Health Management Associates (HMA), a leading operator of general acute care hospitals, reported first-quarter fiscal 2011 earnings per share of 22 cents, beating the Zacks Consensus Estimates by a penny and surpassing the year-ago earnings of 19 cents. Net income surged 18% year over year to $55.5 million on the heels of higher revenues.
Revenues
Revenues climbed 12.7% year over year to $1,433.6 million, but missed the Zacks Consensus Estimate of $1456 million. Sales were driven by higher hospital admissions (on a continuing operations basis). Net sales from same hospital (continuing operations), operated by the Florida-based company for at least a year, increased 4.8% to $1,333 million.
Operational Statistics
Admissions rose 4.2% while adjusted admissions climbed 8.3% in the quarter. Average length of stay was flat year over year at 4.3 days. Surgeries rose 6.1%, patient days increased 5.2%, while emergency room visits climbed 14.5%.
However, on a continuing operations basis, occupancy clipped to 48.3% in the quarter from 49.1% a year ago. Same hospital admissions and adjusted admissions, dipped 3.9% and 0.3%, respectively, hit by lower uninsured admissions and weather-related disruptions.
Margins
Same hospital adjusted EBITDA margin edged up to 18.3% from 18% a year ago. Bad debt expense, as a percentage of sales, was down modestly to 12.1% from 12.3% in the prior-year quarter.
Balance Sheet and Cash Flow
Health Management exited the quarter with cash and cash equivalents of $95.8 million, down 11% year over year, with long-term debt of roughly $2.98 billion. The company generated cash flows (from continuing operations) of $116.8 million during the quarter.
Outlook
Health Management has lifted its earnings guidance for fiscal 2011. The company now expects earnings between 74 cents and 78 cents a share versus its earlier forecast of 72 cents and 76 cents. The current Zacks Consensus Estimate for fiscal 2011 is 75 cents.
Moreover, the company expects same hospital admissions to increase 1% or fall 1% in 2011. The forecasts do not assume any benefit from acquisitions.
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) and LifepointHospitals (LPNT).
To drive results, Health Management is focusing on cost management, emergency room operations, physician recruitment and service development. Moreover, the company remains focused on acquisitions/collaborations as evident from its recently announced partnership with Mississippi-based Tri-Lakes Medical Center. Under the deal (expected to complete by June 1, 2011), Health Management will acquire a controlling interest in the entity.
Health Management benefits from a gradual growth in admissions largely due to improvements in Emergency Rooms and sustained physician recruitment. Moreover, it is well placed to expand margins from continuing operations and drive above-industry average earnings growth.
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