Modern Healthcare’s 2002 Physician Pay; Specialists Rewarded with Highest Raises

Despite a weakened economy and cutbacks in reimbursements, America's physicians--particularly specialists such as radiologists, anesthesiologists and cardiologists--are enjoying another prosperous year, reaping increases in salaries and benefits.

      In many cases the pay-raise percentages are double digits. As usual, specialists remain at the high end of the salary scale, yet even comparatively low-paid primary-care physicians garnered some sizable pay increases, according to Modern Healthcare's ninth annual physician compensation report.

      "There's nothing in the numbers that jumps out as earth-shattering or startling about the salary numbers," says Sean Endicott, vice president of the physician search division at Martin, Fletcher, an Irving, Texas-based physician recruiting firm. "I think they show a continuation of what we've been seeing over the past couple of years: Specialists are in high demand, and they've been in high demand for some time."

      Adds Daniel Stech, survey operations director of the Denver-based Medical Group Management Association: "The news isn't bad for physicians, particularly some specialties, probably because of the difficulty some groups are having in recruitment."

      But that's not to say that primary-care doctors are going hungry these days. Salaries have stabilized in recent years, yet all but one of the national surveys included in the compensation report indicate that internists earned more in 2002 than they did in 2001--as much as a 9-% increase.

      "It's really just started picking up for primary care," says Mark Smith, an executive vice president of Irving, Texas-based Merritt, Hawkins & Associates, the nation's largest recruiter of full-time staff physicians.

      Martin, Fletcher pegged the average internist's salary this year at $185,000, a 9-% jump compared with last year's numbers. Two other surveyors, Coppell, Texas-based Goddard Healthcare Consulting and Philadelphia-based Hay Group, registered increases of 6-%. Only one surveyor, Detroit-based Sullivan, Cotter & Associates, showed a decrease, a 6-% drop to an average of $151,890.

      A wide range of salary numbers was posted for family practitioners. One survey showed a healthy 14-% increase, while another reported a 3-% drop. The American Medical Group Association, which represents big multispecialty physician groups, says its figures show a drop of about 1-% for family practitioners, underscoring a shift in managed care's strict gatekeeper business model.

      "We've seen somewhat of a decline in the need for primary-care physicians," says Tom Flatt, the AMGA's editor of corporate communications. "That's probably reflective of the movement away from managed care."

      Modern Healthcare's annual physician compensation report is a compilation of surveys and studies conducted by 10 organizations, including associations, consulting firms and staffing companies. The accompanying charts list the average reported annual cash compensation by specialty, as reported by each organization. The size of the samples, types of practices and methodology varied among the organizations that participated in the report, accounting for some of the disparity.

      Overall, the increase for all physicians this year is expected to be 4-%, a slight improvement from last year's 3.7-%, says Rosanne Cioffe, director of reports at Oakland, NJ-based Hospital & Healthcare Compensation Service.

      Although specialists once again were at the head of the class salary-wise, one group truly stands out: cardiologists. They enjoyed some of the highest pay increases in the 2002 survey--and the highest average salaries of all the 15 specialties charted in the surveys. The average salary for cardiologists in the MGMA's survey was a hefty $356,721, a 9-% increase from last year's $327,681. Eight of the other nine surveys also showed increases, including a 39-% jump registered by Hay. (Year-ago figures were not available for MD Network, based in Kingsville, Texas.)

      Only the survey by the Hospital & Healthcare Compensation Service veered from the norm--and sharply--with cardiologists' salaries plummeting 21-%, to $202,965 from $257,476. Cioffe says the huge disparity is attributable to a decrease in the pool of high-paying participants in the survey, and not the actual salaries paid to cardiologists.

      Radiologists were right behind cardiologists among the highest-paid physicians, earning an average of $345,265 per year, according to the MGMA's survey (despite a 3-% decrease compared with last year). Seven of the other nine reporting groups say radiologists earned salary increases, with Goddard pegging the raise at 34-%, boosting compensation to $310,000 for this year, versus $230,500 in last year's survey.

