Hospital Companies Weighed Down by Bad Debt

by Mike Bevel, CollectionIndustry.com

Thanks to lagging Medicare reimbursements and increased bad debt, it hasn’t looked great for hospital operators over the past year. And, turns out, that trend isn’t likely to slow down in the coming year(s) either.

According to Business Week, several of the nation’s largest hospital operators have seen their shares fall by nearly 10 percent or more since last November. "It’s been affecting the bottom line for the last three years and we think it will continue," said Kemp Dolliver, a Cowen and Co. analyst.

According to Cowen figures, the hospital sector as a whole is down 4 percent for the year, excluding HCA Inc., which went private in a $21.3 billion leveraged buyout Nov. 17.

Because of the success HCA had with going private, other companies may consider private moves of their own.

Tenet Healthcare, currently the second largest for-profit hospital operator in the nation, has seen a 4 percent drop in its share value over the last year. Triad Hospitals Inc. shares dropped 4 percent over the last year. And Lifepoint Hospitals Inc. shares lost 11.5 percent. Health Management Associates Inc. shares fell 17.6 percent while Community Health Systems Inc. shares fell 15.7 percent.

The doom and gloom isn’t being shared by all hospitals, however. Some companies are faring better than others. In a recent note on Medcath Corp., Ripperger pointed out that the industry average for bad debt has been 9.2 percent. Medcath, however, has seen a 7.6 percent average and has avoided the admissions downturn, marking a 4.1 percent increase over the last two years.

Universal Health is another example of a company going against the trend, largely because it is seeing growth in its key markets, including Las Vegas, Ripperger said. Meanwhile, the industry as a whole has been increasing efforts to collect unpaid bills and is focusing or expanding into key markets with less bad debt.

<!–PAGEBREAK–>  

The industry is looking to get another boost if measures are taken to reduce the ranks of the uninsured, which could trim future bad debt. Also, with Democrats in control of Congress, Medicare reimbursements are not likely to be cut — which bodes well for operators. It’s been a long-standing fear that under a Republican Congress, Medicare payments would continue to shrink.