Health Management Associates' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Health Management Associates, Inc. (HMA)

Q2 2012 Earnings Call

July 24, 2012 11:00 am ET


John Merriwether - VP, Financial Relations,

Gary Newsome - President and CEO

Kelly Curry - CFO

Bob Farnham - SVP - Finance

John Starcher - SVP and Group President


A.J. Rice - UBS

Whit Mayo - Robert Baird

Darren Lehrich - Deutsche Bank

John Ransom - Raymond James

Gary Leiberman - Wells Fargo

Ralph Giacobbe - Credit Suisse

Kevin Fischbeck – Bank of America

Tom Gallucci – Lazard

Gary Taylor - Citi



Good morning, ladies and gentlemen. My name is Martina and I will be your conference operator today. At this time, I would like to welcome everyone to the Health Management Second Quarter 2012 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to Vice President of Financial Relations, John Merriwether. Mr. Merriwether, you may begin your conference.

John Merriwether

Thank you, Martina, and good morning everyone. I'd like to welcome you to Health Management's second quarter 2012 earnings conference call.

Before we get started with the call, I would like to read our disclosure statement. Statements made thought this presentation are based on current estimates of future events and the company has no obligation to update or correct these estimates. Listeners are cautioned that any such looking statements are not guarantees of future performance and involve risks and uncertainties that our actual results made different materially as a result of these various factors. Additional disclosure statements are included on the press release issued last night at 4:00 p.m. Eastern Time.

In addition, adjusted EBITDA, as mentioned on this call, is defined as consolidated net income before discontinued operations, net gains, losses on sales of the assets, net interest and other income, interest expense, income taxes and depreciation and amortization.

On the call with me this morning are President and Chief Executive Officer, Gary Newsome; Chief Financial Officer, Kelly Curry; Senior Vice President - Finance, Bob Farnham; and Senior Vice President and Group President, John Starcher.

Thank you for you attention. And I will turn the call over to Gary.

Gary Newsome

Thanks John, and good morning everyone. Thank you for joining us to discuss another strong quarter as we report our result for the second quarter ended June 30, 2012.

For the second quarter from continuing operations and compared to the same quarter a year ago, Health Management reported net revenue growth of 20.2% to $1.472 billion and adjusted EBIDTA growth of 14.5% to $233.3 million.

Excluding the impact of approximately $22.3 million or $0.05 per diluted share for interest rate swap accounting, as well as the significant mark-to-market adjustment on the swap due to interest rate conditions, diluted earnings per share from continuing operations increased 5% to $0.21 as compared to $0.20 per diluted share for the same quarter a year ago.

Contributing to these solid continuing operations financial results were an admissions increase of 7.1 %, adjusted admissions increase of 13.1%, emergency room increase of 20.1% and a surgery increase of 21.4%.

For continuing operations at hospitals we have owned and operated for one year or more, referred to as same-hospital continuing operations, compared to the prior year's second quarter, net revenue increased 6.1%, adjusted EBIDTA increased 7.4% to $255.4 million resulting in a 30 basis point improvement in EBIDTA margin to 19.7%. In addition, surgeries and emergency room visits were up 2.9% and 3.8% respectively.

Outpatient volume growth in the second quarter of 2012 continues to be a bright spot. While we still believe that a sluggish economic and anemic job growth is still weighing heavily on consumers utilization of in-patient services, the declines in uninsured volumes, which we have seen for several quarters, continued in the second quarter and while observation stays remain largely unchanged quarter over quarter, we have experienced an increase in observation stays in the greater than 24-hour category. This contributed to a same-hospital admission decline for the second quarter of 4% compared to the same period a year ago.

Outpatient services, however, continued their positive trend as outpatient surgeries grew and, as a result, same-hospital adjusted admissions were essentially flat for the quarter. Importantly, had uninsured and greater than 24-hour observation stays been the same as last year, second quarter same-hospital admissions would have declined 2.4% and same-hospital adjusted admissions would have increased 1.5%.

We are achieving strong operating results and high quality score despite the inpatient volume challenges by being effective stewards of our resources and continuing to seek efficiencies through process. We are focusing on our patient centered operating strategy while implementing our emergency room operations, physician recruitment and market service development initiatives. And we continue to believe that there are more opportunities for improvement in both the same-hospital and recently partnered or acquired facilities.

As evidence that our operational and patient centered focus is working our Santa Rosa Regional Medical Center located in Milton, Florida is number one in the entire country for three Medicare quality core measure categories heart-attack care, heart failure care and phenomena care.

In addition, as reported in Orthopedics this week and based on a study that reviewed a database of more than a billion patient records, our River Oakes Hospital in Flowood, Mississippi was recently named the number two hospital in America for back surgery. To quote the article, "River Oaks is the number two hospital in the country to give you the best bang for the buck for back surgery." We are very proud of the great workers of our associates and physicians that they are doing about Santa Rosa Regional Medical Center and River Oaks Hospital.

As you know a physician requirement is a key component of our operating strategy and just recently we announced strategic partnership with athenahealth to support our national physician and care delivery network.

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