Columbia / HCA, Citing Probe, Says Profit Fell 57%

Columbia/HCA Healthcare Corp. said Wednesday that its third-quarter earnings fell 57% as increases in operating costs outstripped growth in revenue amid a government inquiry into the possibility of Medicare fraud.

The earnings decline--the first time in five years that the Nashville-based hospital group failed to increase its profit--is the latest consequence of the investigation that forced the resignation of Chief Executive Richard Scott in July.

The health-care group, which is the country’s largest, said its cost structure remained geared for rapid expansion even as the company slammed on the brakes under a new chief executive. Negative publicity from the government investigation also slowed growth, Columbia said.

“They can’t make those cost adjustments overnight,” said Amy de Rham, an analyst at Nationsbanc Montgomery Securities.

Columbia shares fell 50 cents to close at $27.50 on the New York Stock Exchange.

Profit from continuing operations fell to $129 million, or 21 cents a share, for the third quarter, down from $299 million, or 44 cents, for the same period last year. The most recent results are 3 cents short of analysts’ average estimate.

Columbia took a charge of $38 million, or 6 cents a share, in the latest period to cover the costs of an internal audit and severance payments.

The third-quarter results were below the company’s forecast last month of 26 to 31 cents a share, when it warned that patient admissions were being hurt by negative publicity.

In a conference call with reporters, Columbia spokesman Vic Campbell said the company will continue to have problems because of the government inquiry, including negative publicity and disruption of operations, and that the company must also deal with changes in Medicare billing.

*

Viacom Inc. said its third-quarter earnings dropped 70% as weakness at the Blockbuster video chain offset strong performances from MTV, Paramount studios and the media conglomerate’s other businesses.

New York-based Viacom earned $434.3 million, or $1.19 a share, for the July-September quarter, down from $1.41 billion, or $3.82 a share, for the same period last year. Revenue rose 12%, to $3.65 billion from $3.27 billion.

The earnings include a gain of $416 million in the recent quarter from Viacom’s selling its radio station business and a gain of $1.3 billion last year from spinning off its cable systems operations.

Excluding those businesses, earnings from continuing operations dropped 83%, to $18.4 million from $108.6 million, matching analysts’ expectations.

Not including interest costs, taxes and other items not related to day-to-day operations, Viacom’s earnings were down only 4%, to $667.8 million from $693.8 million.

Viacom’s Class B shares rose 63 cents to close at $29.74 on the American Stock Exchange.

Operating earnings from Viacom’s video and theme parks unit dropped 75% on reduced value of Blockbuster’s videotape inventory and costs to refocus the chain on video rentals rather than broader retail sales. Pay-per-view and satellite television have helped take customers away from Blockbuster.

Those results offset a 22% rise in operating earnings from networks and broadcasting, led by MTV, and a 29% jump from Viacom’s entertainment group, which included strong box-office results from the films “Face/Off” and “In & Out” and syndication revenue from the TV show “Frasier.”

At a Glance:

CompUSA said its third-quarter profit increased 61%. The Dallas-based computer retailing chain said earnings rose to $23.5 million, or 25 cents per share, from $14.6 million, or 15 cents, a year ago.

Electronic Data Systems Corp. said third-quarter earnings fell 7.4% to $246.8 million, or 50 cents a share, from $266.4 million, or 55 cents, a year earlier.

W.R. Grace & Co.’s third-quarter profit from continuing operations rose 23% to $67 million, or 91 cents a share, from $54.4 million, or 60 cents, in the year-ago period.

Reader’s Digest Assn.reported a fiscal first-quarter loss from operations of $4.6 million, or 5 cents a share, for the period ended Sept. 30, contrasted with a net income of $34.6 million, or 32 cents, for the year-earlier period.