Two more investor-owned hospital chains reported their earnings for 2003 last week, and both registered a significant rise in bad-debt expense relative to their 2002 figures.
Triad Hospitals, Plano, Texas, said two after-tax charges wiped out its profits for the fourth quarter and trimmed 2003 profits by one-third compared with 2002. Meanwhile, Community Health Systems, Brentwood, Tenn., said its profits grew for both the quarter and year, but bad debts squeezed margins slightly lower.
One of Triad's charges was $10.2 million to write down the value of 138-bed Alice (Texas) Regional Medical Center, which Triad agreed last week to sell to Christus Health, Irving, Texas. The other charge, $24.9 million, covered the costs of debt refinancing in the quarter. The company earned $95.2 million, or $1.29 per share, in 2003 on revenue of $3.9 billion, with a profit margin of 2.5%.
Triad's bad-debt expense, when measured as a percentage of revenue, was up sharply for 2003 and its fourth quarter compared with the year-ago periods. Burke Whitman, Triad's chief financial officer, said bad-debt expense is "a serious near-term issue," but "not one that can bring the company to its knees." He added that rising employment should cut the number of uninsured patients.
Whitman said the company continues to work on implementing an income-based sliding scale for offering discounts to uninsured patients (See related story, above). Triad also is explaining its new policy to state insurance commissioners and expects to talk about it with managed-care payers, spokeswoman Martha Crombie said.
HHS officials last month said Medicare and other federal regulations don't bar hospitals from discounting bills for the uninsured. HHS stopped short of offering a safe harbor for hospitals that would provide blanket immunity for hospitals.
Community Health CFO Larry Cash also focused on bad debt, saying he expects bad-debt expense to remain at elevated levels through the first six months of 2004. The company earned $131.5 million, or $1.30 per share, in 2003 on revenue of $2.8 billion, with a profit margin of 4.6%.