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Columbia/HCA profits dim
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September 9, 1997: 9:25 p.m. ET
Troubled health-care giant slashes earnings projections amid fraud probe
From Correspondent Katherine Barrett
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NEW YORK (CNNfn) - Shares of health-care colossus Columbia/HCA were hit hard Tuesday when it became evident a widening federal fraud investigation is hurting the company's bottom line.
Columbia/HCA slashed third-quarter profit forecasts by more than 50 percent, with earnings possibly dropping as low as 20 cents a share. Wall Street had counted on 53 cents.
The shortfall is being blamed on the massive fraud investigations facing the company. Lawyers' fees, severance for ousted top executives and the handling of multiple investigations have cost Columbia/HCA $60 million this quarter.
"It'll take months... and potentially years before the ultimate outcome is known," said Merrill Lynch health-care analyst Margo Vignola. "The management remains focused on resolving those issues rather than growing earnings." (148K WAV) or (148K AIFF)
Columbia/HCA expects third-quarter revenues to be flat or even fall slightly, mainly because admissions dropped an estimated one percent in August. Analysts predict the financial picture will get worse before it gets better.
"The investigation itself is not as serious as the negative publicity caused by the investigation," said Sanford C. Bernstein analyst Kenneth Abramowitz. (101K WAV) or (101K AIFF)
Columbia/HCA's CEO tried to reassure analysts Tuesday, but investors battered Columbia/HCA-HCA stock. It fell nine percent in heavy trading to 29-5/8, losing 3-1/16 points. Since peaking in February, the stock has lost one-third of its value.
Meanwhile, the federal investigation shows no sign of letting up. Medicare administrators around the country were told this week to stop processing final paperwork from more than 200 Columbia/HCA hospitals. The facilities will still receive Medicare payments, but the Justice department and Medicare administrators are keeping books open for further review.
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Columbia/HCA
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