48% Earnings Fall by Community Psychiatric Is Not Its Fault, It Says : Health: The hospital chain blames bad year on Texas fraud probe in which it was exonerated. It sees better results in 1993.

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Community Psychiatric Centers, the Laguna Hills-based psychiatric hospital chain, Thursday blamed a 48% drop in its annual earnings on its being unfairly targeted last year in an insurance fraud probe.

But with its recent exoneration by the Texas attorney general’s office, the company said it hoped 1993 will mean a boost in profit and revenue as confidence in the hospital chain returns.

“Our recent voluntary agreement with the Texas attorney general has given our rebuilding effort a significant boost as we enter 1993,” said Chairman Richard L. Conte.


The company also cited higher staffing and administrative costs along with continued pressure by insurers concerned with managing health care costs as causes for lagging profits.

Conte said that a yearlong effort to cut administrative costs and to reduce its debt load to 5% will help the firm weather changes in the health care system.

“We are confident that Community Psychiatric Centers will be one of the survivors of the shakeout which is currently underway,” he said.

For the year ending Nov. 30, the company reported earnings of $23.13 million, down from $45.28 million the previous year.

Revenue for the year totaled $347.7 million, down 12% from $396.6 for fiscal 1991.

The company also reported fourth-quarter net income of $1.2 million, or 3 cents a share, which contrasts with a loss of $3 million, or 6 cents, for the previous year’s fourth quarter. Revenue for the quarter rose 2% to $86.3 million.

The company announced Jan. 15 that it had been cleared of any suspicion by Texas Atty. Gen. Dan Morales in connection with a probe, begun in 1991, of alleged fraud by the psychiatric industry.


The attorney general was investigating the four largest psychiatric firms operating in that state. Community Psychiatric Centers was the only one of the four chains that was not fined in the wake of that insurance scam probe.

The company agreed to abide by new industry regulations that call for more restrictive marketing and admission policies.

Sharon Dorsey Wagoner, an analyst with Argus Research in New York, said she remains cautious about Community Psychiatric’s future, but added that “it’s beginning to look better.”

She also said that “it’s definitely good news that they settled” with Texas law enforcement officials.

For the time being, however, she said she will continue to suggest that investors sell the stock until she sees an improved balance sheet and higher admissions at the firms’ 51 hospitals in the United States, Puerto Rico and Great Britain.

“That’s still a little premature to do,” Wagoner said.

Community Psychiatric Centers’ stock closed Wednesday at $10.875 a share on the New York Stock Exchange, up 12.5 cents.