Vanguard Health Systems, Nashville, trimmed its loss on discontinued operations for the quarter ended June 30 compared with the year-ago quarter, but higher labor costs related to staffing up new services hurt margins. Vanguard reported a loss of $9.6 million for its fiscal fourth quarter, down from $13.6 million in fiscal 2006s fourth quarter. Revenue was up 4.7%, to $651.1 million. For the fiscal year, Vanguard reported a loss of $132.7 million, compared with a profit of $12.9 million in fiscal 2006. The main difference was a pretax impairment charge of $123.8 million to write down the goodwill intangible assets associated with the companys two Chicago hospitals.
In fiscal 2007, Vanguards losses on discontinued operations were $4 million in the fourth quarter and $19.1 million for the fiscal year, respectively. In fiscal 2006, losses on discontinued operations were $11.1 million in the fourth quarter and $10.6 million for the fiscal year. Discontinued operations include three California hospitals sold in October 2006 and Phoenix Memorial Hospital, which ended acute-care services in June. Vanguard is leasing space in the hospital to post-acute providers, the company said.
The higher labor costs, increasing to 41.7% of net revenue in the fourth quarter from 40.8% a year ago, stem from service expansions in Phoenix and San Antonio, the companys two biggest markets. Those expansions incur staffing costs immediately but take some time to generate revenue, said Charles Martin Jr., Vanguards chairman and chief executive officer. The company expects that percentage to moderate going forward, Martin said. Vanguard owns or operates 15 hospitals in four states, as well as managed-care plans in Chicago and Phoenix and two surgery centers in California. -- by Vince Galloro
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