Triad Hospitals, still digesting its $2.4 billion acquisition of Quorum Health Group, last week posted earnings that fell in 2001, in contrast to the more upbeat earnings news recently reported by other investor-owned hospital chains.
Dallas-based Triad, the nation's third-largest for-profit hospital chain, has lagged in its earnings performance behind its former parent, HCA, and Tenet Healthcare Corp., the two largest for-profit systems. While HCA and Tenet spent the late 1990s paring their hospital portfolios to markets in which they are dominant providers, Triad has had to play catch-up as it works to consolidate its new hospitals from Quorum.
"In getting the Quorum hospitals acclimated to the way that Triad does business, they still have a ways to go," said Robert Mains, a healthcare stock analyst with Advest, a brokerage firm based in Hartford, Conn. Triad said its earnings sank 36% to $2.8 million, or 5 cents per share, in 2001, a year in which the company completed the acquisition of Brentwood, Tenn.-based Quorum. By comparison, Triad earned $4.4 million, or 13 cents per share, in 2000, when it had 18 fewer hospitals and about half as many shares outstanding.
The 46-hospital chain did not release comparative results for 2000 that included Quorum's figures; however, Triad said its 2001 revenue of $3.2 billion was a 6.7% increase over the companies' combined revenue in 2000.
Adjusted admissions for continuing operations rose 3.3%, despite a 1.5% drop in nonsurgical outpatient visits related to the closing of some of Triad's weak-performing outpatient clinics, and patient revenue per adjusted admission rose 4.9%, Triad said.
In answering a question during a conference call with analysts last week, Denny Shelton, Triad's chairman and chief executive officer, said the company spent $3 million to $5 million in late 2001 to integrate Quorum, although Triad did not take any charges in the fourth quarter directly related to the deal. The costs included legal fees, compliance training costs related to Quorum's settlement of Medicare cost-reporting fraud charges with the federal government, and $1 million in reorganization and severance pay at Quorum Health Resources, the hospital-management division. Company officials would not specify how many jobs were cut.
Triad executives were adamant that the Quorum acquisition won't harm 2002 earnings. "We worked through the transition period basically through the end of the year, but I can tell you that we're in doggoned good shape for 2002," Shelton said. "We're in the best shape we've ever been."
Mains said Triad's management has experience in turning around good assets that had been managed poorly-the same scenario it faced when Nashville-based HCA spun off 33 hospitals to form Triad in 1999, he said.
Triad's results reflect several extraordinary gains and losses in the fourth quarter, among them a $22 million pretax profit on the sale of 143-bed Paradise Valley Hospital, Phoenix, and a $23.1 million charge to write down goodwill at 138-bed Alice (Texas) Regional Hospital.