Health Management Associates, Naples, Fla., said its third-quarter profits fell more than 15% to $74.4 million, down from $87.8 million in the 2005 quarter, because of higher bad-debt expense and soft volume. HCA, Nashville, reported similar trends when it released quarterly results last week. The decline in profits came even as HMAs third-quarter revenue rose 10.1% to $994.1 million. Bad-debt expense equaled 9.5% of revenue, compared with 8.2% of revenue in the 2005 quarter. For the nine months ended Sept. 30, HMA recorded profits of $239 million, down 12.9% from the year-ago period. Revenue climbed 10.7% to $3 billion.
HMA said part of the third-quarter increase in bad-debt expense resulted from the companys decision to classify more bills as bad debt instead of immediately write them off as charity care, but HMA said it also has continued to treat more uninsured patients in each quarter. By not immediately writing off the accounts, HMA can hope to collect at least part of the bill, said Bob Farnham, chief financial officer and senior vice president. Farnham also noted that out-of-pocket costs for patients continue to depress patient volume. The company reported essentially flat adjusted admissions on a same-hospital basis compared with the year-ago quarter, as a 6.2% increase in inpatient admissions was offset by an 8.7% decrease in total surgeries.
HMA said it is aggressively working on bolstering its physician relationships, making changes that physicians want at its hospitals and also taking a more flexible stance toward partnering with and employing physicians. Those moves, combined with continued cost-control efforts, are expected to pay off in higher volume and increased profit margins in 2007 and 2008, executives said during a conference call. HMA owns or operates 60 hospitals, including three whose sale is pending, in 14 states. -- by Vince Galloro