On Feb 19, 2013 we retained Health Management Associates ( HMA - Analyst Report ) at Neutral after the company missed Zacks Consensus Estimate for earnings but beat revenue estimate in the fourth quarter 2012. We continue to have doubts about sustained growth in volumes. Our skepticism is supported by a drop in (same hospital) admissions and volume pressure in the fourth quarter.

Why the Retention?

On Feb 14, Health Management posted fourth-quarter 2012 adjusted earnings of 19 cents per share, missing the Zacks Consensus Estimate of 20 cents per share. Revenues in the reported quarter increased 8.3% year over year to $1,715 million, beating the Zacks Consensus Estimate of $1,686 million.

Over the past 30 days, the Zacks Consensus Estimate for 2013 has moved up by just 3 cents to 87 cents while for 2014 it has inched up by a penny to $1.08 during the same timeframe.

We believe that bad debt may no longer be an area of looming concern. Bad debt expense remained within a band at 13.7% of revenues in the fourth-quarter of 2012, higher than 12.3% in the year-ago quarter. We expect Health Management’s bad debt expense to be restrained in 2013.

Overall, total uncompensated care (the total of uninsured discounts, indigent/charity write-offs, and provision for bad debt as a percentage of adjusted revenue) was on the higher side at 28.7% in fourth-quarter, up from 25.4% in the prior-year quarter.

Other Stocks to Consider

Health Management currently carries a Zacks Rank #3 (Hold). Acadia Healthcare Company, Inc. ( ACHC - Snapshot Report ) carries a Zacks Rank #2 (Buy) and is expected to do well. Furthermore, Merge Healthcare Incorporated ( MRGE - Analyst Report ) retains a Zacks Rank #2 (Buy) and warrants a look.