Leading operator of general acute care hospitals,
Health Management Associates
) reported second quarter adjusted earnings per share of 21 cents,
matching the Zacks Consensus Estimate and surpassing the year-ago
earnings of 20 cents per share. Adjusted earnings exclude 5 cents
per share for a swap arrangement and mark-to-market
Net income at Health Management however declined 24% year over
year to $36.9 million (or 14 cents per share).
Revenues (prior to provisioning for doubtful clients) improved
20.9% year over year to $1,686.5 million, easily beating the Zacks
Consensus Estimate of $1,638 million. The top line was driven by
higher hospital admissions (on a continuing operations basis). Net
revenues from same hospital (continuing operations) increased 6.1%
to $1,299 million.
From a continuing operations perspective, occupancy declined to
39.6% in the reported quarter from 42.7% in the year-ago quarter.
Admissions rose 7.1% while adjusted admissions increased 13.1% in
the quarter. Average length of stay stood at 4.2 days, flat on a
year-over-year basis. Surgeries were up 21.4%, patient days
increased 5.5%, while emergency room visits rose 20.1%.
On same hospital basis, occupancy dipped to 40.3% in the second
quarter from 42.7% in the prior year quarter. Same hospital
admissions and adjusted admissions also declined 4.0% and 0.2%,
respectively, while surgeries and emergency room visits increased
2.9% and 3.8%, respectively.
Same hospital adjusted EBITDA margin improved to 19.7% from
19.4% in the prior year quarter. Bad debt expense, as a percentage
of revenues, moved up to 12.7% compared to 12.2% in the year-ago
The total of uninsured discounts, indigent/charity write-offs
and bad debt expense as a percentage of the sum of net sales before
provisioning, uninsured discounts and indigent/charity write-offs
rose to 27.2% in the quarter from 25.8% a year ago. This metric
indicates the aggregate extent of patient care for which Health
Management is not reimbursed.
Balance Sheet and Cash Flow
Health Management ended the second quarter with cash, cash
equivalents and available-for-sale securities of $156.3 million,
down 32.3% year over year, with a considerable long-term debt of
about $3,483.4 million, down marginally 0.2% year over year. The
company generated cash flow (from continuing operations) of $228.9
million in the reported quarter, up from $156.1 million in the
The company completed a joint venture transaction with respect
to five Integris Health Oklahoma hospitals with a total of 218
beds, in the quarter. Per the transaction, Health Management owns
80% controlling stake in the five hospitals. It also manages the
daily operations of these hospitals.
For 2012, Health Management maintains its forecast for earnings
in the band of 80 cents and 90 cents per share. The forecast
excludes about $98 million (or 25 cents per share) of effect from
mark-to-market orientation and interest rate swap as well as
Medicare and Medicaid HCIT incentive payments in the range of $90
million to $120 million.
Health Management expects same hospital admissions to decline in
the range of 1% to 3% for 2012 whereas, the same hospital adjusted
admissions growth is expected to be in the range of -1% to 1%.
Health Management is engaged in the ownership and operation of
general acute care hospitals in non-urban communities across the
U.S. The company is an active acquirer of underperforming hospitals
with a turnaround potential in high-growth markets. Health
Management's competitors, in niche markets include
Community Health Systems
Health Management benefits from a gradual growth in admissions
largely due to improvements in Emergency Room, sustained physician
recruitment and service development. Moreover, it is well placed to
expand margins from continuing operations and drive above-industry
average earnings growth. While the debt burden remains sizeable, we
are somewhat comforted that bad debt is no longer an area of urgent
concern. Currently we are 'Neutral' on Health Management which is
backed by a Zacks #3 Rank (Hold).
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