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HMA Quarter in Line

Bad debt expense continues to hit the hospital operator.
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Health Management Associates (HMA) met first-quarter estimates Tuesday but continued to struggle with the bad debt and slow growth that are afflicting the entire hospital industry.

The Naples, Fla., hospital operator made $87.2 million, or 36 cents a share, in the quarter ended March 31, down from the year-ago $99.8 million, or 40 cents a share. Latest-quarter numbers included a penny-a-share charge on deferred financing costs. Revenue rose to $1.03 billion from $908 million a year earlier.

Earnings excluding the charge matched the 37-cent Thomson Financial analyst consensus estimate. Analysts were looking for revenue of $1.01 billion.

"During this quarter, HMA continued to experience slower volume growth and higher levels of uncompensated care than we have experienced historically," said CEO Joseph V. Vumbacco. "We believe this dual challenge has impacted the hospital industry as a whole. HMA's financial position remains strong, but the current environment merits a different strategic approach. At present, we are focusing on our existing operations in order to reinforce their performance and returns on capital."

Net patient service revenue from continuing operations relating to hospitals owned and operated by HMA for one year or more increased 6.5% during the first quarter. Factors contributing to HMA's revenue growth from continuing operations during the first quarter included a 3.3% increase in same hospital surgeries and a 6.7% increase in same hospital net revenue per adjusted admission. Same hospital admissions from continuing operations for the first quarter declined 2.1%, and same hospital adjusted admissions from continuing operations declined 0.1% compared to the same quarter a year ago.

HMA's same hospital earnings before interest, taxes, depreciation and amortization margins for the first quarter were 22.3% compared to 25.2% in the same period a year ago. For the first quarter, cash flow from operations was $137.7 million, which includes cash interest and cash tax payments of $28.1 million.

Bad debt expense from continuing operations, as a percentage of total revenue, for the first quarter was 8.1% compared with 6.9% in the same period a year ago. HMA's charity care/indigent write-offs were 4.1% of gross revenue for the first quarter compared to 4.2% in the same quarter a year ago. On a continuing same hospital basis, uninsured admissions totaled approximately 6.5% of total admissions for the first quarter, which is a 50 basis point decrease, sequentially, when compared to the quarter ended Dec. 31, 2005.