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Health Management Associates Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 3, 2012 08:04AM

Health Management Associates Inc. (HMA) filed Quarterly Report for the period ended 2012-03-31. Health Mgt Assc has a market cap of $1.83 billion; its shares were traded at around $7.01 with a P/E ratio of 8.1 and P/S ratio of 0.3. Health Mgt Assc had an annual average earning growth of 25.6% over the past 10 years. GuruFocus rated Health Mgt Assc the business predictability rank of 2-star.



Highlight of Business Operations:

During the three months ended March 31, 2012, which we refer to as the 2012 Three Month Period, we experienced growth in our net revenue before the provision for doubtful accounts over the three months ended March 31, 2011, which we refer to as the 2011 Three Month Period, of approximately 18.2%. Such growth principally resulted from: (i) our acquisition of a 95% equity interest in a Mississippi-based general acute care hospital with a total of 112 licensed beds and certain related health care operations (collectively, “Tri-Lakes”) in May 2011; (ii) our acquisition of six Tennessee-based general acute care hospitals and other ancillary health care operations with a total of 882 licensed beds (collectively, the “Mercy Hospitals”) on September 30, 2011; (iii) increased surgical volume attributable to physician recruitment and market service development (e.g., ambulatory surgical centers, robotic surgical systems, etc.) at certain of our hospitals and other health care facilities; (iv) an increase in emergency room visits, which we believe was attributable, in part, to our dedicated focus on emergency room operations; and (v) improvements in reimbursement rates that resulted primarily from renegotiated agreements with certain commercial health insurance providers. During the 2012 Three Month Period, we recognized a benefit of approximately $4.6 million from the meaningful use measurement standard under various Medicare and Medicaid Healthcare Information Technology incentive programs (collectively, the “HCIT Programs”), with no comparable amount recognized during the 2011 Three Month Period. Items that adversely affected our profitability during the 2012 Three Month Period included increases in interest expense (principally non-cash charges) and costs for government investigations. Overall, our income from continuing operations decreased during the 2012 Three Month Period by $16.0 million, or 25.8%.

Net revenue before the provision for doubtful accounts during the 2012 Three Month Period was approximately $1,686.5 million as compared to $1,426.8 million during the 2011 Three Month Period. This change represented an increase of $259.7 million, or 18.2%. Our same three month hospitals provided $91.9 million, or 35.4%, of the increase in net revenue before the provision for doubtful accounts as a result of: (i) increased outpatient and surgical volume from, among other things, market service development activities; (ii) an increase in emergency room visits; and (iii) improvements in reimbursement rates. These items were partially offset by a decrease in hospital admissions, which was primarily due to a reduction in admissions of uninsured patients. The remaining 2012 increase of $167.8 million in our net revenue before the provision for doubtful accounts was due to our acquisitions of Tri-Lakes in May 2011 and the Mercy Hospitals in September 2011.

Our provision for doubtful accounts during the 2012 Three Month Period decreased 20 basis points to 11.9% of net revenue before the provision for doubtful accounts as compared to 12.1% of net revenue before the provision for doubtful accounts during the 2011 Three Month Period. This change was primarily due to a decline in self-pay patients in the mix of patients that we serve, partially offset by an increase in the amounts considered to be patient responsibility (e.g., deductibles, co-payments, other amounts not covered by insurance, etc.).

Our consistently applied accounting policy is that accounts written off as charity and indigent care are not recognized in net revenue before the provision for doubtful accounts and, accordingly, such amounts have no impact on our provision for doubtful accounts. However, as a measure of our fiscal performance, we routinely aggregate amounts pertaining to our (i) provision for doubtful accounts, (ii) uninsured self-pay patient discounts and (iii) foregone/unrecognized revenue for charity and indigent care and divide the resulting total by the sum of our (i) net revenue before the provision for doubtful accounts, (ii) uninsured self-pay patient discounts and (iii) foregone/unrecognized revenue for charity and indigent care. We believe that this fiscal measure, which we refer to as our Uncompensated Patient Care Percentage, provides us with key information regarding the aggregate level of patient care for which we do not receive remuneration. During the 2012 Three Month Period and the 2011 Three Month Period, our Uncompensated Patient Care Percentage was 26.1% and 25.0%, respectively. This 110 basis point increase during the 2012 Three Month Period primarily reflects greater uninsured self-pay patient revenue discounts, partially offset by a decline in self-pay patients in the mix of patients that we serve.

Our cash flows from continuing operating activities decreased approximately $53.3 million, or 46.2%, during the 2012 Three Month Period as compared to the 2011 Three Month Period. This decrease primarily related to: (i) an increase in accounts receivable at the Mercy Hospitals, which we acquired on September 30, 2011; (ii) an increase in our interest payments during the 2012 Three Month Period when compared to the 2011 Three Month Period; and (iii) decreases in our operating liabilities. Partially offsetting these developments during the 2012 Three Month Period was improved operating profitability (before non-cash depreciation and amortization), including our receipt of $4.4 million under the meaningful use measurement standard of the HCIT Programs.

Read the The complete Report



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