LifePoint Hospitals, Brentwood, Tenn., said Medicaid cuts and greater competition by physicians at hospitals it acquired in buying Province Healthcare Co. are among several factors that led the company to reduce earnings expectations for 2006 and caused fourth-quarter results to come in well below expectations. Four states that are key markets for LifePoint -- Alabama, Kentucky, Louisiana and Tennessee -- have implemented Medicaid reimbursement cuts or other program changes that reduce the amount LifePoint hospitals will receive, accounting for an earnings shortfall of 22 cents per share in 2006. In a conference call with investors, LifePoint executives said the 19 hospitals acquired from Province face more competition from physicians on the hospitals' medical staffs than LifePoint's longer-held hospitals. LifePoint said it also is still working to integrate information technology systems at the former Province hospitals with its own IT system. LifePoint also pointed to higher energy costs and costs incurred at two new hospital projects that were ongoing when LifePoint acquired Province.
For the fourth quarter, Province said it will earn 42 cents to 45 cents per share, compared with expectations of 61 cents to 65 cents per share. The company expects to issue its earnings report Feb. 6. For 2006, Province said earnings per share should be between $2.18 and $2.35, compared with a previous expectation of $2.87. LifePoint also said November 2005 and December 2005 were bad months financially for some of the five hospitals it is buying from HCA for $285 million. Ken Donahey, LifePoint's chairman, president and chief executive officer, said the system needs to discuss with HCA why performance has deteriorated during the sales process, but he said he expects the deal to close at the end of March. LifePoint owns or operates 50 hospitals. -- by Vince Galloro