Health Management Posts Q3 Loss, Trims Outlook; New Board Oks CHS Merger Deal

(RTTNews) - Health-care services provider Health Management Associates, Inc. (HMA), which is being acquired by larger rival Community Health Systems Inc. (CYH), reported Wednesday a loss for the third quarter compared to a profit last year, reflecting the continuing drop in patient admissions.

Adjusted earnings per share and quarterly revenues came in below analysts' expectations. The company also trimmed its earnings and revenue guidance for the full-year 2013, citing continued admission softness and net revenue pressure.

The Naples, Florida-based hospitals operator reported a net loss from continuing operations of $76.83 million or $0.37 per share for the third quarter, compared to net income of $42.33 million or $0.16 per share in the prior-year quarter.

Results for the latest quarter primarily include $0.32 per share of change of control, severance and merger related costs.

Excluding items, adjusted loss per share from continuing operations was $0.01, compared to last year's earnings of $0.22. On average, 19 analysts polled by Thomson Reuters expected earnings of $0.15 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues grew to $1.68 billion from $1.66 billion in the previous year. Provision for doubtful accounts increased to $255.44 million from $224.08 million a year ago.

Excluding provision for doubtful accounts, adjusted net revenues for the quarter was $1.42 billion, compared to $1.44 billion in the same quarter last year. Twelve Wall Street analysts had a consensus revenue estimate of $1.70 billion for the quarter.

Same hospital net revenue decreased 5.9 percent to $1.35 billion. Same hospital net revenue per adjusted admission declined 3.1 percent, and same hospital surgeries decreased 2.1 percent. Same hospital emergency room visits also dropped 2.2 percent. Occupancy declined 330 basis points to 35.6 percent from last year.

Same hospital admissions decreased 6.8 percent, and adjusted hospital admissions declined 2.9 percent.

Looking ahead to fiscal 2013, Health Management currently expects earnings in a range of $0.48 to $0.50 per share on projected adjusted revenues between $6.84 billion and $6.86 billion.

Street is currently looking for full-year 2013 earnings of $0.55 per share on revenues of $6.90 billion.

The company had previously was back in mid-April said it expects adjusted earnings from continuing operations in a range of $0.86 to $0.95 per share, on projected adjusted revenues between $6.80 billion and $7.0 billion.

Separately, Health Management Associates announced that its newly formed board of Directors have unanimously affirmed its support for the Community Health deal after completing its comprehensive review of the definitive merger agreement. The new board also now recommends its stockholders to vote "FOR" the adoption of the merger agreement.

Health Management agreed on July 30 to be acquired by Community Health Systems in a cash and stock deal valued at about $7.6 billion, including the assumption of about $3.7 billion of indebtedness. The deal is expected to close by the end of the first quarter of 2014, but is primarily subject to approval by a 70 percent vote of Health Management's stockholders. The company's former board had unanimously approved the deal earlier.

In another release, Community Health Systems has expressed its appreciation to the new board of directors for its comprehensive evaluation and full support of the transaction.

Separately, Glenview Capital Management LLC, which owns 14.5 percent of the common stock of Health Management, confirmed its intention to vote its shares in favor of the proposal, which it believes represents full and fair value for the company.

HMA closed Tuesday's regular trading session at $12.53, up $0.06 on a volume of 2.37 million shares.