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Select Medical (SEM), Inova Health Form JV in Northern Virginia

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Select Medical Holdings Corporation (SEM - Free Report) recently announced that it created a joint venture (JV) with a not-for-profit health organization called Inova Health System for a critical illness recovery facility in Northern Virginia. The JV is expected to own and operate the hospital, which will be located within the Inova Mount Vernon Hospital.

The specialty hospital is expected to have 32 beds and commence operations in the first half of next year. The move comes at an opportune time as demand for specialty care is rising in Northern Virginia. The JV will be responsible for providing world-class inpatient post-acute services. Following the opening of the new facility, patients from all five Inova hospitals, who don’t require intensive care services, will be transferred to the new critical illness recovery hospital.

The JV with SEM is expected to enable Inova Health System to expand its continuum of care. Given the lack of a proper specialized post-acute service in the region, the new hospital will be the first of its kind in the region. Select Medical is likely to be the majority owner of the new facility. The move will boost SEM’s footprint in Northern Virginia.

SEM has operations in 46 states along with the District of Columbia. At the first-quarter end, Select Medical had 105 critical illness recovery hospitals, 30 rehabilitation facilities and 1,901 outpatient rehabilitation clinics. The hospital addition is expected to be followed by some similar moves from SEM’s end, which will boost its capacity and expand its reach. This can help Select Medical improve its cash flow situation in turn.

Expansions and creating new facilities are fueling SEM’s growth. The rising incidence of diseases is inducing a spike in the number of patient admissions. This, in turn, is boosting Select Medical’s top line. The metric was up 12.2% year over year in 2021. Revenues are anticipated within $6.25-$6.40 billion in 2022, the midpoint indicating a 2% rise from the 2021 level of $6.2 billion. Over the 2021-2023 forecast period, SEM is targeting a revenue CAGR of 4-6%.

Price Performance

Select Medical’s shares have increased 2% in the past three months against a 4.5% fall of the industry it belongs to.

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Zacks Rank & Other Key Picks

Select Medical currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader medical space are Assertio Holdings, Inc. (ASRT - Free Report) , Altimmune, Inc. (ALT - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) , each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Assertio’s second-quarter earnings indicates a 125% improvement from the year-ago quarter’s reported figure. ASRT has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.

Assertio’s earnings beat estimates twice in the last four quarters and missed the same on the other two occasions, the average surprise being 26.4%.

The Zacks Consensus Estimate for Altimmune’s 2022 bottom line indicates an 8.2% improvement from the 2021 levels. ALT has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction.

Altimmune’s earnings beat estimates in three of the last four quarters and missed the mark once on the remaining occasion.

The Zacks Consensus Estimate for UnitedHealth’s 2022 bottom line indicates 14.4% growth from the year-ago period’s level. UNH has witnessed one upward estimate revision in the past 60 days against none in the opposite direction.

UnitedHealth’s earnings beat estimates in each of the last four quarters, the average being 3.7%.