Previously publicized troubles in accounting for sales of physician practice-management software to middlemen forced NDCHealth last week to discount its fiscal third-quarter earnings. The company also announced it was upping its estimate of inventory held by middlemen and increasing the age of debts they owed the company.
Despite the bad news, the company reported a profit for the quarter, ended Feb. 27, compared with a loss for the year-earlier period. The company reported net income for the quarter of $9.3 million on revenue of $116.1 million. That compares with a net loss of $3.7 million on revenue of $109 million during the year-ago quarter.
The 2003 numbers included $18.7 million in pretax write-offs, including investment losses on MedUnite, a troubled claims clearinghouse venture founded in 2000 by seven of the nation's largest health insurers. The insurers wrote off their investments in MedUnite in January 2003 when they sold the company to ProxyMed, which entered into a partnership with NDCHealth.
NDCHealth had twice delayed earnings reports this quarter, blaming accounting problems in the physician software division. The bulk of the division's sales are to about 1,000 middlemen known as value-added resellers, who typically buy, resell and install NDCHealth software as well as provide IT services at physician practices, according to the company.
NDCHealth said it provides software to 140,000 physicians, mostly in solo and small group practices, yet that part of its business traditionally provides only about 8% of the company's total revenue and 6.5% of its total operating income, according to earlier company statements.
The company also provides data backbones and claims-processing services for the pharmacy industry as well as data-mining for the pharmaceutical industry.