HealthSouth earnings hurt by expansion costs, and other news

HealthSouth Corp., a Birmingham, Ala.-based operator of inpatient rehabilitation hospitals, reported a 7.6% decrease in net income in the third quarter as it incurred startup costs associated with new facilities.

Third-quarter net income decreased to $48.5 million, compared with $52.5 million in the same period of 2013. Revenue, however, totaled $596.9 million, up 5.8% over the year-ago period's $564 million. The chain saw 3.8% more discharges in the quarter than it did during the prior-year period.

HealthSouth spent $1.6 million in preopening startup costs for three new hospitals: a 50-bed facility in Altamonte Springs, Fla.; a 50-bed hospital in Newnan, Ga.; and a 34-bed facility in Middletown, Del. All three are expected to open in the fourth quarter.

In addition, the company expects its 26-bed Quillen Rehabilitation Hospital in Johnson City, Tenn., to be operational by year-end. The hospital is part of a joint venture with Mountain States Health Alliance, based in Johnson City.

HealthSouth revised its earnings projections for the full year, lowering its earnings per share range to $2.24 to $2.27, down from earlier guidance of $2.25 to $2.31.

Methodist Le Bonheur Healthcare in Memphis, Tenn., reported a 47.7% year-over-year decrease in its operating surplus for the first nine months of 2014 as it booked lower revenue per patient, despite higher outpatient volume.

Discharges increased 3.1% while outpatient volume was up 17.8%. Methodist opened a new hospital in Olive Branch, Miss., and has continued its strategy of employing more physicians to bring in additional patients.

The system said it saw fewer commercial patients, which it attributed to more people with high-deductible health plans, and a greater share of Medicaid and Medicare patients, which increased 5.2% and 8%, respectively. Tennessee has cut Medicaid payment rates.

Methodist's operating surplus for the first nine months of 2014 totaled $32.1 million on $1.2 billion in revenue. In the year-ago period, it reported an operating surplus of $61.3 million on revenue just under $1.2 billion.