      Among the other big earners, all based on MGMA statistics: urologists, earning an average of $336,439; oncologists, earning $320,343; and anesthesiologists, earning $309,834.

      Obstetricians/gynecologists, among the hardest-hit by skyrocketing medical malpractice premiums, saw their salaries dip in six of the nine surveys. (Year-ago figures were not available for this specialty from MD Network.) Those decreases were as high as 8-%. Part of the trend may result from a willingness by these specialists to accept lower salaries if their employers contribute to insurance costs, Smith says.

      Despite optimistic trends cited by some survey firms for primary-care doctors, they tend to trail their peers in annual compensation, the reports show. The average salary for a family practitioner was $182,768, according to the Hospital & Healthcare Compensation Service; internists made $185,000, according to Martin, Fletcher; and pediatricians earned an average of $164,375, according to the MGMA. All three were the highest salaries reported in each specialty.

      Stech also says many primary-care doctors appear to be billing more to earn the same or a slightly higher salary. While MGMA statistics indicate that family practice physicians' salaries increased 3-%, those doctors also showed a 10-% increase in gross charges, he says. Gross charges jumped 11-% for internists, whose salaries rose 2-%.

      "They're working harder just to maintain their incomes," Stech says. Back to TOC.

HCA Profits Up 25-%

HCA Inc. , the largest U.S. hospital chain, said quarterly profits rose 25-% from last year on higher occupancy and patient fees, and controlled labor costs.

      Second-quarter net income rose to $350 million, or 66 cents a share, from last year's $281 million, or 52 cents a share.

      Earnings per share excluding goodwill, asset impairments and investigation costs increased 32-% to 71 cents from 54 cents a year ago.

      Analysts expected Nashville, Tennessee-based HCA to report earnings per share of 61 cents to 64 cents for the quarter with an average estimate of 62 cents, according to Thomson First Call.

      HCA's performance was aided by the continued trend of price increases to commercial health care plans--a trend that may continue for another two years. HCA has also followed a strategy of divesting hospitals that do not fit its current strategy, paring its portfolio to 181 hospitals and 80 ambulatory surgery centers from 194 hospitals and 78 ambulatory surgery centers last year.

      HCA’s revenue in the latest second quarter increased 9.5-% to $4.90 billion from $4.48 billion a year ago.

      Revenues at facilities owned more than a year increased 11.7-% during the quarter and equivalent admissions increased 3-%, reflecting strong outpatient volume.

      Equivalent occupancy increased to 79.4-% from 76.7-% a year ago, while revenue per equivalent admission rose to $8,394 from $7,765.

      In controlling costs, company executives said on a conference call that they reduced their use of agencies that provide temporary nurses. As such, salary and benefits costs fell slightly to 40-% of total second quarter revenues from 40.7-% a year ago.

      Second quarter cash flow from operations rose to $615 million from $546 million a year ago. So far this year, HCA has reinvested $829 million to expand capacity and improve equipment at its facilities. The company said it is planning to spend $1.7 billion in 2002 and $1.8 billion in 2003 before any potential acquisitions. Back to TOC.

Tenet Unit Pays $29 Million to Settle Claims Charges

Tenet Healthcare Corp.'s Lifemark Hospitals of Florida unit has paid $29 million to settle federal charges that it and affiliated and predecessor companies submitted false Medicare claims, the U.S. Justice Department said on Wednesday.

      The government alleged Lifemark's Palmetto General Hospital in Hialeah, Florida made false claims for home health services supposedly provided by three agencies in Dade, Islamorada and Key West, between 1994 and 1997.

      Santa Barbara, California-based Tenet acquired Lifemark, which does business as Palmetto, in March 1995.

      Company spokesman Harry Anderson said that Tenet disclosed the settlement last month, that the company did not admit or deny the allegations and that the home health agency involved was closed in 1998. In June, Tenet said it agreed to pay a total of about $55.75 million to settle allegations of improper billing by Palmetto and other company units.

