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Subject: Companies In The News
Date: Mon, 23 Nov 92 12:15:13 EST
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11/23/92


TITLE Companies In The News Health Care & Retirement Builds For A
Growing Business John A. Jones An aging U.S. population is sure
to bring more business to nursing homes. The outlook is even
stronger, analysts say, as the homes evolve into lower-cost sites
for medical care that once was available only in hospitals.
Health Care and Retirement Corp., one of the group's leaders, is
building and acquiring new properties for the expected boom.


Investor's Business Daily, Medical - Nursing Homes ranks eighth,
based on six-month stock-price performance with added weight
given to recent months. In this series, leading companies within
the group are reviewed.  In October 1991, HCR made its initial
public offering and acquired the health-care subsidiaries of
Owens-Illinois Inc. Chairman and Chief Executive Paul A. Ormond
has headed the company since its founding. He had been in charge
of the operations since 1986, while they were part of Owens-
Illinois.  The company is maintaining high occupancy rates and
reports a favorable percentage of patients who either pay their
own way or have insurance.

Occupancy Rate Improved

HCR reported its occupancy ran 91.3% in the latest quarter, up
from 89.5% a year earlier, compared with an industry averages of
about 90%. Ormond said HCR's mature facilities open more than
three years average about 93%, while those opened since 1988 run
over 80%.  The "revenue quality mix" in the latest quarter showed
59% of the patients paid privately, had Medicare or other in-
surance, up from 56.4% a year earlier. The balance came from
lower-paying state Medicaid reimbursements.  Third-quarter earn-
ings rose 48% to 43 cents a share from 29 cents a year earlier,
on a pro-forma basis assuming the company had been public a full
year. Net income was up 46% to $7 million from $4.8 million.
Revenue rose 13% to $126.6 million from $112.4 million.  Paul Or-
mond

For the nine months to Sept. 30, earnings rose 48% to $19.2 mil-
lion, or $1.18 a share, from $13 million, or 80 cents a share, a
year earlier. Nine-month revenue rose 14% to $367 million from
$322 million.  Ormond said key factors in the nine-month gains
included higher occupancy rates, a better quality mix in revenue
and reduced interest rates on lower debt levels.  On Sept. 30,
HCR showed total debt of $172 million, or 38% of total capital.

Ormond said HCR paid down about $50 million debt in the past
year, reducing its debt ratio from about 50% of total capital to
the present 38%. He said the company now has "a fairly conserva-
tive balance sheet that gives us the capital to grow by acquisi-
tion." Early this month#m#cq#m#, HCR acquired Heartland Rehabili-
tation Services Inc., an Ohio-based rehabilitation therapy pro-
vider with three outpatient clinics and contracts to serve more
than a dozen nursing home companies, including HCR.  The price
was not disclosed.  HCR is aggressively adding medical specialty
units, including rehabilitation units, offering an alternative to
hospital stays. The company added five new specialty units in the
third quarter, bringing the total to 34 units with more than
1,000 beds.  HCR operates 129 long-term care centers in 17
states, totaling more than 16,500 beds.

The company sold six facilities in Connecticut early this year
and expects to sell five homes in Massachusetts by year-end to
complete its divestiture of facilities that are "less important
strategically," Ormond said.


Opportunities In Rust Belt

"Our focus is in the Midwest, the mid-Atlantic states and Florida
- the same half of the country we're in now," he said. "We think
the general Rust Belt has a lot of good opportunities for new fa-
cilities and new services in our existing facilities."

HCR has begun building a major 120-bed center at Sarasota, Fla.,
including a large rehabilitation unit, and plans to start another
new facility in Boca Raton, Fla., early next year.  "The outlook
is very strong for the entire nursing home segment," said Robert
J. Hoehn, an analyst at Bear, Stearns & Co. The demand for nurs-
ing home beds is increasing with the aging population, he said,
but the industry's returns historically were limited by other
factors, including a nursing shortage and curbs on state pay-
ments. Now the trends are turning in the industry's favor.

"Due to some legislative and judicial changes, there's now an op-
portunity to get decent rates of reimbursement from the states
for Medicaid recipients," Hoehn said. "And the entire for-profit
industry is adding sub-acute specialty units," adding to the fa-
cilities' revenues and boosting returns.

Average reimbursements are increasing while occupancy is growing,
Hoehn said, resulting in better margins for the entire industry
over the past 18 months.  Tuesday: Living Centers of America

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