Hospitals Back on Their Feet

Most for-profit hospital companies seem poised to deliver their healthiest performance in years.

After suffering through a painful downturn through much of 2003 and 2004, the hospital industry has tried to mend some of its nastiest problems -- particularly bad debt from the uninsured -- and, in turn, has given investors fresh hope that a full-scale recovery is finally on the way. To be sure, the group kicked off 2005 with a bang, delivering pleasant earnings surprises that have pushed hospital stocks up more than 30% so far this year. Now, however, the sector must carry that momentum forward -- without the help it received earlier from the flu -- to prove its overall health.

Credit Suisse First Boston analyst Glen Santangelo believes that at least some of the companies can. ...