      The claims were for services that were not rendered, were provided by unlicensed or unskilled personnel, were based upon improper or missing documentation or were never ordered by a doctor, the Justice Department charged. Additionally, the government accused Palmetto of claiming for billing fees that were not reimbursable by Medicare. The charges came as a result of a whistle-blower that filed a lawsuit against her former employers in Aug. 1997. Isabel Ayers, the whistle-blower, will receive about $4 million under provisions of the law that allow a private party to file suit on behalf of the government and receive a part of any monetary settlement negotiated by the government. Back to TOC.

Universal Health Services, Inc. Reports Second Quarter EPS Growth of 35-%

Universal Health Services, Inc. announced that its net income and earnings per share (diluted) were $44.3 million and $.69 for the three month period ended June 30, 2002, and $90.0 million and $1.40 for the six month period ended June 30, 2002, respectively. These results represent a 35-% increase in earnings per share (diluted) for the three month period and a 30-% increase for the six month period ended June 30, 2002 over the comparable prior year periods. Revenues increased 12-% to $806 million in the three-month period and by 15-% to $1.61 billion in the six month period ended June 30, 2002. At June 30, 2002, the Company's balance sheet debt, net of cash, was $676 million and its shareholders' equity was $899 million.

      Patient admissions to the Company's hospitals continue to grow rapidly. For facilities owned in both the three month periods ended June 30, 2002 and June 30, 2001 admissions to the Company's acute care hospitals, excluding the hospitals located in France, increased 6.3-% while admissions to the Company's behavioral health facilities owned in both periods increased 7.2-%.

      The Company's operating margin, defined as earnings before interest, tax, depreciation and amortization, rental, and minority interest expense was 16.0-% in the three month period ended June 30, 2002, compared to 15.4-% in the same period of the prior year. Operating margins for the Company's acute care hospitals owned in both the three month periods ended June 30, 2002 and June 30, 2001, increased to 17.8-% from 17.5-%. Operating margins for the Company's behavioral health hospitals owned in both periods increased to 20.9-% from 20.3-%. The Company's consolidated pre-tax income as a percentage of net revenue was 8.7-% in the three month period ended June 30, 2002 compared to 7.1-% in the same period of 2001, due to improvement in provision for doubtful accounts, interest expense, and depreciation and amortization expense.

      The Company currently has five major acute care hospital construction projects, which will increase current bed capacity by approximately 12-% by the end of 2003. These projects continue on schedule and on budget. The new 371-bed George Washington University Hospital will open for patient service on August 23, 2002. The 56-bed addition to Auburn Regional Medical Center will open in late December. Both the new 176-bed Spring Valley Medical Center in Las Vegas and the 90-bed expansion of Northwest Texas Hospital in Amarillo, Texas will open in the third quarter of 2003. The new 120-bed Lakewood Ranch Hospital in Manatee County, Florida will open in the fourth quarter of 2003. These projects will provide needed service capacity and quality of care improvements and be significant sources of growth for the Company.

      Universal Health Services, Inc. is a large hospital owner and operator with acute care and behavioral health hospitals and ambulatory surgery and radiation centers nationwide, in Puerto Rico and in France. It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust. Back to TOC.

Physicians React to the Rising Cost of Malpractice Insurance

With medical malpractice insurance premiums skyrocketing, more physicians are now turning to locum tenens (temporary) work in an effort to cost effectively continue practicing medicine.

      Working as a temporary physician has become a popular option for proactive doctors seeking to mitigate the expense of malpractice insurance rates. Temporary recruiting companies offer malpractice insurance coverage for the physicians they represent.

      According to the AMA, medical malpractice insurance is one of its biggest healthcare concerns this year. Many doctors are now forced to reconsider how and where they practice medicine. . In the past two years, admitted malpractice insurance carriers in states like Texas and Florida have dropped dramatically.

      For physicians, having a Locum Tenens company assume the burden of their medical malpractice insurance coverage is an advantage of practicing as a temp physician. Many physicians have tired of the business side of medicine and like the freedom of practicing as a temporary physician. There is a considerable drop in income from full time practice to a temp position.

