Iasis ready to 'get in the game' on acquisitions

Goodwill impairment charge hits Q4 bottom line, but cash flow soars

Email | Print By Erin Lawley

Iasis Healthcare signaled on its year-end conference call this morning that its growth strategy for the future includes increased acquisition activity.

In response to a question about plans for growth now that it has completed a range of planned capital expenditures, CEO David White said the company thinks “there are some very good acquisition opportunities, and we plan to be very proactive in the mix there.” Iasis runs 15 acute-care hospitals and one behavioral hospital.

Asked to elaborate later in the call, White added: “We’ll be a lot more proactive than we have been in the past, and I would just say we’re gonna get in the game. And when you get in the game, you try to get as many at-bats as you can, and I think that’s the way it’s got to be done. And we just have to look at each situation on a case-by-case basis, but the operative words are ‘look at’ and ‘be in the game.’”

Iasis ended the year with operating cash flows of $272 million, up about 90 percent from fiscal 2008. For the fourth quarter ended Sept. 30, net revenues rose by more than 20 percent to $620 million. Admissions rose 4.2 percent compared to the prior-year quarter, but for the year were down slightly, 0.2 percent.

However, the company reported a nearly $30 million net loss for the quarter due to a $43.2 million after-tax charge for the “impairment of goodwill related to the Florida market.” A year ago, profits came in at $5.2 million.

White explained that the charge was the result of “taking a look at the assets, as our auditors do every year, and making the calculations they make. This was something we’ve seen coming for a while, even though the hospitals continue to be profitable. It’s just not a dynamic market” and the company’s ability to expand is limited by Certificate of Need restrictions.

The Florida market is also particularly more difficult because of its high Medicare utilization and the negative impact of the economy, he explained.

Bad debt as a percent of revenue increased 2 percent in the quarter. CFO Carl Whitmer said the company has seen growth in uncompensated care in all of the company’s markets and an increase in self-pay admissions in all markets but one. Self pay-admissions as a percent of total admissions were 6.7 percent compared to 5.4 percent.

For the year, net revenue totaled $2.4 billion, up 14.4 percent from the prior year. Net earnings from continuing operations for the year, including the goodwill impairment charge, were $28.3 million compared to $47.6 million in 2008.