Health Management Associates, Inc.239-598-3131Senior Vice President, Finance
today announced its consolidated financial results for the first quarter ended March 31, 2013.
Key metrics from continuing operations for the first quarter (all percentage changes in the bullet points below compare the first quarter of 2013 to the first quarter of 2012) include:
The tables accompanying this press release include reconciliations of consolidated net income to all presentations of Adjusted EBITDA (which is not a GAAP measure) contained in this press release. Those tables also reconcile earnings per share on a GAAP basis to those amounts presented in this press release and contain disclaimers and other important information regarding how Health Management defines and uses Adjusted EBITDA.
The continuing effects of declines in uninsured admissions and significant increases in observation stays contributed to 8.8% and 5.8% declines in first quarter same hospital admissions and same hospital adjusted admissions, respectively.
“Our first quarter results did not meet our expectations and reflect a difficult operating environment. I believe, however, that we have taken the necessary steps to adjust our cost structure going forward to achieve our previously updated 2013 annual guidance,” said Gary D. Newsome, Health Management’s President and Chief Executive Officer. “As we transition into this new era of health care reform, we intend to continue our patient-centered approach to health care delivery while increasing efficiency and ultimately quality as we enable America’s best local health care.”
For the first quarter, Health Management’s provision for doubtful accounts was $240.9 million, or 14.0% of net revenue before the provision for doubtful accounts, compared to $201.3 million, or 11.9% of net revenue before the provision of doubtful accounts, for the same quarter a year ago.
Uninsured self-pay patient discounts for the first quarter were $327.2 million, compared to $299.7 million for the same quarter a year ago. Charity/indigent care write-offs were $26.3 million for the first quarter, compared to $22.7 million for the same quarter a year ago.
The sum of uninsured discounts, charity/indigent write-offs and the provision for doubtful accounts, as a percent of the sum of net revenue before the provision for doubtful accounts, uninsured discounts and charity/indigent write-offs (which Health Management refers to as its Uncompensated Patient Care Percentage) was 28.6% for the first quarter, compared to 26.1% for the first quarter a year ago, and 28.7% for the quarter ended December 31, 2012. Health Management believes that its Uncompensated Patient Care Percentage provides key information regarding the aggregate level of patient care for which it does not receive payment.
Cash flow from continuing operating activities for the first quarter was $19.3 million, after cash interest and cash tax payments aggregating $81.2 million. Days sales outstanding, or DSO, saw a two day improvement to 50 days as of March 31, 2013 compared to 52 days as of March 31, 2012. At March 31, 2013, Health Management’s total leverage ratio was 3.71 and interest coverage ratio was 4.23, both ratios being well within its debt covenant requirements.
Health Management hospitals recognized $3.8 million and $4.6 million of Medicare and Medicaid Healthcare Information Technology (“HCIT”) incentive payments in the three months ended March 31, 2013 and 2012, respectively. Health Management expects to recognize approximately $75.0 to $85.0 million of HCIT incentive payments during the year ending December 31, 2013.
As previously announced on April 1, 2013, a Health Management subsidiary launched a new joint venture to partner with the 480-bed Bayfront Health System, located in St. Petersburg, Florida. As part of the joint venture, Health Management acquired an 80% interest in Bayfront Health System, and introduced an affiliation with ShandsHealthCare, part of UF&Shands, the University of Florida Academic Health Center. The total purchase price for our 80% interest was approximately $162.0 million, plus a working capital adjustment.
On April 25, 2013, Health Management received a subpoena from the Securities and Exchange Commission (the “SEC”), issued pursuant to an investigation, requesting documents related to accounts receivable, billing write-downs, contractual adjustments, reserves for doubtful accounts, accounts receivable aging, and revenue from Medicare, Medicaid and from privately insured or uninsured patients. Management is cooperating with the SEC’s investigation. Health Management is unable to determine the potential impact, if any, of this investigation.
Health Management’s executive team will hold a conference call and webcast to discuss the contents of this press release and Health Management’s consolidated financial results for the three months ended March 31, 2013 on Friday, May 3, 2013 at 11:00 a.m. ET. Investors are invited to access the webcast via Health Management’s website at or via . Alternatively, investors may join the conference call by dialing 877-476-3476.
Health Management will archive a copy of the audio webcast of the conference call, along with any related information that Health Management may be required to provide pursuant to Securities and Exchange Commission rules, on its website under the heading “Investor Relations” for a period of 60 days following the conference call and webcast.
Health Management enables America's best local health care by providing the people, processes, capital and expertise necessary for its hospital and physician partners to fulfill their local missions of delivering superior health care services. Health Management, through its subsidiaries, operates 71 hospitals with approximately 11,100 licensed beds in non-urban communities located throughout the United States.
All references to “Health Management,” “HMA” or the “Company” used in this release refer to Health Management Associates, Inc. and its affiliates.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “intends,” “plans,” “may,” “pending,” “continues,” “should,” “could” and other similar words. All statements addressing operating performance, events or developments that Health Management Associates, Inc. expects or anticipates will occur in the future, including but not limited to projections of revenue, provisions for doubtful accounts, income or loss, capital expenditures, debt structure, principal payments on debt, capital structure, the amount and timing of funds under the meaningful use measurement standard of various Healthcare Information Technology incentive programs, other financial items and operating statistics, statements regarding our plans and objectives for future operations, the impact of changes in observation stays, our ability to achieve process efficiencies, factors we believe may have an impact on our deductibles and co-pays, acquisitions, acquisition financing, divestitures, joint ventures, market service development and other transactions, statements of future economic performance, statements regarding our legal proceedings and other loss contingencies (including, but not limited to, the timing and estimated costs of such matters), statements regarding market risk exposures, statements regarding our ability to achieve cost efficiencies and/or reductions, statements regarding the effects and/or interpretations of recently enacted or future health care laws and regulations, statements regarding the potential impact of health care exchanges, statements of the beliefs or assumptions underlying or relating to any of the foregoing statements, and statements that are other than statements of historical fact, are considered to be “forward-looking statements.”
Because they are forward-looking, such statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Health Management Associates, Inc.’s most recent Annual Report on Form 10-K, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of Health Management Associates, Inc.’s underlying beliefs or assumptions prove incorrect, actual results could vary materially from those currently anticipated. In addition, undue reliance should not be placed on Health Management Associates, Inc.’s forward-looking statements. Except as required by law, Health Management Associates, Inc. disclaims any obligation to update its risk factors or to publicly announce updates to the forward-looking statements contained in this press release to reflect new information, future events or other developments.
(a) Adjusted EBITDA is defined as consolidated net income before discontinued operations, net (gains) losses on sales of assets, net interest and other income, interest expense, income taxes and depreciation and amortization. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenue. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Health Management believes that providing non-GAAP information such as Adjusted EBITDA is important for investors and other readers of Health Management's consolidated financial statements, as it is commonly used as an analytical indicator within the health care industry and Health Management's debt facilities contain covenants that use Adjusted EBITDA in their calculations. Because Adjusted EBITDA is a non-GAAP measure and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be directly comparable to other similarly titled measures used by other companies.