Naples, Fla.-based Health Management Associates recorded an 80 percent decline in profit in the second quarter of its fiscal year, from $37 million last year to $7.4 million this year, meeting its inauspicious projections it released at the end of July.
On the same day Health Management announced that Franklin, Tenn.-based Community Health Systems would acquire it for $7.6 billion, officials estimated its second quarter would result in poor earnings, sluggish revenue growth and lower-than-expected guidance. Health Management mostly hit those marks. Second-quarter net revenue slipped 0.5 percent to $1.46 billion thanks to lagging volumes. Same-hospital admissions in the second quarter fell 6.7 percent, while adjusted admissions sank 2.4 percent. Surgeries and emergency room visits also dropped 2.2 percent and 3.1 percent, respectively, in the second quarter.
For the six months ended June 30, Health Management's profit fell 59 percent to $30.5 million, compared with $76.6 million a year ago. Net revenue was also down slightly to just less than $2.95 billion, while adjusted EBITDA slipped to $526.2 million in the first six months.
In its preview last month, Health Management also mentioned it had received four additional subpoenas over the past two months from HHS and the Office of Inspector General related to how the company admits people from its emergency department. In December, "60 Minutes" aired a segment on Health Management's ED practices, which the company said was reliant on "disgruntled former employees."
The merger between CHS and Health Management is still subject to several regulatory bodies, but both organizations expect it to close in the first quarter of 2014. Health Management is also still in the middle of a consent solicitation, or shareholder vote. Its largest shareholder, New York City-based hedge fund Glenview Capital Management, is proposing to replace the entire board with eight new members. Health Management said it would add Glenview's nominees to the current board, but Glenview declined the sitting board's proposal, saying it wanted all shareholders to determine board composition.
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