Six months after posting its first-ever annual earnings decline, Comprehensive Care Corp. said Tuesday that it expects to report sharply lower earnings for its fiscal 1987 second quarter ending this month.
B. Lee Karns, CompCare's chairman and chief executive officer, blamed the new round of disappointing results on decreased occupancy rates and lower lengths of stay at its facilities--two conditions which have battered most health care companies since the 1983 imposition of limits on Medicare payments.
Net earnings for the second quarter of Irvine-based CompCare's fiscal 1987 are expected to fall 38% to 45% from the $4.7 million in net earnings the company had a year ago, Karns said. That translates to net earnings of between $2.6 million and $2.9 million. Revenues are expected to fall by a more modest 4% to $45 million from $47 million a year ago.
CompCare, the nation's largest operator of drug and alcohol abuse treatment programs, recently has been the subject of critical news reports alleging various abuses at some of the CareUnit hospitals it operates.
Stock Falls $1.875
The negative publicity, Karns said, has contributed to a reduction in the number of adolescents admitted to CareUnit treatment facilities during the current quarter.
Following Tuesday's announcement, CompCare stock fell $1.875 on the over-the-counter market to close at $12.50 a share. Volume for the day was 112,000 shares.
CompCare not only is feeling the impact of cost-containment pressures but faces a growing competitive challenge from traditional hospital management companies, said analyst Larry Selwitz, of Bateman Eichler, Hill Richards Inc. in Los Angeles.
"If you look at the health care industry, you have a lot of companies asking themselves 'Where are we going, and how are we going to grow?' " Selwitz said. "There is no question but that there is going to be a hell of a lot more competition."
Selwitz said he expects CompCare to continue to post low earnings for at least two more years, about the length of time it will take for the company to develop new markets.
Karns said CompCare plans to announce several new programs shortly, programs the company hopes will supplement its sagging earnings.
He said the new programs probably will not have much near-term impact on earnings, but he would not elaborate.
As previously reported, CompCare's net earnings for its fiscal 1986 fell 24% to $13.1 million from $17.2 million a year earlier. Revenues increased 22% to $192.9 million from the year-earlier $158.5 million.