Leading operator of general acute care hospitals,
Health Management Associates
) reported third quarter adjusted earnings per share of 18 cents,
missing the Zacks Consensus Estimate as well as the year-ago
earnings by a penny.
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Net income at Health Management decreased 5.5% year over year to
$41.3 million (or 16 cents per share).
Revenues (prior to provisioning for doubtful clients) increased
almost 19% year over year to $1,664.2 million, easily surpassing
the Zacks Consensus Estimate of $1,655 million. Net revenues
improved 18.1% year over year to 1,440.1 million. Net revenues
from same hospital (continuing operations) increased 4.5% to
From a continuing operations perspective, occupancy declined to
38.9% in the reported quarter from 41.1% in the year-ago quarter.
Admissions were up 4% while adjusted admissions rose 10.4% in the
third quarter. Average length of stay stood at 4.2 days compared
with 4.1 days in the year-ago quarter. Surgeries climbed 19.1%,
patient days increased 6.5%, while emergency room visits rose
On same hospital basis, occupancy declined to 38.9% in the third
quarter from 41.1% in the prior year quarter. Same hospital
admissions and adjusted admissions also dipped 6.4% and 2.2%,
respectively, while surgeries and emergency room visits increased
0.8% and 4.2%, respectively.
Same hospital adjusted EBITDA margin increased 180 basis points
to 20.4% in the third quarter. Bad debt expense, as a percentage
of revenues, moved up to 13.5% compared to 12.8% 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 29% in the quarter from 26.1% 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 exited the third quarter with cash, cash
equivalents and available-for-sale securities of $181.8 million,
up 44.5% year over year, with a considerable long-term debt of
about $3,476.5 million, up 4.1% year over year. The company
generated cash flow (from continuing operations) of $167.1
million in the reported quarter compared with $175.5 million in
the year-ago quarter.
For 2012, Health Management narrowed its forecast for earnings in
the band of 80 cents and 85 cents per share compared with the
prior guidance of 80 cents to 90 cents per share. The forecast
revision is associated with higher fixed expenditure related to
two new replacement hospitals.
The forecast excludes about $103 million to $107 million (or 26
cents to 27 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
$100 million (or 23 cents to 25 cents per share).
The company expects adjusted EBITDA for 2012 in the band of $875
million and $915 million. Health Management now expects same
hospital admissions to decline in the range of 3% to 5% 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. The debt burden for
the company remains sizeable. Currently we are 'Neutral' on
Health Management which carries a short-term Zacks #5 Rank