Health Management a "Top Performer"

Health Management Associates (HMA - Analyst Report), a leading operator of general acute care hospitals, recently revealed that 35 of its hospitals were selected as Top Performers on Key Quality Measures. This is as per a report issued by The Joint Commission, which is a prominent accreditor of health care bodies. The Health Management institutions were honored by The Joint Commission using data from evidence-based clinical procedures demonstrating enhanced care for health problems such as pneumonia and heart attack.

The universe consisted of about 2,900 Joint Commission accredited hospitals as well as critical access hospitals. A sub-set of just 405 hospitals, or 14% of the universe, received the recognition of top performer. On the other hand, 35 hospitals of Health Management Associates, or almost 60% of its 59 institutions, received the same recognition.

Health Management’s 35 institutions were included for honors following a summation of accountability data provided to The Joint Commission in the prior year. This first honors program is based on information for calendar year 2010. As per the methodology, a top performer needed to satisfy two 95% performance hurdles or thresholds.  

Health Management runs hospitals in select non-urban markets mostly in south eastern U.S. The company continues to emphasize its three long-standing initiatives, namely Emergency Room operations, physician recruitment and market development, which have facilitated admissions.

We are slightly relieved that bad debt may not be an area of looming concern. Delayed care continues to raise acuity in a weak economy. In this regard, Health Management’s specialty recruitment and its market/service development are expected to drive acuity over the medium term as group hospitals become more adept at handling higher acuity patients. Also, Health Management’s deployment of modern surgical systems in its hospitals should continue to grow its surgical market share. 

On the negative side, we are concerned about soft hospital industry volume trends. Sizeable debt remains on the balance sheet. The company’s contracts with commercial managed care organizations partially mitigate its exposure to government programs, Medicare/Medicaid.

The company has indicated its continued willingness to deploy free cash flow for acquisitions. It 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 (CYH - Snapshot Report) and LifepointHospitals (LPNT - Snapshot Report). We currently have a Neutral rating on the stock.

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