Nashville, Feb 7: Columbia/HCA Healthcare Corp, the target of a federal investigation, said it expected to lose between $1.25 billion and $1.35 billion in the fourth quarter, due mainly to charges for closing or selling hospitals and other assets.The anticipated loss was far worse than Wall Street had been expecting, and Columbia's stock plunged in heavy trading. Shares in the world's largest health care company fell $1.31 to $24.75 in heavy late morning consolidated trading on the New York Stock Exchange, where they were among the most actively traded issues.
"The second half of 1997 was a period of tremendous challenge and change for the company," said Thomas Frist, who took over as chief executive last July amid a massive and continuing investigation of Medicare billing and other practices at Columbia.
Columbia said that for the three months ended December 31, it will take $750 million in charges for impaired assets, of which about $450 million relates to its plan to sell off certain home healthcare operations and other businesses.
The company said it also will record $60 million in costs associated with "ongoing government investigations and severance costs" as well as a $60 million charge related to a change in accounting for business start-up costs.
The expected fourth-quarter loss is equivalent to between $1.95 and $2.10 a diluted share. A survey of 25 Wall Street analysts and brokers by market data firm First Call Corp showed they had expected Columbia to post a profit of 16 cents a share.
"There was some sense that the quarter would be weak because the estimates kept coming down, but I do not think anybody thought it would be this bad," one analyst said.
Even excluding special charges, Columbia said, it expected to lose $375 million to $425 million, or 60 cents to 70 cents a diluted share, on a continuing operations basis.
Fourth-quarter 1996 net income was $414 million, or 61 cents a share.The company said in November that it was considering taking charges in the fourth quarter tiedto a restructuring plan, which includes the sale or spin-off of 108 of its 340 hospitals, 35 of its 150 surgery centres and other measures.
Columbia said revenues in the quarter fell by about 10 per cent from the year-ago period, when they were about $5.1 billion, due to unexpectedly high costs, changes in handling of discounts and contracts with certain customers and recent government-mandated Medicare reimbursement reforms.
At the same time, Columbia said, fourth-quarter same-facility admissions rose by about 0.5 per cent -- a sign that some analysts called positive for the company.
Same-facility admissions measure the number of patients admitted to hospitals and other facilities open for at least a year. Columbia had earlier said that same-facility admissions rose in September, following an outright decline in August due partly to bad publicity.
Columbia said an audit of its 1997 accounts by accounting firm Ernst & Young was expected to be completed on or about February 13, when final financialresults will be reported.
Columbia -- which has operations in 36 states, Britain, Switzerland and Spain -- has been under federal investigation for more than a year. Three mid-level Columbia managers have been indicted on fraud charges, top executives have been swept from office and numerous lawsuits have been filed.
Prosecutors in Tampa said last that they were preparing to comply with a judge's order to unseal portions of an FBI affidavit that could reveal key facts about the probe.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