      When insurer St. Paul Companies Inc., recently decided to exit the medical malpractice business, doctors and patients alike felt the effect. Many physicians were forced into early retirement, relocated to a different state or began practicing as locum tenens physician. St. Paul Companies chose to leave the medical malpractice business after forecasting that medical malpractice would generate a 2001 underwriting loss of approximately $940 million.

      Legislative bodies are presently considering tort reform actions that call for a cap on non-economic damages, limits on attorneys' fees and a shortened statute of limitations in most cases. As potentially beneficial as these proposed reforms would be to physicians, until they take effect, insurance premiums will continue to rise and doctors will continue to be forced to pay them. Back to TOC.

LifePoint Hospitals Reports 54.5-% Increase in 2nd Quarter 2002 EPS

LifePoint Hospitals, Inc. announced results for the second quarter and six months ended June 30, 2002.

      For the second quarter ended June 30, 2002, net revenues were $177.9 million, up 17.3-% from $151.6 million a year ago. Income before extraordinary item for the quarter totaled $13.1 million, or $0.34 per diluted share, versus $8.5 million, or $0.22 per diluted share, in the prior-year period, representing increases of 54.6-% and 54.5-%, respectively. As was previously announced, the Company recorded an after-tax extraordinary charge to income of $15.6 million for the quarter ended June 30, 2002, related to the repurchase of $120.5 million of an original $150.0 million in principal amount of outstanding 10 3/4-% Senior Subordinated Notes due 2009 issued by the Company's wholly owned subsidiary, LifePoint Hospitals Holdings, Inc. This charge includes the premium paid for the Notes (the amount paid in excess of the face value of the Notes), deferred loan costs allocable to the Notes purchased and fees and expenses incurred in connection with the purchases. During the three months ended June 30, 2001, the Company wrote off $2.6 million of deferred loan costs related to the original credit agreement, which resulted in an extraordinary charge of $1.6 million, or $0.04 per diluted share. Including extraordinary items in both periods, net loss for the quarter ended June 30, 2002, totaled $2.5 million, or $0.06 per diluted share, compared with net income for the prior year of $6.9 million, or $0.18 per diluted share. Earnings before interest, income taxes, depreciation, amortization, ESOP expense, minority interest and extraordinary loss (EBITDA) increased 21.8-% to $38.7 million from $31.8 million in the same period last year.

      For the six months ended June 30, 2002, net revenues were $359.5 million, up 17.5-% from $305.9 million a year ago. Income before extraordinary item for the six-month period totaled $27.6 million, or $0.71 per diluted share, versus $17.1 million, or $0.47 per diluted share (including a $0.5 million pre-tax gain, or $0.01 per diluted share), in the prior-year period, representing increases of 61.6-% and 51.1-%, respectively. The after-tax extraordinary charges to income mentioned above were $16.4 million and $1.6 million for the six months ended June 30, 2002 and 2001, respectively. For the six months ended June 30, 2002, the Company repurchased $128 million of the 10 3/4-% Senior Subordinated Notes due 2009. Including extraordinary items in both periods, net income for the six months ended June 30, 2002, totaled $11.2 million, or $0.30 per diluted share, compared with net income for the six months ended June 30, 2001, of $15.5 million, or $0.43 per diluted share. Earnings before interest, income taxes, depreciation, amortization, ESOP expense, minority interest, gain on previously impaired asset and extraordinary loss (EBITDA) increased 23.6-% to $81.3 million from $65.8 million in the same period last year.

      During the quarter, the Company completed an offering of an aggregate of $250 million of its 4 1/2-% Convertible Subordinated Notes due June 1, 2009. After paying expenses associated with the offering, LifePoint realized net proceeds from the offering of $242.7 million.

