Health Management Wins Recognition

Leading operator of general acute care hospitals, Health Management Associates (HMA - Analyst Report) recently reported that 41 of its facilities have been selected by The Joint Commission as leading performers on critical quality parameters in its latest report on safety and quality of care.

The 41 Health Management facilities (out of 64 Health Management facilities that were considered) were a part of the 620 hospitals selected by The Joint Commission. These institutions constitute the upper 18% of over 3,400 recognized entities providing data for 2011.

Of the 35 Health Management entities which made it to the Top Performers list for 2011, as many as 27 were also on this year’s listing. Three Health Management facilities which made it to this year’s Top Performers list were also on the list in 2011, prior to their becoming a part of the company.
Other than The Joint Commission, Health Management has recently also received accolades from U.S. News & World Report and FORTUNE magazine.

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%.

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 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 (CYH - Snapshot Report) and Lifepoint Hospitals (LPNT - Snapshot Report).

Health Management benefits from a gradual growth in admissions largely due to improvement 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.

Health Management, directly or via subsidiaries, operates 10,500 licensed beds in 70 hospitals in rural or semi-urban locations in the U.S.

We currently have a Neutral recommendation on Health Management. The stock currently retains a Zacks #2 Rank, which translates into a short-term “Buy” rating.