Advocat

(AVCA)

swung to a second-quarter profit Friday, boosted by a reduction in the health services firm's accrual for self-insured risks associated with professional liability claims.

For its second quarter ended June 30, the Franklin, Tenn., company posted earnings from continuing operations of $2.3 million, or 36 cents a share. That reverses the year-ago continuing operations loss of $8.3 million, or $1.53 a share.

Revenue rose to $52.2 million from $49 million a year earlier. Patient revenue rose 6.8%, due to increased Medicare utilization, Medicare rate increases that were effective Oct. 1, 2003, and increased Medicaid rates in certain states. Those factors were partially offset by a 1.6% decline in census in 2004 as compared to 2003.

In the second quarter, the company made a $5.7 million downward adjustment in the self-insurance reserves that was primarily the result of settlements of claims for amounts less than previously estimated. This downward adjustment was partially offset by expenses of $4.4 million recorded for the estimated costs of claims incurred, resulting in a net benefit of $1.3 million.

As of June 30, Advocat has reported a liability of $41.5 million, including reported professional liability claims and estimates for incurred but unreported claims. The company does not have cash or available resources to pay these accrued professional liability claims or any significant portion thereof.

Advocat shares were flat Friday at $2.93.