      LifePoint Hospitals, Inc. operates 23 hospitals in non-urban areas. In most cases, the LifePoint facility is the only hospital in its community. LifePoint's non-urban operating strategy offers continued operational improvement by focusing on its five core values: delivering high quality patient care, supporting physicians, creating excellent workplaces for its employees, providing community value, and ensuring fiscal responsibility. Headquartered in Brentwood, Tennessee, LifePoint Hospitals is affiliated with over 7,000 employees. Back to TOC.

In This Issue--Also See Archive

Modern Healthcare's Compensation Report

Despite a weakened economy and cutbacks in reimbursements, America's physicians--particularly specialists...

Anthem Completes Merger with Trigon

Anthem, Inc. and Trigon Healthcare, Inc. have closed their merger which is effective at 11:59 p.m., July...

UnitedHealth Earnings Jump 46-%

UnitedHealth Group Inc. , the managed health care company, said on Thursday quarterly profits rose...

AHERF Foreshadows Enron Et Al

Before there was Enron, WorldCom or Tyco, there was the Allegheny Health, Education and Research Foundation. Prosecutors...

HCA Profits Up 25-%

HCA Inc. , the largest U.S. hospital chain, said quarterly profits rose 25-% from last year...

Only Nevada Level-1 Trauma Center Closes

In a clear sign of Nevada's deepening malpractice crisis, the trauma center at 504-bed University Medical Center, Las Vegas...

Tenet Settles Multi-Million Dollar Suit

Tenet Healthcare Corp.'s Lifemark Hospitals of Florida unit has paid $29 million to settle federal charges that it and affiliated...

Ardent Set to Control Albuquerque Hospitals

If it completes two pending deals, Ardent Health Services, Nashville, will build an integrated system in Albuquerque that controls...

UHS Q2 Earnings Up 35-%

Universal Health Services, Inc. announced that its net income and earnings per share (diluted) were $44.3 million...

Menninger's Long-Sought Move Delayed

Modern Healthcare reports that The Menninger Clinic, which had planned to announce a new partner this week, is facing...

Docs React as Malpractice Costs Skyrocket

With medical malpractice insurance premiums skyrocketing, more physicians are now turning to locum tenens (temporary) work...

HMA Posts Record Q3 Earnings Growth

Health Management Associates, Inc. announced that its net patient service revenue grew a robust 25-% to $592.5 million...

Lifepoint Q2 Earnings Up Over 50-%

LifePoint Hospitals, Inc. announced results for the second quarter and six months ended June 30, 2002.

Humana Profits Up 19-%

Humana Inc. reported earnings of $45.4 million, or 27 cents per diluted share, up 19-% from the same period a year ago.

Anthem, Inc. Completes Merger with Trigon Healthcare, Inc.

Anthem, Inc. and Trigon Healthcare, Inc. have closed their merger which is effective at 11:59 p.m., July 31, 2002. The merger with Trigon, which does business as Trigon Blue Cross Blue Shield in Virginia, adds 2.2 million customers to Anthem, firmly placing it as the fifth largest publicly traded health benefits company in the country. With the addition of Trigon, Anthem will be the Blue Cross and Blue Shield licensee for nine states. The combined company will serve more than 10 million members.

      Anthem also announced that three members of the former Trigon Board of Directors will be elected to Anthem's Board of Directors. These new members will be Lenox D. Baker, Jr., M.D., a surgeon with Mid-Atlantic Cardiothoracic Surgeons, Ltd., in Norfolk; John Sherman, Jr., president and CEO of Scott & Stringfellow, Inc., in Richmond, and Jackie M. Ward, president and CEO of Intec Telecom Systems in Atlanta, Ga.

      The merger of Anthem and Trigon was announced April 29, 2002. Under the merger agreement, Trigon's shareholders are entitled to receive $30 in cash and 1.062 shares of Anthem common stock per Trigon share. The value of the transaction is approximately $4.2 billion, based on the closing price of Anthem stock on July 31, 2002. In addition, Anthem has secured the necessary financing to complete the transaction.

      In Virginia, the company will continue to do business as Trigon Blue Cross Blue Shield until early November when it will begin to use the name Anthem Blue Cross and Blue Shield.

