Health Management Associates, Naples, Fla., said higher bad-debt expense and weak patient volume led to a 4.1% decline in profits for its fiscal 2006 first quarter, ended Dec. 31, 2005, compared with the year-ago quarter. The company also announced an agreement to purchase a hospital and the attached physician practice in Florida from the Cleveland Clinic; no terms were disclosed. HMA said it earned $75.5 million, or 31 cents per share, for the quarter, compared with profits of $78.8 million, or 32 cents per share, in its fiscal 2005 first quarter. Revenue was up 14.9% to $936.5 million. HMA said bad-debt expense increased to 8.7% of revenue, up 1.1 percentage points from the year-ago quarter. Hurricanes Katrina and Wilma also depressed profits, as the company's hospitals in Biloxi, Miss., and the Florida Keys lost about $10.5 million in business but received only $5 million in business-interruption insurance payments in the quarter. HMA said it expects to receive more insurance payments in future quarters. On a same-hospital basis, admissions from continuing operations fell 1.6%, but outpatient volume offset the decline, leading to basically flat adjusted admissions comparing the two quarters. Surgeries increased 2.1%.
HMA said it hopes to complete its purchase of 83-bed Cleveland Clinic Hospital-Naples (Fla.) by June 30. HMA also is building a 100-bed hospital outside of Naples. The company expects to have a long-range clinical relationship with Cleveland Clinic that would include clinic physicians practicing at both of HMA's future Naples-area hospitals. On a conference call previously scheduled for the earnings release, HMA said that it will employ the clinic's physicians, but the hospitals' medical staffs will be open to other physicians as well, a change from Cleveland Clinic-Naples' current closed-staff model. HMA owns or operates 59 hospitals in 16 states and has deals pending to acquire three hospitals. -- by Vince Galloro