Health Management Declines on Cut to Top End of Forecast

Health Management Associates Inc., the subject of a ’’60 Minutes’’ report criticizing its emergency room practices, fell the most in four years after the company reduced the high end of its 2013 earnings forecast because of a decline in admissions.

Health Management fell 16 percent to $10.53 at the close in New York, the most since December 2008. The Naples, Florida-based company, an operator of 70 hospitals in 15 states, yesterday forecast full-year profit from continuing operations of 86 cents to 95 cents a share, compared with a Jan. 13 outlook of as much as $1.01.

Preliminary results show adjusted admissions fell 5.7 percent in the first quarter, Health Management said, estimating the number of patients hospitalized for the year will show a 3 percent decline to break-even. The company was the subject of a December report by the television news program “60 Minutes” that criticized its emergency department admission practices.

“The volume weakness and resulting earnings shortfall reported by the company are direct results of the ‘60 Minutes’ investigation/feature on its ER operations and admission policies,” Brian Tanquilut, an analyst at Jefferies & Co. in Los Angeles, said in a note to investors. For that reason, the weakness Health Management experienced is more company-specific, he said.

Shares Drop

Shares of the largest U.S. hospital operators declined. HCA Holdings Inc., the biggest for-profit U.S. hospital chain, fell 2.6 percent to $36.67, while No. 2 Community Health Systems Inc. declined 3.8 percent to $42.26. Tenet Healthcare Corp., the third largest, dropped 5.5 percent to $41.14.

Admissions fell partly because of an increase in patients who are treated under observation status rather than in-patient due to pressure from managed-care payers, Gary Newsome, Health Management’s chief executive officer, said on a conference call today. Observation status brings in lower reimbursements.

Health Management hired extra workers to cope with an expected influx of patients in the first quarter, typically the busiest of the year, Newsome said in the statement yesterday. This year, the anticipated increase didn’t happen, he said.

“Clearly the company was caught off-guard on a number of fronts,” Thomas Gallucci, an analyst at Lazard Capital Markets LLC in New York, said in a note to investors today. “We are less inclined to believe the peer group will, on average, post results for the quarter that reflect as much pressure as seen at HMA.”

Health Management shares have gained 49 percent in the past 12 months. The company operated 70 hospitals in 15 states as of Dec. 31, according to a regulatory filing. The company hasn’t announced when it will release full first-quarter results.

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