Iasis Healthcare will restate financial statements from each of the past three quarters after the for-profit hospital company spotted errors within its managed-care arm, Health Choice. The move, announced late Tuesday, will reduce revenue by almost $48 million.
For the fiscal year ended Sept. 30, Iasis' revenue will decrease $30.6 million, or about 1.2% of previously reported revenue, according to a filing with the Securities and Exchange Commission. That figure includes a restatement of $21.8 million from the quarter ended June 30. Iasis will also retract $17.3 million of revenue from the quarter ended Dec. 31, a 2.5% reduction.
The Franklin, Tenn.-based company's audit committee found errors made by a former Health Choice finance employee. The accounting mistakes were tied to Medicaid managed-care plans and were related to how Iasis and Health Choice record premium revenue and medical costs—and how those are reconciled with mandated limits on profits and losses.
Iasis, which operates 15 acute-care hospitals and insures 337,000 people through Health Choice, said it was working on internal protocols to avoid similar errors in the future.
“The audit committee has reviewed the former employee's activities and related matters to determine steps necessary to ensure future compliance with the company's accounting policies and practices as they relate to accruals of this nature,” the filing said.
In the same document, Iasis said its medical loss ratio—the percentage of premium dollars that were spent on actual healthcare procedures—is expected to decrease by about 2.5% in the first half of fiscal 2015 due largely to lower medical costs among childless adults. Iasis boosted its health plan membership in states that expanded Medicaid under the Affordable Care Act.
Iasis is in the process of filing for an initial public offering and would not comment beyond the regulatory filing. Iasis hopes the IPO will raise $100 million to pay down debt and invest in capital projects.