Health Management Associates Reports Record 4th Quarter Net Income Growth of 33%

Health Management Associates, Inc. announced that net income for the quarter ended September 30, 2001 increased 33% to $51.9 million, up from $39.1 million for the same quarter a year ago. Earnings per share (diluted) for the quarter were $.20 per share, up 25% from $.16 per share, on a 4.2% increase in diluted shares outstanding. Net patient service revenue grew a solid 20% to $491.2 million for the quarter ended September 30, 2001, up $83.3 million from $407.9 million for the same period a year ago.

      Net patient service revenue at hospitals owned and operated by HMA for one year or more was up 11%. This quarter represents the 52nd consecutive quarter of same hospital revenue growth. Among the factors contributing to the growth were a 3.5% increase in admissions and a strong 6.8% increase in surgeries. Same store hospital EBITDA margins increased 120 basis points to 25.3% from 24.1% for the same period a year ago. Continued investment in emergency room services, including our innovative Nurse First and ProMed programs, contributed to a 6.7% growth in same hospital emergency room visits, compared to the same quarter last year.

      "These results mark the 13th consecutive year of operating earnings growth for HMA, an achievement unequalled by any other publicly traded hospital management company, and we are extremely pleased with the outstanding results for this quarter, and the year," said Joseph V. Vumbacco, President and Chief Executive Officer. "Our acquisition hospitals continue to improve their operations in line with our expectations, and combined with strong increases in same store admissions, surgery volumes, and pricing, HMA was able to increase net income during the fourth quarter by 33% over last year. This consistent earnings track record is a clear indication of our strategy to deliver efficient, high quality healthcare services to the growing number of patients in our non-urban communities."

      For the year ended September 30, 2001, net earnings, before non-cash, non- recurring charges, increased to $205.3 million compared to $167.7 million for the same period a year ago, or 22%. Diluted per share earnings for the period, before non-cash, non-recurring charges, were $.80 on 264.4 million shares as compared to $.68 on 247.3 million shares outstanding a year ago. The Company reported total net patient service revenue of $1,879.8 million, an increase of 19% from $1,577.8 million from the previous year end.

      Accounts receivable management was, once again, excellent for the quarter. DSOs saw continued progress for the quarter, decreasing an impressive 13 days year over year to 71.2 days outstanding, well within the objective range set forth at the beginning of the year. These figures include the purchase of accounts receivable at the two most recent acquisitions in Carlisle, Pennsylvania and Pennington Gap, Virginia.

      More importantly, HMA has succeeded in receiving the necessary provider numbers for the Carlisle Hospital acquisition and successfully billed and collected the backlog of Medicare and Medicaid receivables at the Carlisle Hospital before the end of the fourth quarter. This significant reduction in time to obtain the provider numbers is a testament to HMA's excellent relationship with the Centers for Medicare and Medicaid Services (CMS) and further improves HMA's excellent cash flow.

      Cash flow from operations increased an impressive $113.1 million compared to the year ago period, reflecting our continued emphasis on cash collections. During the quarter, HMA completed the acquisition of the 80-bed Lee County Community Hospital in Pennington Gap, Virginia. This sole community provider currently generates approximately $20 million in annual net revenues. "Lee County Community Hospital presents an extraordinary opportunity for HMA to expand services to the residents of southwestern Virginia," added Vumbacco. "This hospital has operated amid certain difficulties that are now being corrected, and it is our intention to transform it into a regional medical center capable of once again earning recognition as a Top 100 Hospital.

      Delivering high quality healthcare and providing healthcare close to home continues to earn HMA the reputation as the acquirer of choice in non-urban communities in the southeast and southwest United States."

      On October 8, 2001, HMA announced the signing of a definitive agreement to acquire our first hospital of fiscal year 2002, the 88-bed East Pointe Hospital in Lehigh Acres, Florida. This hospital is located in the eastern portion of Lee County, Florida, which has been noted as one of the fastest- growing areas not only in the state but also in the nation. "We are very excited to start off our new year with this opportunity," said Vumbacco. "Lehigh Acres is a beautiful community, in need of high-quality healthcare service expansion through physician recruitment and invested capital.

