MedPartners Reports Loss of $840.8 Million
In a loss that far exceeded expectations, MedPartners Inc., the nation’s largest physician-management company, on Wednesday reported a fourth-quarter net loss of $840.8 million, primarily the result of one-time restructuring and other costs.
The fourth-quarter loss, which included pretax charges of $646.7 million, was more than four times worse than the $145 million in quarterly charges that company officials had forecast in early January.
MedPartners owns some of Southern California’s largest medical groups, including Mullikin, Friendly Hills and Talbert.
“This is substantially greater than what the company had signaled a little while ago,” said one health-care analyst who asked not to be named. “The question is, is their business significantly worse than they’ve said?”
MedPartners executives did not immediately return phone calls seeking comment and further explanation for the huge loss.
Analysts said MedPartners may have loaded a lot of one-time charges into its fourth quarter to clear its books of any financial problems in an attempt to reassure Wall Street that there will be no more unpleasant surprises.
The company mentioned the huge quarterly loss in the eighth paragraph of a news release reporting that the company had appointed a new president and chief executive. He is Mac Crawford, formerly the CEO of Magellan Health Services, an Atlanta-based managed-care company.
Crawford promised a “top-to-bottom review of the company’s operating units, their financial condition and their underlying infrastructures.”
The Birmingham, Ala.-based firm said acting CEO Richard Scrushy will step down from that job but remain as chairman.
MedPartners’ stock lost roughly half its value in January after the collapse of its proposed $6.25-billion merger with smaller rival PhyCor Inc. MedPartners’ stock closed Wednesday at $11.88, down 13 cents in New York Stock Exchange trading. The announcement came after the market’s close.
MedPartners said its charge of $646 million was because of restructuring costs and included $522 million for the “impairment of goodwill” related to certain medical clinics. Analysts speculated that MedPartners was acknowledging it had paid far too much for some of the numerous medical groups it has bought in recent years.
The company said its fourth-quarter loss from continuing operations was $190 million, compared with $43.1 million in the year-earlier fourth quarter. It attributed the loss to higher-than-expected medical costs, uncollectible accounts, contract losses and additional charges for malpractice litigation reserves.
The firm said it is closing 84 clinics--including some in Southern California--and 238 physicians will be “affected” by the moves. The company managed medical practices for more than 13,500 physicians.
