(Updated at 6 p.m. ET)
LifePoint Health expected to see more bills go unpaid at the end of 2017, a change the company attributed to an expensive overhaul of its collection procedures.
The Brentwood, Tenn.-based hospital chain posted an increase in doubtful accounts of $72.6 million in the fourth quarter, which it said was due to enhancing procedures and installing new systems to centralize and standardize its collection estimates.
Mike Coggin, LifePoint's CFO, told investors in a conference call Friday morning that the overhaul involved both the hospital and physician side of the company. Following the change, the company's accounts receivable data is more accurate, he said.
"We realized we needed to make this change in our estimate of accounts receivable," he said.
LifePoint is embarking on a strategic review of its operations after posting a $27.5 million loss in the fourth quarter of 2017 compared with a $44 million gain at the same time in 2016.
Overall in 2017, LifePoint drew net income of $102 million on revenue of $6.3 billion down from 2016's net income of $122 million on revenue of about $6.4 billion.
Bill Carpenter, LifePoint's CEO, told investors the company is facing the same challenges as others in the industry: a shifting payer mix, increased consumerism and a move toward value-based care. LifePoint has undertaken such reviews three times within the past decade, each at times of dramatic change, such as directly following the passage of the Affordable Care Act, he said.
"We want to make sure that we are not reacting, but we are proactive and innovative as we think about dealing with that change," Carpenter said. "That's the reason we've chosen to do this now. I think the timing couldn't be better."
The company expects to complete the review by the middle of this year, said LifePoint COO David Dill.
The company's earnings before interest, taxes, depreciation and amortization was also down in the fourth quarter to $104.5 million, a 47% drop from the prior year.
In addition to the costly accounts receivable project, same-hospital revenues were down 5.2% in the quarter to just under $1.5 billion. Declines in emergency room visits, admissions and surgeries all contributed.
LifePoint's consolidated admissions dipped 2.7% in 2017 to about 267,000. Inpatient surgeries fell by 6%, while outpatient surgeries fell 2.8%. Emergency room visits slipped by 2.3% to about 1.6 million.
LifePoint also shouldered nearly $5 million in severance costs from trimming its workforce at its headquarters and a $43.2 million impairment charge associated with writing down the carrying values of long-lived assets at two hospitals.
On a positive note, Dill pointed out that the four hospitals LifePoint acquired in 2016 showed improved margins and equivalent admissions growth of 1.4%. Under the new tax law, the company projects its 2018 tax rate will be 24.5%, resulting in savings of approximately $30 million annually.
Excluding non-operating factors like the severance pay and new accounts receivable systems, LifePoint estimated a smaller decrease in same-hospital revenues of 0.6% in the fourth quarter and a net income of $31.3 million and EBITDA of $182 million.
LifePoint's loss per share in the fourth quarter was $0.70. The company's stock price was down nearly 14% at Friday's close.