Columbia/HCA Healthcare Corp., the target of a massive federal investigation, on Friday said it expected to report a loss in the fourth quarter, suggesting the world's largest health-care company may be much sicker than previously thought.
Columbia said it expects the loss to be $1.25 billion to $1.35 billion in the fourth quarter.
Stock in Columbia fell $1.69 to close at $24.38 in heavy trading on the New York Stock Exchange.
"The second half of 1997 was a period of tremendous challenge and change," said Dr. Thomas Frist, named chief executive in July amid a widening federal probe of Columbia's business practices that is now in its second year.
Nashville, Tenn.-based Columbia said that for the three months ended Dec. 31 it will take $750 million in charges for impaired assets, of which about $450 million relates to a plan to sell certain home health operations and other businesses.
The company said it also will record $60 million in costs associated with "ongoing government investigations and severance costs," as well as a $60-million charge related to a change in accounting for business start-up costs.
The expected fourth-quarter loss equals about $1.95 to $2.10 a diluted share. A survey of 25 Wall Street analysts and brokers by market data firm First Call Corp. showed they had expected Columbia to post a profit of 16 cents a share.
"This company is definitely sicker than I thought six months ago. The organizational disarray is substantial," said health-care analyst Nancy Weaver of Stephens Inc., an investment bank and brokerage in Little Rock, Ark.
Even excluding special charges, Columbia said, it expected to lose $375 million to $425 million, or 60 cents to 70 cents a diluted share, on continuing operations for the quarter.
Fourth-quarter 1996 net income as $414 million, or 61 cents a share.
Moody's Investors Service, a credit rating firm, said Friday that it lowered ratings on certain of Columbia's senior notes and commercial paper and may cut ratings further.
Columbia said an audit of its 1997 accounts by accounting firm Ernst & Young was expected to be completed on or about Feb. 13, when final financial results will be reported.
Columbia, which has operations in 36 states, Britain, Switzerland and Spain, has been under federal investigation for more than a year. Three mid-level Columbia managers have been indicted on fraud charges, more than a dozen top executives have resigned, and numerous lawsuits are pending.
Prosectors in Tampa, Fla., said last week that they were preparing to comply with a judge's order to unseal portions of an FBI affidavit that could reveal key facts about the federal probe--the largest of its kind in government history.