      HMA stands ready to focus on this growing community's healthcare needs." The transaction is expected to be completed in November 2001. "We have identified 200 acquisition opportunities in 14 states across the southeast and southwest where HMA would be the dominant provider of healthcare in those growing non-urban communities," added Vumbacco. "We will continue to be selective with our acquisitions, seeking the best opportunities for HMA to improve the quality of healthcare, and subsequently improve the intrinsic value of the Company for our shareholders.

      Investing in our future by attracting the best and brightest physicians and employees to our hospitals, and employing the capital in the necessary areas to best affect improvements in the highest quality outcomes, remains our focus. Adhering to these principles will continue our mission to be the healthcare provider of choice in non-urban America."

      HMA is the largest non-urban hospital operator of general acute care hospitals in communities situated primarily in the Southeast and Southwest. The Company, after completing the previously announced transaction to acquire the 88-bed East Pointe Hospital, will operate 39 facilities in 12 states with 5,406 licensed beds. HMA has experienced 13 years of uninterrupted operating earnings growth. Back to TOC.

Healthsouth Reports Q3 Earnings Per Share of 20¢

Healthsouth Corporation announced operating results for the quarter and nine months ended September 30, 2001. For the quarter, HEALTHSOUTH's revenues were $1.076 billion, an increase of 1.5% as compared to $1.060 billion for the third quarter of 2000.

      Adjusting in both periods for the effect of the 2001 sale of the company's occupational medicine operations and its Richmond, Virginia, medical center, revenues for the 2001 quarter increased 5.2% over revenues for the 2000 quarter. Net income for the 2001 quarter was $79.1 million, an increase of 11% compared to net income of $71.0 million in the 2000 quarter.

      Earnings per share (assuming dilution) were $.20 for the 2001 quarter, consistent with consensus Wall Street estimates and representing an increase of 11% as compared to earnings per share (assuming dilution) of $.18 in the 2000 quarter. For the quarter, the company's earnings before interest, taxes, depreciation and amortization (EBITDA) margin was 27.7%, compared to 27.0% in the third quarter of 2000.

      For the nine months ended September 30, 2001, HEALTHSOUTH's revenues were $3.265 billion, compared to $3.118 billion for the same period in 2000. Income before unusual and non-recurring items for the 2001 period (all of which were incurred in the second quarter of 2001) was $237.5 million, compared to net income of $201.6 million for the 2000 period.

      The comparable income per share (assuming dilution) for the 2001 period was $.60, a 15% increase compared to earnings per share (assuming dilution) of $.52 for the 2000 period. HEALTHSOUTH is a large provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with over 1,900 locations in all 50 states, the United Kingdom, Australia, Puerto Rico and Canada. Back to TOC.

HMOs Debate Access to Specialists

According to Stephanie Nano, an Associated Press writer, when a Boston HMO gave patients direct access to specialists, it braced for a flurry of calls for appointments. The calls never came. Until 1998, Harvard Vanguard Medical Associates, like other managed care plans required patients to get authorization from their primary care doctor before they could be seen by most specialists. Such "gatekeeping" policies are used to keep costs down and coordinate care.

      But at Harvard Vanguard, the system was unpopular with doctors and patients alike, said Dr. Steven Pearson of Harvard Medical School (news - web sites), and a decision was made to drop it. A study by Pearson and his colleagues found that patients did not rush to specialists. "Overall, there was a negligible change, really hard to pick up at all," Pearson said. The study, published in Thursday's New England Journal of Medicine (news - web sites), was based on an analysis of doctor visits made by 60,000 patients during the three years before the policy was dropped and 30,000 patients after.

      On average, patients visited their primary care physician 1.21 times per six-month period before the change and 1.19 times after. The average number of visits to specialists was the same - 0.78 times - before and after gatekeeping.

      The researchers found a small increase in first-time visits to specialists, with the most significant rise seen in those seeking treatment for back pain. "The bottom line is that in this kind of system, you can offer open access to specialists without breaking the bank and without creating havoc," Pearson said. "And that's an important lesson for the health care system."

