Community Psychiatric Centers Earnings to Drop : Finance: The Laguna Hills chain predicts a decline of about $14 million due to bad debts and bill-collection delays.

Community Psychiatric Centers said Monday that its fourth-quarter earnings will be reduced by about $14 million because of continuing losses from bad debts and delays in bill collection.

The Laguna Hills-based psychiatric hospital chain also said that its patient numbers and new admissions have dropped in the fourth quarter compared to a year ago. The company attributed the decline to the weak economy and tougher admissions-review policies by third-party providers such as health maintenance organizations.

Patient admissions since Sept. 1 have dropped 6% to 8% compared to a year earlier, the company said.

It also said admissions have been hurt by unfavorable media coverage about alleged fraudulent business practices involving Psychiatric Institutes of America, a private psychiatric hospital chain owned by National Medical Enterprises in Santa Monica.

The company said its business with health maintenance organizations has declined as HMOs negotiate lower rates and place tougher limits on the length of time a patient can be treated in psychiatric hospitals and still receive insurance reimbursement. HMOs account for about 35% of CPC’s annual sales.

The company said the $14-million reserve should account for anticipated losses in accounts receivable as of Sept. 30. CPC’s accounts receivable totaled $108 million as of Aug. 31, company spokeswoman Suzanne Hovdey said.

The company has already taken a $23-million reserve against its third-quarter earnings for billing problems.

CPC said its billing problems have been particularly bad in California, a competitive market that accounts for one-quarter of the company’s hospital beds. Because of those problems, the company said that Richard L. Conte, president, will now oversee its 15 California hospitals.

The company’s stock closed at $12.50 Monday, down $1.25 a share on the New York Stock Exchange.

CPC Chairman James Conte said the company has tabled its acquisition plans because of negative trends in the industry. In September, CPC made an offer valued by analysts at $350 million to acquire two Texas health-care companies. But the company dropped those plans after reporting a 98% decline in third-quarter earnings.

“They realize they will be busy cleaning their own house,” said Joel Ray, an analyst at Kidder, Peabody & Co. in New York. “The whole industry is going through a shakeout.”

In October, Psychiatric Institutes of America, a CPC competitor, was hit with allegations that some of its hospitals and treatment centers systematically misdiagnosed, mistreated and abused patients to increase its profits from insurance claims. The company has said it is not guilty of any wrongdoing and that the charges are inaccurate or overblown.

But CPC, which has not been accused of any wrongdoing, said it has been hurt by the unfavorable industry publicity.

The company said it is also looking for a full-time chief financial officer. It will also establish an internal audit department and a national accounts-receivable department in an effort to more closely monitor accounts receivable.

CPC operates 50 hospitals in 18 states with a total of 5,100 beds.

For the nine months ended Aug. 31, it reported earnings of $48.3 million on revenue of $311.2 million.