Health Management Associates
), a leading operator of general acute care hospitals, reported
fourth quarter and 2012 adjusted (excluding one-time expenses
other than stock-based compensation expense) earnings per share
of 19 cents and 75 cents, respectively, missing the corresponding
Zacks Consensus Estimates of 20 cents and 83 cents. Adjusted
earnings in the fourth quarter exclude payments for Medicare and
Medicaid Healthcare Information Technology, interest rate swap
amortization and mark-to-market modification.
Net income at Health Management increased 56.5% year over year
to $48.3 million (or 19 cents per share).
Revenues (prior to provisioning for doubtful clients)
increased about 8.3% year over year to $1,715.5 million, easily
surpassing the Zacks Consensus Estimate of $1,686 million. Net
revenues improved 6.6% year over year to 1,480.9 million. Net
revenues from same hospital increased 5.1% to $1,458.9
For 2012, revenues climbed 16.3% to $6,752.7 million beating
the Zacks Consensus Estimate of $6,728 million.
From a continuing operations perspective, occupancy declined
to 38.4% in the reported quarter from 40.2% in the year-ago
quarter. Admissions were down 3.6% while adjusted admissions rose
1.4% in the fourth quarter. Average length of stay stood at 4.2
days compared with 4.1 days in the year-ago quarter. Surgeries
climbed 2%, patient days dropped 1.9%, while emergency room
visits rose 12.2%.
On a same hospital basis, occupancy declined to 38.9% in the
fourth quarter from 40.2% in the prior year quarter. Same
hospital admissions and adjusted admissions also dipped 4.7% and
0.1%, respectively, while surgeries and emergency room visits
increased 0.9% and 9.2%, respectively.
Same hospital adjusted EBITDA margin increased 230 basis
points to 18.7% in the fourth quarter. Bad debt expense, as a
percentage of revenues, moved up to 13.7% compared to 12.3% in
the year-ago period.
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 28.7% in the quarter from 25.4% 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 fourth quarter with cash, cash
equivalents and available-for-sale securities of $180.3 million,
down 3.3% year over year, with a considerable long-term debt of
about $3,463.1 million, up 6.1% year over year. The company
generated cash flow (from continuing operations) of $139.2
million in the reported quarter.
A subsidiary of Health Management undertook a definitive
agreement to team with the Bayfront Health System of St.
Petersburg, Florida. As per the deal, Health Management will take
an 80% stake in Bayfront Health System besides an affiliation
with ShandsHealthCare (belonging to UF & Shands, the Univ. of
Florida, Academic Health Care). The total consideration for the
80% stake is about $162 million.
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.
We currently have a Zacks Rank #3 (Hold) on Health
Management. We are more positive about other stocks such as
Acadia Healthcare Company
), which carries a Zacks Rank #1 (Strong Buy).
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