Hospital Fans Watch HCA

Deutsche Bank analyst Darren Lehrich believes the sector is, in fact, ripe for another LBO. He notes that private equity groups continue to control huge amounts of capital that they hope to invest in new ventures.

Moreover -- even after counting the HCA deal -- Lehrich says that they have underinvested in the hospital sector so far.

Still, Lehrich acknowledges, those investors have few hospital companies to choose from right now.

However, he suggests, they could pay a decent price for any deals they do find.

"As a result of the narrow health care service sector capitalization weighting and the relatively small pool of good-sized publicly traded health care services companies in general, we believe there may be a scarcity premium afforded to the sector on the heels of the HCA LBO announcement," Lehrich writes in a research note last month.

"Simply put, the supply of private equity capital and the interest level swirling around health care services may provide a floor to valuation even in the face of depressed near-term fundamentals," he continues.

Lehrich lists both HMA and Community on his list of possible take-out candidates.

He has a hold recommendation on the first and a buy recommendation on the second. His firm owns stock in both companies.

Skolnick portrays Community as the more attractive of the two.

"I think HMA would like to be sold," she says. "But at that multiple, I don't know if anybody would be fool enough to buy them.

"Community remains interesting to me from that perspective," she adds. "It's a rural hospital company with attractive margins and excellent management. But I can't believe that the whole private equity world hasn't looked at it already."