Columbia/HCA Expects $1B-Plus Loss
NASHVILLE, Tenn. (AP) _ Columbia/HCA Healthcare Corp. today said it expects a fourth-quarter loss of $1.25 billion to $1.35 billion due to the costs of restructuring and an ongoing government investigation.
The expected loss amounts to $1.95 to $2.10 per diluted share for the quarter ended Dec. 31. News of further disappointment by a company that has endured many in the past year surprised Wall Street investors, who drove Columbia’s stock price to its lowest level in more than a year.
Thomas F. Frist Jr., Columbia’s chairman and chief executive officer, called 1997 ``a period of tremendous challenge and change″ and said he expects 1998 to include ``further challenges″ as the company works through a restructuring plan that took effect Jan. 1.
``However, we are confident that we have taken significant steps forward in our efforts to reposition the company for 1998 and future years,″ Frist said in a statement.
Columbia shares fell 5 percent, down $1.31 1/4 at $24.75 in midday trading on the New York Stock Exchange, reaching a new 52-week low.
Victor Campbell, head of investor relations for the company, stressed that reorganization and other costly changes were not aimed at ``a quick fix.″
``We’re repositioning the company for the future,″ Campbell told a telephone conference this morning.
Campbell highlighted a slight increase in hospital admissions of one-half of one percent. He said while that wasn’t up to the 3 percent to 4 percent a quarter growth the company once saw in hospital admissions, it indicates a confidence in patient care at Columbia/HCA.
Included in the loss are costs of about $375 million to $425 million, or 60 to 70 cents per diluted share, from continuing operations, about $750 million in assets being closed or sold off, about $60 million in costs associated with ongoing government investigations and severance costs for ousted executives, and $60 million due to a change in accounting principles.
Nashville-based Columbia plans to sell off its Value Health home health care business, some surgery centers and about a third of its hospitals as a result of a wide-ranging federal investigation into alleged Medicare fraud.
Columbia bought ValueHealth benefits management company for $1.3 billion and almost immediately sold part of it, Value Behavioral Health, for $230 million.
Three middle managers have been indicted and the company itself is a target of the investigation into allegations that the federal government was fraudulently overbilled.
Sales declined by about 10 percent over the quarter, compared with the comparable 1996 period, the company said. The company attributed the drop to lower Medicare reimbursement rates and higher estimates of the cost of discounts and contract agreements with payers. Salary and bad debt costs also contributed to lower sales, the company said.
The company’s financial statements for all of 1997 are being audited. Final figures are expected to be released Feb. 13.