HCA, Nashville, reported much lower profits for the second quarter, as interest expense from the $33 billion leveraged buyout last year and bad debt raised costs. The company also reported lower patient volume.
HCA reported net income of $116 million, down from $295 million in profits in the year-ago quarter. Revenue increased 5.8%, to $6.73 billion. Interest expense was $557 million, nearly triple the $196 million in interest expense in 2006s second quarter. Bad-debt expense also edged up, to 11.2% of revenue from 10.6% of revenue.
On a same-facility basis, admissions fell 1.8% and adjusted admissions fell 1.5%. As of June 30, the company operated 164 hospitals and 107 freestanding surgery centers in the U.S. HCA also operates six hospitals in London and, last month, sold two hospitals in Geneva, Switzerland. The net proceeds of $394 million from the sale will be used to pay down debt, the company said.
The volume declines are explained in part by HCA walking away from a managed-care contract in Las Vegas with Sierra Health Services, Las Vegas. HCAs facilities in the Las Vegas area lost 13.9% of their patient volume for the quarter, but improved their operating earnings by 4%, said Richard Bracken, HCAs chief operating officer.
Speaking to analysts on a conference call, Bracken acknowledged that some of the volume losses stem from increased competition, but some losses also stem from decisions to exit low-margin business lines and to refuse, as in Las Vegas, to accept managed-care contracts that arent profitable. HCA had increases in high-margin, high-acuity surgeries such as neurological and orthopedic, although cardiovascular surgeries declined because of changes in treatment, Bracken added. -- by Vince Galloro
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