      Anthem, Inc. is an Indiana-domiciled publicly traded company that, through its subsidiary companies, provides health care benefits and services to more than 10 million members. Anthem is the fifth largest publicly traded health benefits company in the United States and is the Blue Cross and Blue Shield licensee for Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada, Maine and now Trigon in Virginia (excluding suburbs adjacent to Washington, D.C.). As of December 31, 2001, Anthem had assets of $6 billion and operating revenues of $10 billion. Back to TOC.

UnitedHealth Earnings Jump 46-%, Revenues Rose 5-% to $6.08 Billion

UnitedHealth Group Inc. , the managed health care company, said on Thursday quarterly profits rose 46-%, the latest in a long string of double-digit increases, as membership growth and price increases outpaced rising medical costs.

      UnitedHealth, based in Minneapolis, also raised earnings expectations for the full year and is now estimating profit growth in excess of 30-% over 2001.

      The company said second-quarter earnings rose to $325 million, or $1.01 per share, from $223 million, or 68 cents a share, a year earlier. Wall Street analysts had expected earnings of 93 cents to 97 cents, with a mean estimate of 95 cents, according to research firm Thomson First Call.

      The results marked UnitedHealth's 15th consecutive quarter of double-digit profit growth, according to Lehman Brothers, a trend analysts expect will continue through at least 2004.

      The company, which this year eclipsed Aetna Inc as the insurer with the most members, has countered rising health care costs by surveying its doctors and patients to track disease trends and automating health data, analysts said.

      UnitedHealth also expects to sustain EPS growth of more than 15-% in 2003. Back to TOC.

Allegheny Health, Education and Research Foundation

Before there was Enron, WorldCom or Tyco, there was the Allegheny Health, Education and Research Foundation. Prosecutors and creditors are still mopping up after the 1998 collapse of AHERF, the 14-hospital, Pittsburgh-based system. In a not-for-profit scenario that parallels recent corporate failures, the rapidly expanding hospital system completely unraveled after officials raided charitable endowments to prop up downward spiraling finances.

      AHERF also broke new ground on the accounting front, marking the first case in which the Securities and Exchange Commission charged not-for-profit healthcare executives and their external auditors with misleading bond buyers--long before the auditors of publicly traded companies were called to account.

      The accounting issues also have proved to be trickiest to prosecute.

      Still outstanding is the lawsuit filed in U.S. District Court in Philadelphia in August 2001 in which the SEC charged that three auditors employed by Coopers & Lybrand, now Price Waterhouse Coopers, took part in the scheme to cover up the deteriorating financial condition of their client. The SEC long ago settled civil securities fraud charges with AHERF The distinction between the lawsuits against AHERF and its officers, and executive actions against the external accountants are subtle. The SEC sued AHERF and its officers for "their direct fraud" in misleading bond buyers on their financial condition, she said. The auditors, however, are being sued for their opinion that the audit fairly presents the organization's financial position according to accepted accounting practices. The reality was the exact opposite. Back to TOC.

Nevada's Only Trauma Center Closes Due to Malpractice Costs

In a clear sign of Nevada's deepening malpractice crisis, the trauma center at 504-bed University Medical Center, Las Vegas--the only Level I trauma center in the state--closed its doors after dozens of specialists resigned because of liability risks.

      The hospital is diverting patients to nearby emergency rooms that do not offer specialized trauma services. The most severely injured patients will be airlifted to trauma centers in Phoenix or San Bernadino, Calif., an official said. UMC has no timetable for reopening its trauma center, although officials said it will do so once enough replacement physicians have been recruited.

      Officials said 56 of 58 on-call orthopedic specialists at UMC resigned, despite the medical center's offer of additional money and liability protection. The medical center has launched a national search for orthopedic surgeons, who will be offered full-time employment. As a county-operated hospital, UMC limits liability for on-staff doctors to $50,000.

      Privately employed physicians, who make up about 75-% of all the doctors at UMC, rejected a promise by hospital administrators to extend that protection to them, questioning whether it would hold up in court.

