Some investor-owned hospital chains have the same relationship with bad debt that Florida has with hurricanes: They keep getting hit over and over.
Two of the five for-profit hospital operators that reported earnings last week-Community Health Systems and Province Healthcare Co.-reported higher bad-debt expense, as measured as a percentage of net revenue, when compared with the year-ago quarter.
Triad Hospitals, Plano, Texas, said its bad debt fell from the year-ago quarter ended Sept. 30, but the year-ago figure was swelled by a $50.6 million increase in its allowance for bad debt that included some catching up from prior quarters. Triad said its collection rate on uninsured patients continues to decline. Only Health Management Associates, Naples, Fla., has managed over the last 15 months to avoid big problems with bad debt. Bad debt remained at 7.5% of net revenue for the quarter but was up 0.2 percentage points to 7.5% for HMA's fiscal 2004, which ended Sept. 30. The company credits its local collection processes. LifePoint Hospitals also reported a lower bad-debt percentage for the quarter, down 0.6 percentage points to 9.6% of net revenue.
HMA earned $74 million, or 30 cents per share, for the fourth quarter, compared with $69.8 million, or 28 cents per share, in the year-ago quarter. Revenue increased 21%, to $798.1 million. For the fiscal year, profits were up nearly 15%, to $325.1 million, or $1.32 per share, compared with $283.4 million, or $1.13 per share, in fiscal 2003. Hurricane costs lowered net income for the quarter and fiscal year by $9.5 million. Burke Whitman, Triad's chief financial officer, said the company is collecting less per dollar of self-pay revenue, but the decline in the collection rate has slowed. Triad earned $49.2 million, or 64 cents per share, in the third quarter, compared with $10.4 million, or 14 cents per share, in the year-ago quarter. Revenue rose 20% to $1.11 billion.
Province said its recent acquisition of Memorial Medical Center in Las Cruces, N.M., was a significant factor behind its increasing bad-debt expense, which rose 1.3 percentage points to 11.3% of revenue for the quarter.
Community said its bad-debt expense increased 0.7 percentage points, to 10.5% of net revenue. Several charges also held down Community's profits, including after-tax losses of $1.5 million related to hurricanes and $5.6 million on discontinued operations. Community, Brentwood, Tenn., said its profits for the quarter were $32 million, or 32 cents per share, compared with $31.7 million, or 31 cents per share, in the year-ago quarter. Revenue climbed 18% to $844 million.
LifePoint, also in Brentwood, doesn't anti-cipate regulatory issues that would affect its $1.7 billion acquisition of Province. The deal, expected to close in the first quarter of 2005, would create a company with 51 nonurban hospitals. The Federal Trade Commission has declined to intervene, and financing is in place, LifePoint said. Meanwhile, LifePoint reported more than 20% profit growth to $19.7 million, or 50 cents per share, for the quarter ended Sept. 30, compared with $16.2 million, or 42 cents per share, in the year-ago period. Revenue was up 16% to $253.7 million.
Province said it earned $11.5 million, or 22 cents per share, in the third quarter, compared with $9.8 million, or 20 cents per share, in the year-ago quarter. Revenue was up by more than a quarter, to $235.3 million.