HealthSouth expects stronger results as new hospitals boost volume

HealthSouth Corp., a publicly traded operator of inpatient rehabilitation hospitals, raised its financial projections for 2014 after what it described as strong results in the first half of the year.

The Birmingham, Ala.-based chain reported a 45.3% drop in net income in the second quarter compared with the same period in 2013. However, last year's results included a one-time federal income tax benefit stemming from a settlement with the Internal Revenue Service. Excluding the settlement, HealthSouth's operating performance improved year-over-year as revenue grew faster than expenses.

HealthSouth also booked a $27.2 million income gain when it acquired an additional 30% stake in Fairlawn Rehabilitation Hospital from its joint venture partner, UMass Memorial Health Care. The deal, which increased HealthSouth’s ownership stake in the Worcester, Mass.-based facility to 80%, closed in June.

Same-hospital discharges in the second quarter increased 1.4% year-over-year. However, new hospitals in its portfolio, including Fairlawn, helped boost total discharges 3%. Revenue per discharge increased 4.9%.

In total, HealthSouth reported $97.9 million in net income on $595.1 million in net revenue in the second quarter of this year compared with $179 million in income on $557.5 million in revenue in the prior-year period.

HealthSouth also said it is now expecting $570 million to $580 million in full-year earnings before interest, taxes, depreciation and amortization, instead of its previous forecast of $555 million to $565 million. Earnings per share are expected to come in at $2.25 to $2.31, up from $1.86 to $1.91 per share.

Shares of HealthSouth were trading up more than 7% in after-hours trading.

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