      UMC operated the only Level I trauma center within a 10,000-square-mile radius, serving 1.5 million people who live in southern Nevada and tens of thousands of residents in parts of Arizona, Utah and California. It was the fourth-busiest center in the nation, handling about 11,400 patients last year.

      Dale Pugh, UMC's assistant administrator, said that while the nine hospitals in the Las Vegas metropolitan area will "pull together, everyone is in agreement that we will not have the highest caliber of care available anymore for those patients who are critically injured."

      Nevada is one of only nine states without any kind of tort reform, a hospital official said.

      It also is one of a dozen states cited last month by the American Medical Association as suffering a "crisis" in medical malpractice. Rates have skyrocketed, doubling and tripling in some cases, leading the state to form its own malpractice insurance company to help stem what some officials described as an exodus of physicians from Nevada. Gov. Kenny Guinn plans to call a special session of the Legislature next month to address the problem. Back to TOC.

Ardent Health Services Taking Out Lovelace Health in Albuquerque

If it completes two pending deals, Ardent Health Services, Nashville, will build an integrated system in Albuquerque that controls nearly 40-% of the city's private acute-care and inpatient rehabilitation beds, a 167,700-member health plan and a multispecialty group practice with 255 physicians.

      Ardent would also end up with a total of six acute-care hospitals and one rehabilitation hospital, up from its current two acute-care hospitals. The company also operates 22 behavioral facilities.

      Ardent signed a definitive agreement to pay $235 million for Lovelace Health Systems, which includes a 191-bed hospital, the health plan and a group practice. The deal must be approved by New Mexico insurance regulators and federal antitrust regulators, starting with a premerger notification filing with the Federal Trade Commission, the company said. The filing had not been made as of last week. The deal could take four to six months to close, Ardent said.

      The seller is insurer Cigna Corp., Philadelphia, which would continue to serve about 72,800 points-of-service, a preferred provider organization and indemnity plan members in Albuquerque. Ardent is buying only the 167,700-member HMO business that Cigna offers as the Lovelace Health Plan. The definitive agreement includes provisions in which Cigna would continue to sell some services to the Lovelace Health Plan, and the Ardent system would be open to Cigna's remaining members. Ardent also bought the rights to the name "Lovelace Health Systems" and plans to use it.

      The Lovelace purchase builds on Ardent's first foray into Albuquerque, its $77 million deal to buy four-hospital St. Joseph Healthcare from Catholic Health Initiatives, Denver. Ardent also has a definitive agreement with CHI, and the company has said the deal could close this month, although it declined to specify a closing date.

      The combined system--with 584 staffed beds, out of 1,491 total staffed beds in Albuquerque, a network of 14 clinics and the commercial Medicare and Medicaid HMOs--would rival the city's dominant player, Presbyterian Healthcare Services. Presbyterian's two Albuquerque hospitals are staffed for 530 beds, and its Presbyterian Health Plan has 330,000 members statewide, the largest plan in New Mexico. Presbyterian isn't sitting back and waiting for Ardent--it launched a new marketing campaign in May, including an ad that plays up its independent, not-for-profit status Back to TOC.

Menninger's Long-Sought Move Meets Another Delay

Modern Healthcare reports that The Menninger Clinic, which had planned to announce a new partner this week, is facing yet another delay in its long, frustrating attempt to leave Topeka, Kan., and merge with a major academic medical center.

      Officials with the world-renowned psychiatric facility, saddled with a $3 million loss in 2000, last week abruptly canceled their long-anticipated plans to anoint a new partner at a board meeting July 11.

      Last year, Menninger suffered through the collapse of its planned merger with two Houston-based healthcare facilities over the size of an expected endowment. With a new list of finalists pared to five, officials want to be absolutely certain of their next big commitment when they head to the altar a second time.

      Menninger was forced to launch a second search for a partner last summer after the collapse of its planned merger with the Baylor College of Medicine and Methodist Health Care System in Houston. The two Texas partners reportedly were unable to raise the estimated $200 million in endowment funds promised to Menninger as part of its dowry.

