LifePoint Wary Economy Could Push Up Bad Debt

Unpaid medical debt at LifePoint Hospitals  (Nasdaq: LPNT) in the first quarter was less what its leaders expected, due to fewer self-pay admissions. But executives are concerned a soft economy could push bad debt expense up and pressure the hospital’s financial results in the latter half of the year.

The Brentwood, Tenn.-based rural hospital operator set aside $82.7 million, or 11.8 percent of net revenue, for doubtful accounts, down a half percentage point from the fourth quarter ("Solid Profits Point LifePoint to Acquisitions," May 2). The set aside included about $14 million for charity care.

“Even though we had a good first quarter, our view is we could still see pressure in that area (of bad debt),” David Dill, LifePoint chief financial officer said last week during the company’s conference call with analysts.

Dill said there’s a lot of uncertainty going forward in the local markets LifePoint serves because two or three employers usually dominate the employment environment. He said self-pay admission volumes, which declined during the first quarter, could creep up. Still, he is more concerned that hard economic times would affect the hospitals’ collection rates for co-pays and deductibles as employer programs change, affecting workers’ ability to pay their share of the medical bills.

“Let's don't lose sight of rising co-pays and deductibles,” Dill said. “Those are people that have access to jobs theoretically and have money to pay. We've just got to go collect it. And in some of these markets, that could get more difficult as this year goes on. We don't know.”