Health Care Provider Sees Earnings Plunge

Community Psychiatric Centers Inc., the latest victim of the troubled psychiatric care industry, said Friday that its third-quarter earnings plunged 98%. In heavy New York Stock Exchange trading, its share price sank 27% on the news.

The Laguna Hills-based company blamed its dismal performance on pricing pressures and millions of dollars in uncollected bills.

In addition, the company ratcheted down its offer to buy two Texas-based hospital companies, Healthcare International Inc. and HealthVest, after examining their financial records. Stock analysts estimated the revision at about 10% less.

The sharp drop in earnings stunned most of Wall Street. The stock, which had fallen $2.75 on Thursday, plummeted $6.25 on Friday to close at a 52-week low of $17.25 with 5.2 million shares traded.

“You’re basically seeing the ravages of shareholders disappointed,” said Daniel T. LeMaitre, a health-care analyst at Cowen & Co., a Boston brokerage. LeMaitre had expected earnings of about 43 cents a share--lower than the 48-cent-per-share average Wall Street forecast.

Instead, Community Psychiatric reported earnings of 1 cent per share on total revenues of $90.35 million, compared with earnings of 43 cents per share on revenues of $94.86 million for the same quarter last year.

The company attributed some of the slump to a one-time, $23-million reserve against uncollected bills.

However, even discounting that non-recurring charge, baseline earnings would have been 32 cents per share, compared to 38 cents per share for the same quarter last year, reflecting sluggish hospital admissions, shorter patient stays and a drop in net revenue per patient, said analyst Rae Alperstein of Kemper Securities Group Inc. in Los Angeles.

“I initially believed that the market was overreacting, but then I realized that business was really bad,” Alperstein said.

“It sounds like some of the very tough industry trends are catching up to them,” LeMaitre agreed.

Community Psychiatric runs 50 hospitals in 18 states and is seeking to add 1,400 beds to its 5,100 beds by buying Healthcare and HealthVest, each headquartered in Austin, Tex. Company spokeswoman Suzanne Hovdey said the chain hopes to offset the shorter patient stays by increasing patient volume through more hospital acquisitions.

Alperstein and other analysts had valued Community Psychiatric’s initial offer for the Texas companies at roughly $76 million and the assumption of $254 million in debt. She estimated Friday’s offer at less than $46 million plus the debt.

HealthVest President Clark Abbott, who valued the old offer at a total of $350 million and had not yet analyzed the new one, said major shareholders were “not nearly as pleased.” Abbott said another potential suitor, Greenery Rehabilitation Corp. of Newton, Mass., might soon make a more attractive bid.

Community Psychiatric Centers

In the third quarter ended Aug. 31, Community Psychiatric Centers Inc. reported net earnings of $435,000 as its revenues dropped 4.75% to $90.3 million. The company attributed the slump to a one-time $23-million write-off as well as pricing pressures.

Figures are in thousands, except per-share data.

3rd Qtr 3rd Qtr 9 Months 9 Months 1991 1990 1991 1990 Revenue $90,347 $94,858 $311,157 $282,181 Net income 435 19,737 48,292 62,476 Per share .01 0.43 1.04 1.35

Source: Community Psychiatric Centers Inc.