Hospital operator beats profit forecasts

Monday, July 24, 2000 | 11:06 a.m.

NASHVILLE, Tenn. -- HCA -- The Healthcare Co., the biggest hospital chain in the United States, said second-quarter profit rose 23 percent on higher hospital admission and reduced costs.

Formerly known as Columbia-HCA Healthcare Corp., the firm is a big operator in Las Vegas with its Sunrise and MountainView hospitals.

Profit from continuing operations rose to $223 million, or 40 cents a share, from $182 million, or 31 cents, a year earlier. Revenue was little changed at $4.13 billion from $4.16 billion. Revenue at hospitals owned more than a year rose 5.2 percent. Results beat the 36 cents average estimate of analysts surveyed by First Call/Thomson Financial.

HCA had lower costs for salaries and benefits, while its 3 percent rise in admissions was at the top of the range expected in the industry, said analyst Peter Emch of Credit Suisse First Boston.

"I think they've made some lasting positive changes in their cost structure," said Emch, who has a "buy" rating on the stock.

HCA, which has about 200 hospitals, also benefited from higher prices of about 5 percent to 7 percent in managed-care insurance contracts it negotiated, while facing fewer cuts in reimbursement under the federal Medicare program, said PaineWebber analyst Andrew Gitkin.

"They look very strong," said Gitkin, who has a "buy" rating on the stock. "The results confirm the positive trends we've seen within the hospital industry."

Overall revenue declined slightly because HCA sold some of its hospitals as it continued a restructuring sparked by a federal fraud investigation that became public in 1997.

In May, the company reached a $745 million partial settlement with the government, covering allegations that it routinely overbilled government health-care programs for home-health and laboratory services and inflated the severity of patients' illnesses to get more reimbursement.