National Medical Enterprises Posts 43% Lower Profit for 3rd Quarter

Citing a sharp drop in its psychiatric care revenue, National Medical Enterprises reported Wednesday that its net earnings plunged 43% in its third quarter, ended Feb. 29.

The Santa Monica-based firm earned $40.2 million on sales of $941 million in the quarter, compared to $70.9 million on revenue of $955.7 million in the year-earlier period.

The net earnings included a $4.3-million charge for redemption of the firm’s zero-coupon notes, but the most important effect on earnings was the impact of declining revenue in its psychiatric care division, which historically represents about 30% of its business.

The psychiatric hospital division, which is under investigation in three states, experienced a 24% drop in net operating revenue and an operating loss before interest.

Health care professionals are referring fewer patents to the firm’s hospitals in Texas, New Jersey and Florida, where the firm is the subject of investigations, company officials said. The New Jersey unit is the subject of a federal investigation, they said.

National Medical Chairman Richard Eamer said that cost reduction efforts undertaken had little impact on the quarter’s results but should have a greater impact on later periods.

The firm’s general hospital division had a strong quarter, posting a 20% increase in operating profit before interest charges. Similarly, its rehabilitation hospital division performed well, Eamer said.

Before the extraordinary charge, the firm earned 25 cents per share, versus 39 cents last year in the quarter.