BUSINESSGoing south: How one hospital company crashed and burnedThe high-flying rehab hospital giant HealthSouth has crashed to Earth. Is this just one company's isolated problems, or are all large for-profit physician and hospital companies doomed to failure?By Bob Cook, AMNews staff. Dec. 2, 2002. HealthSouth, which spent the 1990s aggressively building the nation's largest chain of rehabilitation facilities and outpatient surgery centers, is in need of some rehabilitation itself. The Birmingham, Ala.-based company, which owns 1,900 centers spread over all 50 states and a few locations elsewhere, has suffered compound fractures over the last year. The most severe came when it declared Aug. 27 that, because of a Centers for Medicare & Medicaid Services' clarification on how physical therapy services would be billed, the company would see revenue decline by $175 million in 2002. That sent the company's stock down 44% in one day, to $6.71 from about $12. On Nov. 5, the company announced that its profits would be even less than Wall Street expected. The company in the third quarter of 2002 earned $38.3 million -- or 10 cents per share -- of revenue, down more than half from the $79.1 million -- or 21 cents per share -- in the like period in 2001, though revenue bumped up 2% to $1.1 billion. As a result, HealthSouth shares dropped another 32%, to $4.07. Given that HealthSouth has followed the same pattern as so many other once-booming for-profit health companies -- grow, grow faster, grow even faster, crash in a heap of its own chutzpah -- the question is, is it impossible to mix caregiving with Wall Street? Is HealthSouth doomed no matter what? There's a temptation to say yes. Historically, companies that grew too fast suffered under some combination of an inability to integrate their acquisitions into a cohesive whole, a propensity to upset physicians by cutting corners on paying for care, or questions over whether they're overbilling Medicare or other insurers to keep earnings growing to Wall Street's satisfaction. In this, HealthSouth has plenty of company:
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Copyright 2002 American Medical Association. All rights reserved.
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