Columbia shakes U.S. healthcare industry
Reuters Story - August 01, 1997 16:42
By Kevin Drawbaugh
CHICAGO, Aug 1 (Reuter) - Shock waves from the crisis at
Columbia/HCA Healthcare Corp this week rumbled through the
$1-trillion U.S. healthcare industry.
As the federal government clamped down on Medicare
reimbursement rules, making an example of Columbia, Wall Street
analysts warned any company was subject to scrutiny.
"Anybody and everybody who works with Medicare is exposed
to potential review," said Wheat First Butcher Singer
healthcare industry analyst Joel Ray.
"All these companies should be reviewing their procedures
and be on their toes," Ray said.
At the same time, opinion was mixed as to whether stricter
rules enforcement will cut overall profit and revenue growth.
Medicare, Medicaid and the military's CHAMPUS healthcare
system make up a huge chunk of healthcare revenues.
No one knows the exact size of the fraud and abuse problem
in these programs, but a recent federal audit estimated up to
$23 billion in incorrect payments last year in Medicare alone
-- equal to 14 percent of total Medicare spending.
The government showed it is getting serious about rooting
out problems in recent days by expanding a massive
investigation of Nashville, Tenn.-based Columbia -- by far the
largest U.S. for-profit hospital company.
Columbia's chief executive resigned last week and three
mid-level executives were indicted Wednesday on fraud charges.
"It's going to make the industry more conservative in what
they bill to the government. But I'm not convinced that has
enough impact to make the industry growth rate slow," said ABN
AMRO Chicago Corp healthcare industry analyst Peter Costa.
Stocks in other hospital firms trended down slightly this
week in the wake of Columbia's troubles.
Late Friday on the New York Stock Exchange, in a broadly
sagging market, shares in Tenet Healthcare Corp were
down 1-11/16 to 28-1/4; shares in Health Management Associates
Inc were down 7/16 at 31-1/2; shares in Universal
Health Services were down 11/16 at 39-15/16.
In over-the-counter action, Quorum Health Group Inc
shares were off 1/2 at 35-1/8.
"The stocks have been weak with the leader in the group
under investigation," Costa said.
Not only hospital companies, but nursing home chains, home
healthcare companies, physician practice management firms,
health maintenance organizations -- all may be entering a new
era of tight Medicare reimbursement oversight, analysts said.
"In general, Medicare is very much scrutinizing everybody
out there, not only for-profits, but non-profits," said Olde
Discount healthcare analyst Jason Fox.
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This might explain the weakness in the shares recently. But according to last year's 10-K, only 12% of revenues were generated from Medicare & Medicaid. I imagine that the number is less than 10% by now. It doesn't seem like anything to worry about.
Todd |
