AMI to Follow Pearce’s Rx for Better Earnings
The chairman of American Medical International said Thursday that the hospital chain is taking the medicine ordered by Dr. M. Lee Pearce, a Miami health consultant and a major AMI shareholder.
Two weeks ago, Pearce gave AMI a prescription for change, saying the company needed to lower costs, fire workers and sell marginal businesses to improve lackluster earnings.
If AMI ignored his advice, Pearce said, he might try to force a change in management or a merger between AMI and another firm.
“We are well on our way to accomplishing the kind of initiatives he referred to,” AMI Chairman Walter L. Weisman said in an interview after the company’s annual shareholders meeting in Beverly Hills.
Weisman said he and Pearce agree on what needs to be done to improve AMI’s performance. “We have an amicable relationship,” Weisman said.
Pearce, who owns 5.4% of AMI’s shares, didn’t attend the annual meeting and wasn’t available for comment.
Difficult Year Ahead
Weisman said AMI has already taken steps to reduce costs and raise cash. He said AMI reduced administrative overhead by 8% during its first quarter and that he expects additional savings in that area.
At the same time, he said, AMI plans to raise $100 million by selling about 30% of its British hospital subsidiary to the public next month.
But Weisman said the hospital chain nonetheless faces a difficult year in 1988. Labor costs rose 8% during AMI’s first fiscal quarter, and medical reimbursement from the government in the form of Medicare or Medicaid payments is dwindling, he said.
Weisman indicated that the industry outlook remains bleak. “The industry has been turned upside down and it is still changing, and it’s not going to stop changing in the foreseeable future,” he said.
Asked if AMI might sell more hospitals, Weisman said that at least five and possibly as many as 20 would be sold during the next three years. During the past 18 months, AMI sold 15 hospitals, fired 2,000 workers and closed its group health insurance unit to lower costs.
