Pressure from health management organizations to cut costs and reduced patient stays resulted in a 67% drop in first-quarter profit for Community Psychiatric Centers Inc., the company announced on Monday.
It is the Laguna Hills-based company's third consecutive quarter of severe earnings reductions.
The company, which owns and operates 50 psychiatric hospitals providing short-term care in the United States and United Kingdom, had net income of $6.9 million for the three months ending Feb. 29, contrasted with earnings of $21.1 million a year earlier.
Revenue for the first quarter was $84.5 million, down 18% from $103.1 million in 1991 first quarter.
The company blamed its declines on cost-cutting measures by managed-care companies, which negotiate discount prices with health providers and other insurers. Patient days in the hospital fell by 13.7% from the first quarter of 1991.
The recession is also hurting business because fewer people have coverage for mental health care, said Steve Halper, a researcher with the New York brokerage firm Donaldson, Lufkin & Jenrette.
"These results are in line with our expectations," Halper said. "We know the psychiatric business is miserable."
He added that other psychiatric care providers are having trouble and that his brokerage expects some business failures.
Allegations of poor patient care have also taken a toll. In November, the Texas attorney general's office announced that it would investigate Community Psychiatric, which owns five hospitals in that state. No charges have been brought in the ongoing investigation, said Suzanne Hovdey, a company spokeswoman.
"The bad publicity seems to be waning," she said.
Community Psychiatric shares closed unchanged at $12.50 on the New York Stock Exchange. Community Psychiatric lost $3 million in its 1991 fourth quarter and posted a 98% drop in third-quarter earnings to $435,000. During both of those quarters, the company wrote off huge onetime charges against unpaid bills. At year's end, the company had earned $45.3 million on revenue of $396.6 million.
On Monday, the company said there are signs that business is turning around. First-quarter admissions at facilities operated for more than 12 months were up 0.9% from first quarter 1991, contrasted with a 5.4% drop in the fourth quarter. Net revenue for each day of a patient's stay increased $11 to $490 in the fourth quarter. Hovdey pointed out that that number is still low compared to first-quarter figures a year ago, when revenue per patient day was $527.
The average length of time bills were left unpaid also has dropped from 93 days to 92 days since the last quarter. During the second half of last year, that figure was well up over 100, Hovdey said. "To us, this is a sign that bill collection is under control and improving," she said.
Community Psychiatric also announced that it has received a $4.7-million payment from Ontario Health Insurance Plan for care rendered to Canadian patients, which will be accounted for in the second quarter. In the third quarter of 1991, Community Psychiatric posted a onetime charge of $6.6 million, which was the full amount owed and which the company had added to its reserves for doubtful accounts after Ontario Health slowed payments.
A continuing slump in the psychiatric care industry and allegations of poor care have cut into the company's earnings for three consecutive quarters.
(Dollars in thousands, except per-share data)
Percent 1992 1991 Change Total revenue $ 84,451 $103,086 -18.1 Net earnings 6,941 21,145 -67.2 Earnings per share 0.15 0.46 -67.4
Source: Community Psychiatric Centers Inc .