TORONTO and HOUSTON, Aug. 14 /CNW/ - Northstar Healthcare Inc. (TSX:NHC)
today announced its financial results for the second quarter and six months
ended June 30, 2009. All dollar amounts are in United States currency;
percentage calculations are based on the numbers in the financial statements
and may not correspond to rounded figures presented in this release.
Detailed information relating to the second quarter and six months ended
June 30, 2009 is available in Management's Discussion and Analysis (MD&A) and
Consolidated Financial Statements, which are available on the company's web
site at: www.northstar-healthcare.com and at www.sedar.com. This information
is not intended to provide a comprehensive comparison of financial results.
Second Quarter Results
In the second quarter ended June 30, 2009, Northstar generated net
patient service revenue of $6.6 million compared with $10.9 million in the
corresponding period of 2008. In June 2009, after comparing historical payment
data to the estimated net patient service revenues primarily reported in 2008,
management determined that actual collections as of June 30, 2009 had exceeded
2008 reported revenues. As a result, the Company recorded a $1.5 million
increase to net patient service revenues during the three months ended June
The year-over-year reduction in revenue was attributable to a 30%
decrease in case volume - to 1,754 cases in the second quarter of 2009 from
2,504 in the 2008 period - and a 14.3% decrease in the overall reimbursement
rate. The reduction in the reimbursement rate is related to two issues. First
is the significant decrease in highly reimbursed cases at Palladium-Houston,
attributable to the previously disclosed collection difficulty with one of the
center's major payors and the attendant reduction in use by physicians under
'Exclusive Use' contracts. The second is lower reimbursement levels at the
Kirby Center, resulting from the in-network contract that took effect January
Northstar recorded Q2/2009 income from operations of $0.1 million
compared with $6.0 million in the 2008 period. Net income in the 2009 period
was $1.7 million, or $0.12 per share fully diluted, compared with $2.9
million, or $0.21 per share fully diluted. The net income figures included
foreign currency gains of $2.6 million in the 2009 period and $1.6 million in
the 2008 period.
Cash flows provided by operating activities in the second quarter of 2009
were $1.6 million, compared with $6.6 million in the corresponding period in
Northstar reports Adjusted EBITDA which, while non-GAAP, is a useful
measure of the performance of the Company. During the second quarter of 2009,
Adjusted EBITDA net of non-controlling interests, capital expenditures, and
before an unrealized loss on foreign exchange contracts and non-controlling
interest, was negative $0.5 million. This compares with positive Adjusted
EBITDA of $3.2 million in the corresponding 2008 period.
"Q2 results reflected the ongoing and previously disclosed difficulty in
collections at Palladium-Houston from a major health insurance provider," said
Steve Linehan, CEO of Northstar. "We are in the process of negotiating an
in-network contract with this payor and are optimistic that this initiative
will soon lead to a comprehensive solution of the dispute."
Six Months Results
In the six months ended June 30, 2009, Northstar generated net patient
service revenue of $12.2 million compared with $21.9 million in the
corresponding period of 2008. As indicated above, the 2009 figure included
$1.5 million in revenue attributable to 2008 operations, as the company's
final 2008 collections exceeded the reported figures.
The year-over-year reduction in revenue was primarily attributable to a
27.1% decrease in case volume - to 3,497 cases in the first six months of 2009
from 4,795 in the corresponding 2008 period - and a 24.2% reduction in the
overall reimbursement rate. The reduction in the reimbursement rate is related
to the same two issues identified above in the discussion of the second
Income from operations for the six months ended June 30, 2009 was
negative $0.3 million. This compares with positive income from operations of
$12.3 million in the comparable 2008 period. Net income in the 2009 six-month
period was nominal, compared with $5.0 million, or $0.36 per share fully
diluted, in the 2008 period. The net income figures included a foreign
currency gain of $1.2 million in the 2009 period and a loss of $1.2 million in
the 2008 period.
Cash flows provided by operating activities in the first six months of
2009 were $4.5 million, compared with $13.1 million in the corresponding
period in 2008. Adjusted EBITDA net of non-controlling interests, capital
expenditures, and before an unrealized loss on foreign exchange contracts and
non-controlling interest, was negative $0.7 million in the 2009 six month
period. This compares with positive Adjusted EBITDA of $6.7 million in the
corresponding 2008 period.
