Northstar Healthcare(TSX: T.NHC, Stock Forum) shares plummeted more than 71% to 81 cents Monday as the company suspended dividends on its common shares after announcing that it is experiencing difficulties with payments by one of its key third party payors.
The company, which owns and manages ambulatory surgery centers in the United States, says one issue relates to payments on cases performed by non-partner surgeons operating at its Palladium-Houston Surgical Center under use agreements with the center.
While 2008 and 2009 revenue and cash flow are expected to be adversely affected by the difficulties, the extent of the impact is not yet clear, says Northstar.
The company says it is “working on a number of strategies to resolve the situation but the timing and parameters of a resolution are unclear,” and as a result, has suspended dividends on Northstar's common shares to maintain the company’s debt-free financial position.
The suspension takes effect following payment of the December 2008 dividend on January 15.
Northstar also announced that its Kirby Surgical Center has entered into an in-network contract with a major private insurance company, where surgical procedures performed at the center will be reimbursed at agreed rates effective January 1 for an initial period of two years, extendible annually.
"This contract will go a long way toward addressing the volume issues that have resulted in reduced revenue and earnings at the Kirby Center," said Syl Ghirardi, interim CEO of Northstar.
As part of a larger post on the company’s Bullboard Monday, lessspike said:
I agree that there is far too little information being given on this. This could be a contractual agreement dispute or it could be an insolvency situation. I'm not sure which is worse, but a contractual agreement has the possibility of either being resolved immediately or could take forever in the courts. Insolvency would certainly drag out for months as claimants step in and assets are liquidated. The fact that they are saying that 2009 revenues will be affected tells me that they aren't about to resolve this mess anytime soon.[sic]
