CLEANING UP IN HEALTH CARE; AREA FIRM THRIVES IN EQUIPMENT SERVICING.

Byline: Ben Sullivan Daily News Staff Writer

Executives at Chatsworth-based Cohr Inc. admit their business is not the most glamorous in the health care industry.

There's not a Kildare or Welby among the firm's 800-plus staff, and NBC is unlikely to base a prime time, dramatic series on them.

But with the company enjoying 50 percent average annual growth over the past three years, Cohr is proving one of the most robust firms in health care.

Cohr cleans, repairs and replaces medical equipment at hospitals and clinics across the nation. It also purchases medical material in bulk - from hypodermic needles to heart monitors - that it resells at a discount to members of its group purchasing plan.

Under the direction of Chief Executive Paul Chopra, Cohr has bought 21 competitors in the past three years. Now, with a successful secondary stock offering under its belt, the company says it is poised to buy 20 more.

``We are the consolidator in the field,'' Chopra said.

Analysts have responded positively to the company's aggressive approach. Cohr shares, which closed Wednesday at $20-3/4, down 1-1/8 from Tuesday, have been rated a ``buy'' or ``strong buy'' by each of the four largest U.S. brokerages that cover them.

``Historically this has been a relatively unprofitable sector to be in, but they've managed to make some real money,'' said Justin Vaicek, an analyst at Oppenheimer & Co.

Indeed, Vaicek and others say that as managed care compels hospitals to cut costs, Cohr is singularly poised to profit from their growing reliance on outsourcing.

``Most hospitals are looking for that one-contract, one-cost approach and we provide it,'' Chopra said. ``We make life very easy for them and we save them money.''

Here's how it works: A hospital pays Cohr a flat annual fee to maintain all of its medical equipment. If something breaks, Cohr will fix or replace it, usually within a day. Depending on the contract, Cohr technicians either work full time at the hospital, or are on call to them 24 hours a day.

Two years ago, Pasadena's Huntington Memorial Hospital eliminated its in-house maintenance staff in favor of a $1 million-plus annual contract with Cohr.

``In-house technicians tend to get real lackadaisical,'' said Rob Kessler, Huntington's director of facility services. When an X-ray machine or sterilizer went on the blink, Kessler said, Huntington technicians would typically spend several days repairing it.

``With Cohr it's a performance-based contract,'' he said. ``Their turnaround time has usually been less than a day.'' In the first year of the contract, Kessler said, Huntington saved $60,000 in wages and other repair costs by outsourcing to Cohr.

Original equipment manufacturers, like General Electric and Siemens, still perform the bulk of repairs made on hospital equipment, analysts said, but companies like Cohr take more of the market each year. A decade ago OEMs accounted for three-quarters of all repairs; today they have 65 percent.

As the largest so-called ``independent service organization,'' Cohr has benefited most from that shift.

For such ballyhooed success, Cohr had an inauspicious start. The company was founded in 1974 as a tiny for-profit wing of the Hospital Council of Southern California (since renamed the Healthcare Association of Southern California). The trade association started Cohr in an attempt to cut the equipment maintenance costs of its members by pooling their technical resources.

The company floundered financially for its first decade - losing upward of $2 million a year on less than $10 million in revenues - until Chopra joined the management team in 1987. First as chief financial officer and later as CEO, Chopra implemented a plan that cut staff and expenses, and charted a course for growth. Last year, Cohr had net income of $4.8 million on $90 million in revenues.

In early 1996, the company went public with an initial public offering price of $9 per share. A secondary stock offering in November raised about $27 million, which is being used primarily to buy more competitors, said David Langness, Cohr's director of investor relations.

``These are usually mom-and-pop shops, companies that might fix one or two types of machine,'' but are often unable to eke out a profit on their own, Langness said.

By selectively purchasing such firms, Langness said, Cohr now has the staff to repair any hospital equipment approved for use in the United States.

Equipment maintenance still accounts for about 75 percent of the company's revenues, and its 1,100-plus contracts make it the largest company of its kind. But Cohr's group purchasing wing is a growing profit source.

While revenue growth has been slower in the group purchasing division, its profit margins are higher, said Seth Frank, an analyst at Equitable Securities Research. Accounting for only a quarter of the company's revenues, ``we project that the business will generate . . . over 50 percent of its operating profit (this year),'' Frank said.

Cohr buys equipment and supplies for more than 1,000 hospitals and clinics across the nation, Langness said. By pooling the purchases it gets discounts from suppliers that it passes on to plan members. The members pay Cohr about $6,000 a year for the service, and Cohr gets a commission of between 0.5 percent and 3 percent from the suppliers for bringing such large orders to them.

``We get the revenue stream from both directions,'' Langness said.

CAPTION(S):

2 Photos, Chart

Photo: (1--Color) Paul Chopra, chief executive, has led Cohr Inc. of Chatsworth to annual 50 percent growth over the past three years.

(2) Billy Bolden, senior communications technician, works at Cohr Inc.'s Chatsworth headquarters.

David R. Crane/Daily News

Chart: (Color) COHR SOARS