Northstar fourth quarter net patient service revenue decreases to $2.2 million

Northstar Healthcare Inc. (TSX:NHC) today announced its financial results for the fourth quarter and year ended December 31, 2010. All dollar amounts are in United States currency unless otherwise stated; 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 fourth quarter and year ended December 31, 2010 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.

"The fourth quarter was a transitional quarter for the Company," said Dr. Don Kramer, Chief Executive Officer of Northstar. "We've laid the foundation for our turn-around plan and assessed multiple opportunities present in the changing healthcare market." Since the closing of the private placement five months ago, we have accomplished the following:

• syndicated the newly formed MicroSurgery Institute of Houston ("MSIH") with 11 physician partners,
• completed the acquisition of Palladium for Surgery - Dallas,
• syndicated the newly formed MicroSurgery Institute of Dallas with 8 physician partners,
• implemented tighter cost controls at our corporate office which will benefit us going forward, and
• assessed multiple acquisitions candidates and opportunities to partner with other healthcare service providers to expand our service offerings and physician network.

Dr. Kramer continued, "the board of directors and management believes the company needs to diversify its revenue base beyond outpatient surgery centers. In order to advance this objective, the company continues to assess opportunities to acquire and grow a number of healthcare delivery businesses in Texas. Additionally, we are assessing opportunities to partner with other healthcare service providers to expand the utilization of our facilities and capitalize on our network of physicians."

Pursuant to this plan, the Company announces the formation of Gulf Coast Toxicology, LLC in partnership with Pioneer Laboratories, LLC. Northstar has a 20% ownership interest in Gulf Coast Toxicology, LLC, a Dallas-based drug testing laboratory. The laboratory will screen and quantify narcotics and other drugs in urine samples. This is a rapidly growing area of medical practice as governmental agencies are now requiring pain clinics and other medical practices to routinely perform drug testing. Gulf Coast Toxicology will partner with a number of physicians in Houston who will supply the urine samples to be tested in the laboratory of Gulf Coast Toxicology. If successful in Houston, Northstar expects to expand this business to other cities.

Fourth Quarter Results
In the fourth quarter ended December 31, 2010, Northstar generated net patient service revenue of $2.2 million compared with $5.9 million in the corresponding period of 2009. There were no collections during the fourth quarter of 2010 that were not recognized as revenues in prior periods.

The year-over-year decline in Q4 net patient service revenues was primarily due to a 26.3% decrease in case volume and a 14.6% decrease in the net patient service revenues per case.  The overall case volume decline was attributable to a 9.4% decrease at the Kirby Partnership and a 95.9% decrease at the Palladium Partnership. The decrease at the Palladium Partnership was due to a lack of cases by non-partner physicians, reflecting the difficulty on collections associated with those cases. These decreases were partially mitigated by cases performed by the MSIH Partnership in the last two months of the year.

Northstar recorded a fourth quarter 2010 loss from operations of $0.1 million compared with a $2.9 million profit in the 2009 period. The net loss in the 2010 period was $1.8 million, or $0.05 per share fully diluted, compared with a loss of $13.3 million, or $0.95 per share fully diluted. The 2009 figure included non-cash impairment charges of $13.7 million for goodwill and $1.2 million for other intangible assets. The 2009 net income figure also included a $1.6 million non-cash gain related to the change in fair value of other liabilities, non-controlling interest.

Cash flow used for operating activities in the fourth quarter of 2010 was $0.3 million, compared with cash flow provided by operating activities of $2.5 million in the corresponding period in 2009.

Twelve Months Results
In the year ended December 31, 2010, Northstar generated net patient service revenue of $12.3 million compared with $24.9 million in the corresponding period of 2009. The 2010 figure included $1.2 million in revenue attributable to earlier periods, while the corresponding 2009 period included $6.5 million in such revenue. The year-over-year reduction in revenue was primarily attributable to a 33.0% decrease in case volume and a 26.1% reduction in revenue per case.

Northstar had income from operations for the year ended December 31, 2010 of $1.6 million compared to $11.5 million in the comparable 2009 period.

Northstar reported a net loss in 2010 of $5.0 million, or $0.26 per share fully diluted, compared with a loss of $10.4 million, or $0.75 per share fully diluted in 2009. The 2010 net income figure included a $2 million gain on de-recognition of Class B Units. The 2009 figure included a $3.9 million gain on foreign currency. The 2009 figure included non-cash impairment charges of $13.7 million for goodwill and $1.2 million for other intangible assets. The 2009 net income figure also included a $1.6 million non-cash gain related to the change in fair value of other liabilities, non-controlling interest.

Cash flow used for operating activities in 2010 was $4.1 million compared with cash flow provided by operating activities of $9.2 million in the corresponding prior year period.

As of December 31, 2010, Northstar had consolidated working capital of $5.3 million, including cash of $4.2 million. This compares with $8.3 million and $6.2 million, respectively, at year-end 2009. Of the $4.2 million cash at December 31, 2010, $3.8 million is cash available at the Northstar corporate level related to the private placement, with the balance being cash held at the operating level by the Palladium, MSIH and Kirby Partnerships.