Thumbs Down: Hospitals Sick

Physician's Money Digest, October31 2003, Volume 10, Issue 20

A few years ago, for-profit hospitalswere hot stocks, with companieslike HCA and Tenet Healthcarecruising to new highs. Growth rolledalong at a sizzling 17% clip last year,but is forecast to come in at a moremodest 9.5% this year. And that figureexcludes Tenet, which recentlyadmitted that a hefty chunk of its revenuecame by way of a loophole inthe Medicare system. That admission,along with declining inpatient admissionsand rising labor costs connectedto the nursing shortage, has causedhospital stocks to turn ice-cold. HCAhas dropped 13.5% so far this year andTenet, which paid $54 million to USand California governments to endcriminal and civil investigations, hasposted a year-to-date 8% loss. Tenetstock has fallen more than 71% fromits 52-week high, which earned it a"sell" rating from Prudential Financial.