HCA, Tenet , Specialty Labs

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HCA WANTS TO BUY HEALTH MIDWEST FOR $1.25 BILLION

FOR-PROFIT HOSPITAL BEHEMOTH HCA Inc. announced an agreement in principal to acquire Health Midwest, a 14-hospital system based in Kansas City, Missouri.

Subject to further negotiations and due diligence, HCA will pay an estimated $1.25 billion for Health Midwest. HCA also committed to a five-year capital investment program totaling $450 million. Health Midwest is a not-for-profit system. The deal must clear regulatory review and Missouri law requires that most of the sale proceeds be placed in a charitable foundation.

Both HCA and Tenet Healthcare Corporation were asked to bid. Health Midwest has struggled financially in recent years. It is the largest health system in Kansas City. This acquisition marks the return of HCA as a market consolidator. It currently operates 181 hospitals throughout the United States.

Times are good at HCA. For third quarter, it reported revenue growth of 11%, to $4.9 billion, compared to $4.4 billion during third quarter 2001. It said that same-facility revenues increased 12.2% during third quarter. Same facility admissions grew 3.4% for the quarter.

REVENUES AND PROFITS UP AT TENET HEALTHCARE

IT MAY HAVE LOST in the bidding process to acquire Health Midwest, but Tenet Healthcare Corporation continues on a financial roll.

Tenet reported third quarter revenues of $3.7 billion, an increase of 12.3% over third quarter 2001. The company also noted that it was the eleventh consecutive quarter where earnings growth exceeded 20%.

Like HCA, Tenet is seeing a increased demand for services. Its hospitals reported a 4.1% increase in admissions overall and a same-facility increase in admissions of 1.8%.

Of particularly interest to hospital laboratorians and pathologists, Tenet reports a shift toward higher acuity cases. It noted that same-facility patient admission for sub-acute services declined 4.2%. Tenet is deliberately shifting its medical service emphasis toward high acuity services like cardiology, orthopedics, and neurology.

SPECIALTY LABS ISSUES REPORT ON THIRD QUARTER FINANCIAL PERFORMANCE

THINGS APPEAR TO BE QUIETING DOWN at Specialty Laboratories. The company’s third quarter financials were in line with expectations.

Its revenues were $32.5 million, a decline of 28% from $42.8 million in third quarter 2001. It reported a net loss of $3.3 million, compared to its net income of $2.9 million in third quarter 2001.

The declines in revenue were mirrored by a drop in specimen volume. Specialty accessioned 685,000 specimens for the quarter. This was a drop of 13% from third quarter 2001 and a drop of 7% from first quarter, 2002.

Specialty attributes its revenue and specimen volume declines to “client uncertainty generated by the recently- concluded regulatory compliance issues.” It acknowledges that it is “now fully engaged in the effort to rebuild relationships with hospital clients and expand its customer base.”

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