Hospitals

Columbia/HCA Healthcare Corporation

Columbia/HCA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %> is in the midst of some pretty ugly proceedings right now. Three executives of the company have been indicted for allegedly falsifying Medicare reimbursement claims. The number in question? $1.7 million in interest expenses that were not fully deductible under Medicare rules. Even though the government contractor in this case made what may be the crucial mistake, Columbia/HCA cannot seek restitution from the government on the matter. Meanwhile, whistleblowers have the incentive of winning themselves double-digit percentages of fines that the company might have to pay.

Does this damage the long-term viability of Columbia/HCA? We don't think so. Have the allegations of scandal, and even the payment of fines, hurt the long-term prospects of companies like General Electric, General Dynamics, or Archer Daniels Midland? Nope. Therefore, we're going to look past the current problems of the company and at a credible scenario in which we can see Columbia/HCA growing at an annual rate in the mid-teens over the coming five to ten years.

There's more than enough room to consolidate the industry, and that's where we think CEO Dr. Thomas Frist will concentrate. Statistically, there appears to be nothing out of the norm in Columbia's solid numbers. As the industry leader with a solid balance sheet and an attractive price at least 40% below what we figure to be intrinsic value, Columbia/HCA appears to be the most attractive company for building solid shareholder value over the next five to ten years.

Latest Financials

Revenues totaled $5.2 billion for the quarter ended June 30, 1997, up from $4.9 billion in the second quarter of 1996. Earnings per share rose 15% to $0.62 from $0.54 last year. For six months ended June 30, 1997, revenues totaled $10.5 billion, up from $9.9 billion during the six months ended June 30, 1996. Earnings per share for the six-month period totaled $1.32, up 15% from $1.15 reported for the same period of 1996.

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