      While the practice is subsiding, Pearson said about half of the people enrolled in managed health plans still face some referral requirements. Harvard Vanguard, with 120 general internists and 50 specialists, is now an independent group practice. Until 1997, it was part of Harvard Pilgrim Health Care, a health plan whose foundation funded the study. Pearson's department at Harvard is a joint venture with Harvard Pilgrim.

      The researchers said the results may not apply to other managed care plans or other groups of patients, a point emphasized by Dr. David Lawrence. He noted in an editorial that less than 5 percent of Americans receive care from group practices just as Harvard Vanguard. Lawrence, chairman and chief executive officer of Kaiser Foundation Health Plan and Hospitals, said his health care plan strongly encourages patients to get referrals from their primary care doctors.

      "If the patient is left to try and find his or her way through what is a maze of choices and a maze of different opinions and ideas about what should happen, the patient is really at rather substantial risk," he said. Back to TOC.

Correctional Properties Trust Reports 21% Quarterly Growth

Correctional Properties Trust a real estate investment trust (REIT), announced funds from operations for the three months ended September 30, 2001, of $4.1 million, or $0.57 per diluted share, on revenue of $7.5 million. Net income for the third quarter of 2001 was $2.3 million or $0.32 per diluted share. The Trust reported funds from operations of $3.4 million for the third quarter of 2000, or $0.47 per diluted share, on revenue of $5.7 million. Net income for the third quarter of 2000 was $2.0 million or $0.29 per diluted share.

      Correctional Properties Trust also announced that its Board of Trustees increased the quarterly dividend to $0.375 (thirty seven and one half cents) per share on each common share of beneficial interest, payable December 4, 2001, to shareholders of record at the close of business November 16, 2001.

      Charles R. Jones, President and CEO stated, "This is the first full quarter that has included the increased earnings attributable to the acquisitions we made during the first half of 2001. These two acquisitions added significantly to our earnings and cash flow, while diversifying our lessee base to include the State of North Carolina. The result is the increase in our quarterly dividend announced today, which is especially satisfying."

      Correctional Properties Trust is dedicated to ownership of correctional facilities under long-term, triple-net leases without occupancy risk or development risk. Correctional Properties Trust currently owns 13 correctional facilities in nine states, all of which are leased, with an aggregate initial design capacity of 7,282 beds. Prison Operator Cornell Cos Operating Earnings up 50 Percent Cornell Cos Inc. reported a 50 percent increase in operating earnings and confirmed its 90-cent-per-share estimate for the full year. Third-quarter net income, however, dropped 25 percent to $1.4 million, or 15 cents a share, from $1.9 million, or 20 cents a share, last year. Revenue increased increased 21 percent to $68.7 million.

      Net income in the latest quarter included charges totaling $2.6 million, or 15 cents per share, leaving earnings per share from operations of 30 cents for the quarter and 61 cents for the first nine months of 2001. HCA Announces New $250 Million Share Repurchase Program HCA has announced an authorization to repurchase up to $250 million of its common stock. HCA expects to repurchase it's shares from time to time through open market purchases or privately negotiated transactions.

      The Company had approximately 515 million shares outstanding as of September 30, 2001. Back to TOC.

WebMD Corp. Updates

WebMD Corporation stated that completion of its previously announced plan to dispose of its Porex plastics and filtration technologies business will take longer than it had expected. WebMD has determined not to accept any of the offers made by potential buyers to date because it believes that such offers do not reflect the value of the Porex business. WebMD plans to continue to explore various divestiture alternatives for the Porex business, but no longer expects to complete the disposition in 2001. Beginning in the September quarter, results of the Porex business will be classified as a discontinued operation in WebMD's financial statements.

      WebMD also announced that Charles Stevens has resigned as a director of WebMD. Mr. Stevens had been appointed to the WebMD Board of Directors as a representative of Microsoft Corporation in accordance with an agreement that is no longer in effect. The resignation does not affect the existing agreement between WebMD and Microsoft pursuant to which WebMD is the primary provider of health programming on MSN and other Microsoft-affiliated sites. Back to TOC.

