office found Columbia did not follow through on a 1996 promise to continue charity care at the same levels when it bought 109-bed Cape Fear Memorial Hospital in Wilmington.
While the level of care did not decrease, the investigation found evidence that Columbia was billing state and federal governments for the services, according to the state's attorney general's office. The settlement money will be administered through the North Carolina Medical Society Foundation. Under the settlement, Columbia denied wrongdoing.
Meanwhile, Columbia spinoff LifePoint Hospitals, which was launched last May with a portfolio of Columbia's rural hospitals, also pleased analysts last week with flat net income.
Based in Brentwood, Tenn., the company reported net income of $4 million for the first quarter of 2000, the same profit it had in the first quarter of 1999. Revenue was $136 million, compared with 1999 first-quarter revenue of $134.2 million. During the quarter the company sold two hospitals, and it expects to sell a third within two to three months. Excluding these three hospitals, the company reported an increase in net income to $5 million, or 16 cents per share, compared with $3.6 million, or 12 cents per share, last year. The company exceeded analysts' expectations of earnings of 14 cents per share.
Scott Mercy, LifePoint's chairman and chief executive officer, said the company will acquire more hospitals to add to its 21 rural facilities.
"Don't be surprised to see us step up and do an acquisition," he told analysts on a conference call.
Province Healthcare Co., another rural operator based in Brentwood, showed increased profits in its first quarter, reporting a 28% earnings jump.
The company reported net income of $5.2 million, or 32 cents per share, compared with last year's $4.1 million, or 25 cents per share. Included in the figures were results from six hospitals the company acquired since last year's first quarter. Revenue increased 49% to $109.1 million, compared with $73.2 million last year.
"Overall, we just had a very strong quarter," said Merilyn Herbert, Province's vice president of investor relations.
Although the company has typically reported strong earnings growth, Herbert also said the industry is enjoying greater support overall.
"The general perception of the industry has improved dramatically," she said. "A lot of that is being driven by the positive news coming out of Washington."