|
HealthSouth shares slide
|
 |
October 1, 1998: 8:54 a.m. ET
Profit warning by health-care firm highlights industry-wide pricing fears
|
NEW YORK (CNNfn) - HealthSouth Corp.'s stock plummeted 28 percent, highlighting concerns in the health-care industry about how managed-care pricing will affect companies' earnings.
Shares of Birmingham, Ala.-based HealthSouth (HRC) fell 4-1/8 to close at 10-1/2 in Wednesday trading after the company said it may have to lower its earnings estimates amid concerns about managed-care pricing.
HealthSouth, the nation's largest provider of outpatient surgery and rehabilitative healthcare services, indicated it was facing continuing pressure from major managed-care firms to renegotiate existing contract terms, as well as delays in reimbursement from those firms.
The company said it is evaluating whether those factors will affect its earnings for the remainder of 1998 and in 1999.
The news exacerbated fears that already had begun rippling through the health-care industry, particularly because HealthSouth has been a consistently strong performer, posting 48 quarters of steady earnings growth.
Suddenly, however, three analysts had cut their estimates for the company. Jean Swenson of BT Alex. Brown lowered her 1999 earnings target to $1.30 per share from $1.40 because she expects the company to yield to pressure from health maintenance organizations. Swenson also cut her rating to "buy" from "strong buy."
HealthSouth's warning comes as other once-high-flying health-care companies, such as Oxford Health Plans Inc. (OXHP) and PhyCor Inc. (PHYC), have logged disappointing earnings.
In a statement, HealthSouth Chief Executive Officer Richard Scrushy said the company's fundamentals remain strong. But he also told the Wall Street Journal that the company's growth rate is beginning to slow to 15 percent to 20 percent, down from the 30-percent growth it had been enjoying.
"They've been holding the line for too long,'' Swenson said. ''[HealthSouth] is the cheapest game in town, but they (HMOs) want it cheaper." 
-- from staff and wire reports
|
|
|
|
|
|
HealthSouth
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