In This Issue--Also See Archive

Record 4th Quarter at HMA

Health Management Associates, Inc. announced that net income for the quarter ended September 30, 2001 increase...

Healthsouth Earns 20¢ per Share

Healthsouth Corporation announced operating results for the quarter and nine months ended September 30...

HMOs Debate Access to Specialists

According to Stephanie Nano, an Associated Press writer, when a Boston HMO gave patients direct access...

CPT Reports 21% Growth in Quarter

Correctional Properties Trust a real estate investment trust (REIT), announced funds from operations for...

WebMD Updates

WebMD Corporation stated that completion of its previously announced plan to dispose of its Porex plastics...

Humana Up 30% For Q3

Managed-care giant Humana Inc. reported a 30 percent increase in third-quarter earnings Monday...

Earnings Up, Lifepoint Shares Down

Shares of Lifepoint Hospitals Inc. fell nearly 13 percent despite beating analysts third-quarter earnings...

Tenet Acquires St. Alexius Hospital

Tenet Healthcare Corporation announced that a Tenet subsidiary has completed the acquisition of St. Alexius Hosp...

UHS Enjoys Booming 3rd Quarter

Universal Health Services, Inc. announced that its earnings per share (diluted) for the third quarter ended Sept

US Oncology Reports 13¢ EPS in Q3

US Oncology Inc. announced results for the third quarter ended Sept. 30, 2001. Net patient revenues

Humana Up 30% in 3Q

Managed-care giant Humana Inc. reported a 30 percent increase in third-quarter earnings Monday as premiums assessed commercial members outpaced rises in medical costs.

      The company posted net income of $30 million, or 18 cents per share, for the quarter ending Sept. 30, up from $23 million, or 14 cents a share, for the same period last year. The results, also related to Humana's leaner operations and soaring revenues from insuring military personnel, matched projections by analysts surveyed by Thomson Financial/First Call. But the key factor in the earnings gain was that a smaller percentage of Humana's premiums for commercial members went to pay medical expenses, compared with a year earlier, a company official said. "We've been successful in raising our commercial premiums at a level that outpaces the increases in medical costs that we and other insurers are experiencing," said Humana spokesman Tom Noland.

      Revenue slipped to $2.61 billion for the quarter from $2.64 billion a year ago, reflecting the company's planned departure from non-core markets late last year to enhance profitability. Humana said it had about 6.4 million members as of Sept. 30, compared with about 5.4 million members a year ago.

      Third-quarter revenues from premiums charged commercial members totaled $1.31 billion, down slightly from $1.37 billion for the same period last year.

      Premiums assessed the government to cover Medicare, Medicaid and military-related members totaled $1.23 billion for the quarter, compared with $1.22 billion a year ago. Humana said revenues from premiums charged to military members grew to $399 million for the quarter, compared to $238 million a year earlier.

      Humana took over administering health benefits to military members in nine Midwestern and Southeastern states earlier this year. For the first nine months of the year, Humana earned $82 million, or 49 cents a share, up from $63 million, or 38 cents a share, a year ago. Revenue fell to $7.57 billion from $8.02 billion a year ago.

Lifepoint Falls, Despite Higher Q3 Earnings

Shares of Lifepoint Hospitals Inc. fell nearly 13 percent despite beating analysts third-quarter earnings estimates, because the company did not show strong revenue growth per patient at facilities open more than a year.

      SunTrust Robinson Humphrey analyst Darren Lehrich said LifePoint's $4.77 drop to $32.92 is "somewhat of an overreaction" to a modestly weak pricing trend in the hospital. "It flies somewhat in the face of what you are seeing in the industry with a strong pricing environment," Lehrich said. Lehrich, however, noted that the 21-hospital company showed very strong overall earnings growth and had good admissions trends.

      "They beat expectations and the margins were still 50 basis points ahead of what what I forecast," Lehrich said. "From income statement standpoint, it was a positive quarter in my view."

