How is the health of Quorum Health?
July 28, 2016 at 4:25 p.m.
With the sale of Kosciusko Community Hospital officially closed, local investors and patrons have a growing interest in the health of Quorum Health Group Inc.
Quorum, the company that purchased KCH, is based in Brentwood, Tenn. One of the largest health care corporations in the country, Quorum operates Lutheran and St. Joseph hospitals in Fort Wayne. Nationwide, Quorum owns 21 hospitals and manages 241 others.
In 1998, the company faced two legal actions.
According to a November filing by Quorum with the Securities and Exchange Commission, the U.S. Justice Department launched an investigation into Quorum's alleged violations of Medicare law.
The Justice Department investigation, initiated in May, is concerned with the preparation of cost reports for Medicare and other government payment programs between 1984 and 1997. The allegations are that Quorum overstated Medicare costs during the years under investigation.
Two separate lawsuits were filed on behalf of Quorum stockholders, on Oct. 23 and Nov. 2, 1998, in the U.S. Court for the Middle District of Tennessee naming Quorum as a defendant.
A third lawsuit was filed Nov. 2, 1998, on behalf of stockholders, in the U.S. District Court for Northern Alabama, alleging breach of fiduciary responsibility and violations of the Racketeer Influenced and Corrupt Organizations Act.
That lawsuit alleges Quorum intentionally or negligently failed to ensure it was in compliance with applicable Medicare and Medicaid reimbursement.
All three lawsuits are still pending before the district courts in which they were filed.
Mirroring these events, Quorums stock prices fell between May 1998, when the investigation was announced, and when the legal actions were announced in the fall.
The company's 52-week high for its stock price was $33.81 per share in May 1998. Quorum closed at $8-9/16 Friday. Estimates for the company's earnings per share for 1999 is $.80 to $.90 per share, down from the consensus projection of $1.10 per share, according to PCQuote Internet quote and news service.
Steve B. Hewett, vice president and chief financial officer for Quorum, attributed this fall, and a possible negative impact to the company's 1999 earnings, to both the uncertainty as to the outcome of the legal cases and poor performances of some of the hospitals it has acquired.
Specifically, Hewett said, Quorum is seeking to sell off Park Medical Center in Columbus, Ohio, acquired in February 1992, because of poor financial performance.
"The company is in the process of negotiating the sale of Park Medical Center and expects the sale to be completed in fiscal 1999," he said. "The company expects its operating margins and results of operations to be adversely affected by Park Medical Center until the sale is completed."
Hewett added in the filing, that with each acquisition Quorum makes, the company typically takes a number of steps to lower costs, but those cost savings are offset by increased costs to expand the hospital services, strengthen its medical staff and improve its market position.
"The benefits of these investments may not occur immediately," he said. "Additionally, operations at acquired hospitals may deteriorate before and after the purchase date."
Hewett added that acquisitions made in late 1998 and early this year, to include KCH, are expected to continue to reduce Quorum's operating margins through 1999.
"There is a significant risk that the financial performance of the acquisitions may not improve to the extent necessary to positively impact the company's results of operations for the remainder of 1999," he said. "Acquired facilities must show improved operating results more quickly than in the past for the company to achieve its historical growth targets."
Moreover, to reach the financial performance mandated by Quorum's board of directors and stockholders, Hewett said, the company will have to accelerate its acquisition activity.
"Additionally, as the company grows, it depends on a greater volume of acquisitions, or acquisitions of a larger size, to achieve its growth targets," he said. [[In-content Ad]]
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With the sale of Kosciusko Community Hospital officially closed, local investors and patrons have a growing interest in the health of Quorum Health Group Inc.
Quorum, the company that purchased KCH, is based in Brentwood, Tenn. One of the largest health care corporations in the country, Quorum operates Lutheran and St. Joseph hospitals in Fort Wayne. Nationwide, Quorum owns 21 hospitals and manages 241 others.
In 1998, the company faced two legal actions.
According to a November filing by Quorum with the Securities and Exchange Commission, the U.S. Justice Department launched an investigation into Quorum's alleged violations of Medicare law.
The Justice Department investigation, initiated in May, is concerned with the preparation of cost reports for Medicare and other government payment programs between 1984 and 1997. The allegations are that Quorum overstated Medicare costs during the years under investigation.
Two separate lawsuits were filed on behalf of Quorum stockholders, on Oct. 23 and Nov. 2, 1998, in the U.S. Court for the Middle District of Tennessee naming Quorum as a defendant.
A third lawsuit was filed Nov. 2, 1998, on behalf of stockholders, in the U.S. District Court for Northern Alabama, alleging breach of fiduciary responsibility and violations of the Racketeer Influenced and Corrupt Organizations Act.
That lawsuit alleges Quorum intentionally or negligently failed to ensure it was in compliance with applicable Medicare and Medicaid reimbursement.
All three lawsuits are still pending before the district courts in which they were filed.
Mirroring these events, Quorums stock prices fell between May 1998, when the investigation was announced, and when the legal actions were announced in the fall.
The company's 52-week high for its stock price was $33.81 per share in May 1998. Quorum closed at $8-9/16 Friday. Estimates for the company's earnings per share for 1999 is $.80 to $.90 per share, down from the consensus projection of $1.10 per share, according to PCQuote Internet quote and news service.
Steve B. Hewett, vice president and chief financial officer for Quorum, attributed this fall, and a possible negative impact to the company's 1999 earnings, to both the uncertainty as to the outcome of the legal cases and poor performances of some of the hospitals it has acquired.
Specifically, Hewett said, Quorum is seeking to sell off Park Medical Center in Columbus, Ohio, acquired in February 1992, because of poor financial performance.
"The company is in the process of negotiating the sale of Park Medical Center and expects the sale to be completed in fiscal 1999," he said. "The company expects its operating margins and results of operations to be adversely affected by Park Medical Center until the sale is completed."
Hewett added in the filing, that with each acquisition Quorum makes, the company typically takes a number of steps to lower costs, but those cost savings are offset by increased costs to expand the hospital services, strengthen its medical staff and improve its market position.
"The benefits of these investments may not occur immediately," he said. "Additionally, operations at acquired hospitals may deteriorate before and after the purchase date."
Hewett added that acquisitions made in late 1998 and early this year, to include KCH, are expected to continue to reduce Quorum's operating margins through 1999.
"There is a significant risk that the financial performance of the acquisitions may not improve to the extent necessary to positively impact the company's results of operations for the remainder of 1999," he said. "Acquired facilities must show improved operating results more quickly than in the past for the company to achieve its historical growth targets."
Moreover, to reach the financial performance mandated by Quorum's board of directors and stockholders, Hewett said, the company will have to accelerate its acquisition activity.
"Additionally, as the company grows, it depends on a greater volume of acquisitions, or acquisitions of a larger size, to achieve its growth targets," he said. [[In-content Ad]]