Three Midwest hospitals, once so weak analysts referred to them as "The Three Stooges," joined forces last year with Illinois' profitable Hinsdale Hospital, and the new alliance is showing dramatic results.

The four-hospital team, known as the Hinsdale Health System, registered a profit of $8.2 million for the first six months of 1991, Hinsdale President Charles W. Snyder said yesterday. A feasibility study prepared in 1990 projected profits of just $5.6 million for all of 1991.

"We'll more than double that" by the end of the year, he predicted.

He has good reason for optimism. The feasibility study forecast profits of $2.8 million for 1990, and undershot the mark by almost $16 million. "We did perform quite well," Mr. Snyder said, summing up net income figures that were 570% better than expected.

Glenn N. Wagner, vice president of credit research at Morgan Stanley & Co., said Hinsdale's achievements have "far surpassed anyone's wildest expectations."

"It was always assumed Hinsdale was going to do well, but the question was how well the rest of the group members would do," Mr. Wagner said.

The results are all the more impressive, considering that the three weaker members of the group -- Battle Creek Adventist in Michigan, Chippewa Valley in Wisconsin, and GlenOaks Medical Center in Illinois -- were all showing loses prior to the new alliance, which was forged in connection with a $136 million bond sale in February 1990.

Chippewa Valley and GlenOaks are now back in the black, with 1990 profits of $466,000 and $3 million, respectively.

Battle Creek showed a loss for the year of $678,000, but Mr. Snyder said that figure does not tell the whole story. Battle Creek was ahead of its planned $350,000 profit until the middle of last year, when Michigan retroactively denied 40 Medicaid claims worth more than $800,000 to the facility.

Appeals of the two largest cases, about $200,000 of the total, were recently decided in Battle Creek's favor, and Mr. Snyder said the rest are under appeal.

Hinsdale Hospital was brought on board as the flagship of the obligated group, which is responsible for supporting the bonds. Chippewa Valley and GlenOaks at the time faced losses of $35,000 and $1.6 million, respectively. Battle Creek had a $211,000 profit.

Mr. Snyder was hesitant to call the improved results a turnaround, saying that tag can only be earned after a string of profitable years. But he said the profits are a reflection of a business strategy requiring every facility to sink or swim on its own merits.

At the time the obligated group was formed, questions about how much Hinsdale would be required to do to keep other facilities afloat raised red flags in some investors' minds. If Hinsdale was being used solely to keep failing institutions from closing, then the credit was going to suffer, critics argued.

But Mr. Snyder promised last year that would not happen.

"Each individual in the obligated group is expected to carry itself," he said. And apparently Hinsdale has kept that promise. No financial transfers from Hinsdale to the other members have taken place since the time of the bond sale.

Fears that Hinsdale would be forced to prop up Tri-County Hospital in Michigan, an associated facility outside the obligated group that lost $440,000 in 1989, turned out to be unfounded as well. Adventist Health System, Hinsdale's parent company, closed down the unprofitable operation in May without any drains on Hinsdale's resources, according to Mr. Snyder.

"Each organization should maintain itself," he explained. "If it can't, then we have to divest of that organization or restructure."

The strategy has worked so well that Mr. Snyder believes Hinsdale might soon be ready for an upgrade from its current BBB-minus rating from Standard & Poor's Corp. The low rating helped saddle the 1990 bond sale with a 9.5% coupon, and analysts have speculated that, given the system's vastly improved financial results since then, a refinancing might be in the cards.

Mr. Snyder said he is eager to refinance sometime "in the near future," but declined to speculate on when that might be.

Market sources say the original bond sale was very narrowly distributed in the market and has seen virtually no secondary-market trading since the sale, making accurate price quotes unavailable.

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