Strong revenue growth, mostly thanks to reimbursement increases, has led to bigger profits for all seven of the publicly traded hospital chains that have reported results for the quarter ended March 31. But Dallas-based Triad Hospitals may have made the biggest splash with its first-quarter results last week.
Triad said it earned net income of $40.4 million, or 55 cents per share, for the quarter, blowing past stock analysts' consensus projection of 39 cents per share. The company also upgraded its profit expectations for 2002-to $1.69 to $1.75 per share from an earlier projection of $1.40 to $1.48 per share-because of lower projected costs for interest and depreciation.
In the first quarter of 2001, which preceded Triad's $2.4 billion acquisition of Quorum Health Group, Brentwood, Tenn., Triad earned net income of $7.8 million, or 22 cents per share. The merger was completed April 27, 2001. Triad did not provide pro forma net income or earnings per share for the combined company in the 2001 first quarter because the calculations would have required huge assumptions that might not have yielded an accurate picture, Triad Chief Financial Officer Burke Whitman said.
Revenue that included the performance of Triad's and Quorum's hospitals in both years rose 7.9% to $860.9 million in the first quarter ended March 31, compared with $797.9 million in the year-ago quarter.
During a conference call with analysts, Triad Chairman and Chief Executive Officer Denny Shelton said the strong results reflect the completion of almost all steps needed to integrate Quorum. "I think it was just the focus that was given during the last two quarters of (2001), and it's starting to pay off," he said.
At the 43 hospitals Triad or Quorum operated in both quarters, adjusted admissions, which account for both inpatient and outpatient volumes, were up 2.6%. Triad's patient revenue per adjusted admission rose 5.6%.
In releasing its first-quarter results, Triad also announced several management changes related to subsidiary Quorum Health Resources, Brentwood, which provides management services to more than 200 hospitals.
Dan Moen, CEO of the subsidiary, was named Triad's executive vice president of development and management services, overseeing QHR and the company's acquisitions.
John Stinson, president of QHR's central division, was named president of QHR. Moen, Stinson and three other executives will move to Triad's Dallas headquarters this summer. The rest of QHR's operation will remain in Brentwood.
James Stokes, QHR's former president, and David Dempsey, its CFO, both longtime residents of the Nashville area, decided to leave the company rather than move to Dallas, Triad officials said.
Meanwhile, Nashville-based HCA, the nation's largest investor-owned hospital chain, said last week it earned $385 million in net income, or 74 cents per share, for the first quarter ended March 31, compared with $343 million, or 62 cents per share, in the year-ago quarter. Revenue was up 8.9% to nearly $4.9 billion. As of March 31, HCA owned 175 hospitals and operated six hospitals under 50-50 joint ventures, down from 185 owned and nine joint ventures a year ago.
HCA Chairman and CEO Jack Bovender Jr. told stock analysts that government lawyers have been sent back to the drawing board on civil Medicare fraud claims against the company. An appellate court decision last month reversing the convictions of Robert Whiteside and Jay Jarrell (April 1, p. 6), the only two HCA employees to be found guilty in a federal probe of the former Columbia/HCA's billing practices, has stalled settlement negotiations. "But we are ready to resume negotiations and hopefully bring all these issues to an end in the near future," he said.
The still-outstanding cases involve allegations of improper cost reporting and physician relationships. HCA previously paid $840 million to settle other civil claims and all criminal claims against it. The company reported spending $17 million on costs related to the investigation for the quarter, up slightly from $14 million in the first quarter of 2001.
Four smaller hospital companies focusing on rural markets-Health Management Associates, Naples, Fla., and Community Health Systems, LifePoint Hospitals and Province Healthcare Co., all based in Brentwood-also last week reported stronger earnings, ranging from HMA's 20% improvement over the year-earlier quarter to LifePoint's 59% increase in profits. All four companies reported strong revenue growth based mostly on higher reimbursements and, to a lesser extent, on higher patient volumes.
HMA, which owns or operates 42 hospitals in nonurban markets, said its profit increased 42% to $69.2 million, or 27 cents per share, for its fiscal 2002 second quarter ended March 31. HMA said revenue for the quarter was up 20.4% to $579.4 million, despite a 0.3% drop in inpatient admissions. For the six months ended March 31, HMA earned $119.7 million, or 47 cents per share, on revenue of $1.1 billion.
Community earned net income of $29.4 million, or 27 cents per share, for the first quarter ended March 31, compared with $10.8 million, or 12 cents per share, in the first quarter of 2001. Revenue was up 33.8% to $533.5 million. Community's revenue growth included the acquisition of seven hospitals since the first quarter of 2001 and growth at the 52 hospitals it operated in both quarters.
LifePoint, a chain of 23 rural hospitals, reported a 59% increase in profit to $13.7 million, or 36 cents per share, for the first quarter ended March 31. LifePoint's revenue climbed 17.7% to $181.6 million. The revenue growth came from two hospitals the company acquired last year and from an 8% increase in revenue at the 21 hospitals it owned in both quarters.
Province, which owns or operates 18 rural hospitals, earned net income of $11.7 million, or 35 cents per share, for the first quarter ended March 31, compared with $8.5 million, or 26 cents per share, in the first quarter of 2001. Revenue was up 35.3% to $165.6 million.