Sparks Health System a healthy addition for HMA

Sparks Health System has been good for Naples, Fla.-based Health Management Associates.

HMA purchased Sparks Health System in a $138-million deal that closed Nov. 30. The company operates 55 hospitals — including Summit Medical in Van Buren — in 15 states and employs about 33,700. The publicly held (NYSE: HMA) hospital company is directly and indirectly affiliated with 8,000 physicians. The company has said it plans to invest $20 million in Sparks during 2010.

When the deal was finalized in December 2009, Sparks represented about 6% of the licensed beds in the HMA network. Sparks, with 492 beds, is the largest hospital in the HMA system. The Central Mississippi Medical Center in Jackson, Miss., is the second largest with 429 beds, followed by Venice Regional in Venice, Fla., with 312 beds, and Midwest City in Oklahoma City with 255 beds.

During the third fiscal quarter (July-September), HMA posted $1.27 billion in total revenue, up 13.2% over the same period in 2009. Total revenue during the first nine months of 2010 for HMA was $3.803 billion, up 11.2% over the 2009 period.

According to HMA’s third quarter 10Q filing with the federal Securities and Exchange Commission, HMA cited Sparks as one of three top reasons for the revenue growth. The other reasons were a 60% interest three Florida-based acute-care hospitals and increased surgery volume.

“Primarily as a result of the growth in net revenue, income from operations increased approximately $12.1 million, or 12.4%, during the 2010 Three Month Period and income from continuing operations increased during the same period by $8.6 million, or 27.4%,” HMA said of the impact of the three new revenue generators.

Of the $385.1 million in revenue gain for the first nine months of 2010 compared to 2009, HMA reported in the 10Q that “$230.9 million was due to our acquisitions of Sparks in December 2009 and Shands in July 2010.”

For the first nine months of 2010, HMA posted $121.89 million in net income, up 17.1% over the same period in 2009.

HMA will need continued revenue gains from acquisitions. Long-term debt continues to be substantial for the publicly held hospital-holding company. The company had $2.99 billion in long-term debt as of Sept. 30, down from $3.004 billion as of Dec. 31.

Other notes of interest in the HMA 10Q include:
• “While we continue to evaluate the provisions of the 2010 Health Care Legislation, its overall effect on our business cannot be reasonably determined at the present time because, among other things, the new legislation is very broad in scope and there exist uncertainties regarding the interpretation and future implementation of many of the regulations mandated under the 2010 Health Care Legislation.”

• “We continue to invest significant resources in physician recruitment and retention (primary care physicians and specialists), emergency room operations, replacement hospital construction and other capital projects.”

• “We believe that our company-wide investments to upgrade our emergency room clinical systems contributed, in large part, to the growth in emergency room visits and hospital admissions that we experienced during 2009. For 2010, we are implementing ER Extra, which is our new emergency room operational initiative that is designed to reduce patient wait times, enhance patient satisfaction and improve the quality and scope of patient assessments.”

HMA shares (NYSE: HMA) closed Monday (Nov. 22) at $8.62. During the past 52 weeks, the share price has ranged from a $9.81 high to a $6 low.