AMI Reports $65.3-Million Loss
Despite drastic cuts this year--including layoffs of more than 2,000 employees and paring everything from overnight mail to office space--American Medical International on Thursday reported a $65.3-million loss for the fourth quarter ended Aug. 31.
As a result, the Beverly Hills-based health-care giant wound up fiscal 1986 with its first annual loss ever--$97.3 million. In fiscal 1985, the company had net income of $163.8 million.
“They’ve had a blood bath in the last year,” said Randall Huyser, a health-care analyst for Montgomery Securities in San Francisco.
“It was a lousy year for us financially,” agreed American Medical spokesman Mick Taylor. “We’re looking at recovering quickly. But we are not making projections or estimates on when.”
American Medical, which has about 40,000 employees and owns approximately 90 hospitals in the United States, is the nation’s third-largest hospital chain--measured by revenue--behind National Medical Enterprises and Hospital Corp. of America. But the far-flung hospital chain has found its enormous expenses difficult to tame in the current cost-conscious health-care environment.
Although American Medical rolled up record revenue of $893.5 in the fourth quarter, it suffered a $65.3-million quarterly loss primarily due to additions to reserves for Medicare and the closing of the company’s troubled group health insurance operations. During the same quarter last year, American Medical had net income of $25.8 million on revenue of $706.7 million.
Like most other hospital chains in the $426-billion health-care industry, American Medical has suffered wrenching financial problems in adjusting to a more frugal Medicare reimbursement system, which on average furnishes about 40% of hospitals’ revenue.
But American Medical also felt the fallout of years of ambitious expansion that took the health-care company far afield of its hospital roots into areas as varied as selling group health insurance, renting wheelchairs and oxygen tanks through a home health subsidiary and running health maintenance organizations.
In a prepared statement released Thursday, however, Walter L. Weisman, American Medical’s president and chief executive, vowed to refocus “the company on its traditional strength--the management of acute care hospitals. We are determined to enhance the effectiveness of every important aspect of hospital operations.”
To that end, American Medical took a special charge against earnings of $65 million for the previously announced closing of its group health insurance operation, which the company said was proving “too costly and ineffective in building local market share for the company’s hospitals.”
The hospital chain also enlarged its Medicare reserves by $33 million to a total of $49 million to cover any patient medical bills that might not be fully reimbursed by the government due to rule changes in the federal Medicare program.
As a result of the belt tightening, Thomas McGinnis Jr., a health-care analyst for the New York investment house Eberstadt Fleming, said that the worst should be over and that American Medical should soon return to profitability.
“This should be the last of the quarterly losses for a while,” said McGinnis. “They may sell a few more hospitals,” he observed. But otherwise, “they’ve cut everything one can possibly think of.”