"Management is intensely focused on four major initiatives at this time:
a successful resolution of the major payor collection issue at
Palladium-Houston, including the negotiation of an in-network contract; a
re-syndication of the Palladium-Houston partnership designed to result in a
broader base of revenue at the facility; a timely resolution to the previously
disclosed claims filed against Dr. Kramer and associated entities; and
disciplined management of operating costs. The resolution of these matters and
the clarification of their inherent uncertainty should permit further timely
progress on the Strategic Review Process initiated by the board in Q1, 2009,"
added Mr. Linehan.
"We have already made tangible progress on all of these initiatives.
Talks with the third party payor are at an advanced level; re-syndication
meetings and initiatives are progressing; the company has filed a request for
mediation of the Kramer-related claims with the American Arbitration
Association; and cost reduction initiatives are continuing at both
facilities," he said.
The company noted, however, that progress on the re-syndication has been
somewhat slowed, due predominantly to the claims the Company has made against
Dr. Donald Kramer, related entities and certain former managers, who own
approximately 19% of the Palladium Partnership under agreements relating to
Northstar's acquisition of its interest in the Palladium Partnership.
In March 2009, Northstar selected an independent third party valuator to
conduct a formal valuation in connection with the announcement by Dr. Donald
Kramer, Northstar's former chief executive officer, in February, 2009 that he
intended to lead a group of physicians, through an acquisition company, to
make an offer to acquire all the issued and outstanding common shares of
Northstar for Cdn$0.95 per common share in cash. The valuation process
requested by Dr. Kramer has not yet been initiated as Dr. Kramer has not yet
advanced a retainer to cover the expenses for the valuator, which expenses are
required to be paid by Dr. Kramer under applicable securities laws.
A conference call for the investment community will be held today, August
14, 2009 at 10:00 a.m. (ET). The call-in numbers for participants are
416-644-3427 or 800-590-1817. A live audio feed of the call will also be
available on the Internet at:
A replay of the call will be available from 12:00 p.m. (ET) on August 14,
2009 until 11:59 p.m. on August 21, 2009. To access the replay, call
416-640-1917 or 877-289-8525, enter pass code number 21313008, and then press
the pound # key. The replay can also be accessed over the Internet at the
About Northstar Healthcare Inc.
Northstar owns and/or manages ambulatory surgery centres in the United
States, focusing initially on Houston and other metropolitan areas in Texas.
The Company currently holds interests in two ambulatory surgery centres in
Houston - a 70% partnership interest in The Palladium for Surgery-Houston and
a 60% partnership interest in Medical Ambulatory Surgical Suites. In addition,
Northstar manages an ambulatory surgery centre in Dallas.
Northstar was founded and sponsored by Donald Kramer, M.D. and Stewart A.
Feldman. Mr. Feldman also served as the co-principal and Chairman and Chief
Executive Officer of Healthcare Ventures, Ltd., which sponsored Northstar,
with Dr. Kramer serving as its President.
This news release may contain forward-looking statements (within the
meaning of applicable securities laws) relating to business of Northstar
Healthcare Inc. (the "Company") and the environment in which it operates.
Forward-looking statements are identified by words such as "believe",
"anticipate", "expect", "intend", "plan", "will", "may" and other similar
expressions. These statements are based on the Company's expectations,
estimates, forecasts and projections. They are not guarantees of future
performance and involve risks and uncertainties that are difficult to control
or predict. These risks and uncertainties are discussed in the Company's
regulatory filings available on the Company's web site at
www.Northstar-Healthcare.com or at www.sedar.com. There can be no assurance
that forward-looking statements will prove to be accurate as actual outcomes
and results may differ materially from those expressed in these
forward-looking statements. Readers, therefore, should not place undue
reliance on any such forward-looking statements. Further, a forward-looking
statement speaks only as of the date on which such statement is made. The
Company undertakes no obligation to publicly update any such statement or to
reflect new information or the occurrence of future events or circumstances.
For further information:
For further information: Philip Koven, Tel: (416) 447-4740 Ext. 235,