In the wake of rising hospital stock prices, Health Management Associates has temporarily relinquished its stock repurchase program in favor of more hospital acquisitions, the Naples, Fla.-based hospital chain said last week.
The company's board had approved a 25 million share repurchase program last September, but after buying 5 million shares back, HMA has decided to spend its cash on buying hospitals instead. The move shows one company's reaction to the overall rise in stock prices among publicly traded hospital companies.
In HMA's case, its stock hit a 52-week low of $7 per share in October, just after the repurchase program was announced. It reached a 52-week high of $18.25 per share during the first week of January. In between the high and low points, HMA's stock price climbed relatively steadily.
"If we borrowed funds, it would not be accretive," said Chairman and Chief Executive Officer William Schoen. Because share prices have risen, purchasing hospitals and turning them around is a better investment for the company and its shareholders, he said.
Schoen would not disclose specifics but said HMA has "some letters of intent out" in its current markets or other markets, primarily in the Southeast and Southwest. Acquisition targets are hospitals with 100 to 300 beds, he said. The company operates 35 hospitals in 12 states.
HMA disclosed the change in policy along with its earnings report for the first quarter ended Dec. 31, 1999. During the quarter, the company's net income rose almost 11% to $34.3 million, or 14 cents per share, from $31 million, or 12 cents per share, in the prior-year quarter. The company's revenue jumped 21% to $370.1 million from $305.5 million in last year's quarter.
To help make hospital purchases and keep the company growing during the next few years, HMA negotiated a new $600 million line of credit with several banks during the quarter. Its previous $300 million line of credit expired last November.