Health Management Associates (HMA), a leading operator of general acute care hospitals, reported fourth quarter and fiscal 2010 earnings per share of 16 cents and 65 cents, respectively, meeting the corresponding Zacks Consensus Estimates and surpassing the year-ago earnings per share of 13 cents and 55 cents.
Net income in the relevant quarter was $28.2 million, down 17.4% from the year-ago period. The company recorded a loss of $13.1 million on discontinued operations, which somewhat offset the improved performance in continuing operations.
As of December 31, 2010, Health Management sold the Riley Hospital in Meridian, Mississippi. Consequently, the hospital was categorized as a discontinued operation. The loss of a nickel from discontinued operations, for both the quarter and fiscal year, was primarily due to the loss on the sale of the hospital and associated impairment charges.
Revenues grew 14.1% year over year to $1,352.1 million in the fourth quarter, beating the Zacks Consensus Estimate of $1337 million. Net sales from same hospital, continuing operations, increased 2.1% on a year-over-year basis. For fiscal 2010, sales rose 12.2% to $5,115 million, but missed the Zacks Consensus Estimate of $5,142 million.
Operational Statistics
On a continuing operations basis, Health Management’s occupancy dipped to 42.6% in the reported quarter compared with 44.3% a year ago. Patient days increased 7.1% year over year. Admissions went up 8.3% while adjusted admissions grew 12.6%. Average length of stay was more or less stagnant at about 4.1 days, surgeries soared 15.2% while emergency room visits gained 10.2%.
Adjusted EBITDA went up 9.6% year over year to $186.5 million. EBITDA margin was lower at 13.8% in the reported quarter compared with 14.4% a year ago.
Bad debt expense, as a percentage of sales, was down slightly to 12.2% from 12.3% in the prior-year period. The total of discounts for uninsured patients, write-offs for charity and bad debt expense, as a percentage of the sum of net sales, uninsured discounts and charity write-offs, was higher at 25.1% in the reported quarter, compared with 24% a year ago.
Balance Sheet
Cash and cash equivalents were $101.8 million at the end of the quarter, down 4% year over year. Long-term debt was stagnant at about $2.98 billion.
Outlook
Health Management reiterated its earnings per share guidance for fiscal 2011 in the range of 72 cents to 76 cents. The forecast does not assume any benefit from acquisitions.
Florida-based 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).
Health Management offers a wide range of services including general surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services and psychiatric care. It also provides outpatient services and specialty services in cardiology. Health Management aims to deliver compassionate and high quality health care services to improve the quality of life for patients, physicians and the communities it serves.
Health Management is benefiting from a gradual growth in admissions largely due to improvements in Emergency Room and sustained physician recruitment. Moreover, the company is well placed to expand margins from continuing operations and drive above-industry average EPS growth.
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