Health Management Associates Inc. has seen a jump in its outpatient business, including knee and spinal implant surgeries that don't require an overnight stay in the hospital.
However, the company's same-hospital admissions — or admissions at hospitals it has owned for at least a year — have been falling.
HMA saw a 4.2 percent drop in its hospital admissions in the first quarter of this year, in part because of a milder flu season. The company, based in Naples, also saw fewer uninsured patients checking into its hospitals across the country.
HMA operates 71 hospitals in nonurban communities throughout the U.S. Locally, those hospitals include Physicians Regional–Pine Ridge and Physicians Regional–Collier Boulevard. Shares closed down 13 cents at $7.02 Tuesday on the New York Stock Exchange.
In a conference call with analysts Tuesday, Gary D. Newsome, HMA's president and CEO, pointed to a report by the Centers for Disease Control and Prevention that showed one flu-related hospital admission in Florida this year for every 100,000 residents. That compared to 21.6 last year — when there wasn't a big flu season, he said.
If flu-related admissions had been the same as last year, HMA's same-hospital admissions would have dropped by 1.6 percent and its adjusted admissions, which includes outpatient activity, would have risen by 2.4 percent.
Overall, the company's admissions grew 5.9 percent in the quarter, including admissions at hospitals HMA has owned for less than a year. Its total adjusted admissions rose 11.8 percent.
The company is benefitting from recent acquisitions and an increase in revenue per adjusted admission, wrote Adam Feinstein, an analyst with Barclays Capital in New York, in a research note.
Net revenues grew 18.4 percent to nearly $1.5 billion in the quarter. The company reported lower profits for the quarter, but operationally it performed better than analysts expected.
Excluding adjustments related to interest rate swap accounting, HMA earned 24 cents a share — a more than 9 percent increase from the same quarter a year ago. With the accounting adjustments related to the swap agreement, HMA reported earnings of about $37.7 million, or 15 cents a share. That was down more than 32 percent from profits of $55.5 million, or 22 cents a share, a year ago.
The adjustments cut profits by $36.7 million, or 9 cents a share.
In a swap agreement, a company agrees to pay the bank a fixed interest rate on a loan, while the bank agrees to pay back interest to the company based on a floating rate. But when the floating rate goes down, not up, the company takes a hit.
"Where somebody else wins, somebody else loses," explained Sheryl Skolnick, an analyst with CRT Capital Group LLC in Stamford, Conn., who follows HMA.
While she appreciates the progress HMA has made through acquisitions and controlling its costs, she's concerned about the downward trend in the company's same-hospital admissions. They've been on the decline for nine quarters in a row, she said.
"At the end of the day, hospitals have beds. This is what hospitals do and when the beds aren't full, at some point you have to pay the piper," Skolnick said.
During the conference call, Newsome said he expected the jump in the outpatient activity to eventually lead to more hospital admissions when patients who haven't stayed overnight need more critical care.
Surgeries at HMA's same hospitals rose 3.8 percent in the first quarter. On the outpatient side, orthopedic procedures made up much of that business. Spinal implants increased 10 percent in the first quarter, compared to a year ago, company executives reported.
Tom Gallucci, an analyst with Lazard Capital Markets in New York, said the quarterly results show solid trends with the more attractive parts of HMA's business and there are signs of stabilization in patient volumes.
HMA executives said they continue to look for expansion opportunities but the company is rejecting many acquisition and partnership offers because they aren't the right fit.
"There are a lot of hospitals out there that are looking to either sell or partner. I think those give HMA opportunities to grow further," Gallucci said.
Connect with Laura Layden at www.naplesnews.com/staff/laura_layden