LifePoint Health reports weak Q3 volumes ahead of sale to RCCH
Despite weak volumes, LifePoint Health exceeded analysts' expectations in key financial metrics in the third quarter as it prepares for its merger with fellow Brentwood, Tenn.-based rural hospital operator RCCH HealthCare Partners.
The investor-owned hospital chain's revenue came in at just under $1.6 billion in the quarter that ended Sept. 30, down 1.2% compared with the third quarter of 2017, just beating analysts' expectations. Meanwhile, profit attributable to LifePoint rounded out the quarter at $22.3 million, down 19% from third quarter 2017, when it was $27.5 million.
LifePoint's net cash from operations totaled $163 million during the quarter, up 79% year-over-year, and the company's earnings per share rounded out the quarter at $1.24, beating analysts' estimates. Its normalized earnings before interest, taxes, depreciation and amortization of $183 million also beat predictions.
On a same-hospital basis, LifePoint said its revenue grew 2.1% year-over-year, to $1.5 billion, due in part to a 0.7% increase in same-hospital equivalent admissions during the quarter and a 1.4% increase in same-hospital revenues per equivalent admission.
The company reported a 4.7% decline in overall admissions to 63,118 in the third quarter of 2018 year-over-year. On a same-facility basis, however, admissions were relatively unchanged year-over-year, inching up by 0.1%. Inpatient surgeries were down 7.1% year-over-year during the quarter, and down 2.5% on a same-facility basis. Outpatient surgeries were down 2.8%, and up by 0.7% on a same-facility basis. Emergency room visits were down 9.1% overall, and down 3.8% on a same-facility basis.
The company is not holding a third quarter earnings call due to its pending merger with RCCH and its shareholder meeting scheduled for Monday. The company's stock price was up slightly Friday afternoon.
LifePoint announced in July it plans to merge with RCCH, a deal that would ultimately result in LifePoint becoming an RCCH subsidiary. The resulting company would have combined revenue of $8 billion and 84 hospitals, physician practices, outpatient centers and post-acute providers in 30 states.
RCCH is owned by the private equity firm Apollo Global Management, which will pay LifePoint's shareholders $65 per share in cash if the deal goes through, resulting in a $5.6 billion purchase priced, including $2.9 billion in net debt and minority interest. Some analysts predict Apollo will pursue a real estate investment trust structure with some of LifePoint's assets.
In its earnings report on Friday, LifePoint said the merger would be facilitated through a Delaware RCCH subsidiary called Legend Merger Sub, which would merge with LifePoint along with RCCH, with LifePoint continuing to become an RCCH subsidiary.
When LifePoint announced the deal, the company said its current chairman and CEO, William Carpenter III, would continue in those roles post-merger. In September, the company changed course and announced Carpenter would retire upon completion of the merger, and that LifePoint's Chief Operating Officer David Dill would take over as CEO upon Carpenter's retirement.
As a result of Carpenter's retirement, LifePoint sped up the vesting of $21.6 million worth of outstanding stock-based awards, giving him ownership of the securities.
Before the merger can close, the deal must get approval from a majority of LifePoint's shareholders and must receive regulatory approvals, although spokeswoman Michelle Augusty declined to say which regulators still need to give the green light. The company noted in its release that the applicable waiting period for the federal government to block the deal under the Hart-Scott-Rodino Antitrust Improvements Act expired Sept. 4.
In a statement included with the results, Carpenter wrote that the company is pleased with its operating results, which were driven by same-hospital revenue growth, effective cost management and strong operating cash flows.
LifePoint also recorded a $40 million impairment loss stemming from the termination of its operation of a hospital in Louisiana. The company also attributed the loss to merger-related expenses.
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