      After those plans fell through, Menninger resumed its search by identifying 180 potential partners--all big academic medical centers boasting a sizable research component. Menninger sent solicitation letters to 56 of those institutions, asking them to sign a confidentiality agreement if they were interested in pursuing an affiliation. Baylor had expressed interest in renewing merger talks, but a spokesman said he was unable to say anything more because of the confidentiality agreement.

      After losing about $3 million in 2000, largely because of changes in the way mental health services are reimbursed by insurers, the internationally known not-for-profit institution has gradually reduced staffing and services in anticipation of its eventual relocation. Back to TOC.

Health Management Associates Reports Record 3rd Quarter EPS Growth of 24-%

Health Management Associates, Inc. announced that its net patient service revenue grew a robust 25-% to $592.5 million for its third quarter ended June 30, 2002, up $119.3 million from $473.2 million for the same period a year ago. The Company's net income for the quarter increased similarly, up 23-% to $66.6 million, an increase of $12.5 million from $54.1 million for the same quarter a year ago. Earnings per share (diluted) for the quarter were $.26 per share, up 24-% from $.21 per share for the prior year's quarter.

      Net patient service revenue at hospitals owned and operated by HMA for one year or more was up approximately 8-%, at the upper end of the objective range. This represents the Company's 55th consecutive quarter of same hospital revenue growth. Among the factors contributing to the revenue growth were a 2.8-% increase in surgeries and a 1.6-% increase in admissions. The increase in admissions is significant given the sizable 6.7-% admission growth in the same quarter a year ago. Additionally, total admissions for the Company grew 18.6-% for the fiscal third quarter, reflecting the admission contribution from hospitals acquired during the last twelve months. Likewise, same hospital adjusted admissions, which adjust admissions for outpatient volumes, grew 3.2-% as a result of HMA's continued focus on outpatient services, such as emergency room services, which experienced a 5.5-% increase in visits compared to the same quarter a year ago. Same hospital net revenue per admission grew 6.1-% in the quarter, reflecting an improving pricing cycle and strong outpatient growth.

      HMA's same hospital EBITDA margins also expanded 10 basis points to26.5-% in the fiscal third quarter, up from 26.4-% for the same period a year ago. This margin increase resulted from strong top-line revenue growth and cost controls in nearly every operating expense category.

      During the quarter, HMA exceeded its stated acquisition objective by adding the fifth hospital of the 2002 fiscal year and the seventh acquisition in the last twelve months, by acquiring the 172-bed Mesquite Community Hospital from Manor Care, Inc. As a result of this transaction, HMA now owns 80-% of the two hospitals located in Mesquite, Texas, and is solely responsible for the operations of both facilities, representing 348 licensed beds.

      Health Management Associates, Inc is a large non-urban hospital operator of general acute care hospitals in communities situated primarily in the Southeast and Southwest. The Company, upon completing the previously announced transaction to acquire the 67-bed Madison County Medical Center, will operate 44 hospitals in 14 states with 5,970 licensed beds. HMA has experienced 13 years of uninterrupted operating earnings growth. Back to TOC.

Humana Profits Rise 19-%

Humana Inc. reported earnings of $45.4 million, or 27 cents per diluted share, up 19-% from the same period a year ago.

      Humana reported $38.1 million, or 23 cents per diluted share, in the second quarter of 2001. The results matched expectations of analysts surveyed by Thomson First Call.

      Revenues rose to $2.83 billion compared with $2.49 billion last year. Total medical membership at June 30, 2002 was 6.5 million compared with 6.4 million last year.

      Medical membership for the commercial segment increased by 55,700 members to 2.9 million at June 30, compared with 2.8 million last year. The company also said that its board of directors authorized the use of $100 million for the repurchase of its common shares. The company had 169.5 million shares outstanding as of June 30. The company said that the shares may be purchased from time to time at prevailing prices in the open-market, by block purchases, or in privately negotiated transactions.Back to TOC.