      On Monday, after the market closed, LifePoint said it earned $7.5 million or 20 cents per share for the third quarter. This compares with the Thomson Financial/First Call estimate of 19 cents per share and last year's third-quarter net income of $4.8 million, or 14 cents a share. Last year's result included a gain of 2 cents per share. Back to TOC.

Tenet Completes Acquisition of St. Alexius Hospital

Tenet Healthcare Corporation announced that a Tenet subsidiary has completed the acquisition of St. Alexius Hospital, a 203-bed acute care facility in south St. Louis that had been controlled by St. Anthony's Medical Center, also in St. Louis. "Adding St. Alexius to Tenet's growing St. Louis family gives us a wonderful opportunity to enhance our health care network to meet the needs of the people of south St. Louis and the physicians who serve them," said Phillip S. Schaengold, vice president, operations, for Tenet's St. Louis Market. "We will begin immediately to assess and optimize the capabilities of St. Alexius and Tenet's nearby SouthPointe Hospital to assure that we meet the needs of the South City communities for quality care and service."

      Schaengold announced that James D. ("Doug") Doris, chief executive officer of SouthPointe Hospital, would also serve as chief executive officer of St. Alexius Hospital. Under Doris, the two facilities will have separate management teams, and both will continue to operate as acute-care hospitals with separate licenses. As part of the acquisition, Tenet agreed to: Offer employment to all active St. Alexius employees in good standing at their current salaries and with no change in their seniority,

      Continue to provide charity care for the poor according to the hospital's current policies and practices concerning care for the indigent, and Maintain the hospital's Catholic heritage and operate it according to the Ethical and Religious Directives for Catholic Health Care Services approved by the National Conference of Catholic Bishops.

      Tenet's other St. Louis hospitals include 408-bed SouthPointe Hospital; 450-bed Forest Park Hospital; 167-bed Des Peres Hospital; and 356-bed Saint Louis University Hospital, the primary teaching hospital for the Saint Louis University School of Medicine. Built in 1978, St. Alexius Hospital had net revenues of $42.1 million last year. Formerly known as Alexian Brothers Hospital, it has been part of the St. Louis health care landscape for more than 130 years. It was operated by the Alexian Brothers, a healing order of Catholic men, until 1997, when rapid changes and consolidation in the hospital business caused the brothers to assign its sponsorship and control to Unity Health System, a large St. Louis-based Catholic hospital system.

      The hospital changed its name to St. Alexius in June 2000, when it and St. Anthony's Medical Center, which managed both facilities under Unity, left the Unity system. Tenet Healthcare owns and operates 114 acute care hospitals with 28,256 beds and numerous relatedhealth care services. The company employs approximately 111,000 people serving communities in 17 states and services its hospitals from a Dallas-based operations center.

Universal Health Services EPS Up 33% In Q3

Universal Health Services, Inc. announced that its earnings per share (diluted) for the third quarter ended September 30, 2001 were $.48 compared to $.36 for the same period in 2000. Net income for the three-month period ended September 30, 2001 was $30.3 million compared to $22.3 million in the same period of 2000. EBITDA (earnings before interest, tax, depreciation, and amortization) was $90.1 million during the third quarter of 2001, an increase of 27% from the comparable quarter last year.

      Net revenues for the quarter increased 28% to $721 million. At September 30, 2001 balance sheet debt, net of cash, was approximately $601 million and shareholders' equity was approximately $799 million.

      For the nine-month period ended September 30, 2001 earnings per share (diluted) were $1.56 and net income was $98.8 million, increases of 31% and 33% respectively from the results recorded in the same period of the prior year. Net revenues for the 2001 nine-month period were $2.1 billion, an increase of 30% over the comparable period in 2000. For the nine-month period the Company's coverage of EBITDA to interest expense was 9.7 times.

      Patients and their physicians continue to choose UHS facilities for care. Admissions to the Company's acute care hospitals owned for more than a year rose 7.1% during the quarter compared to the same period in the prior year. Admissions to the Company's behavioral health facilities owned for more than a year increased 7.5% in the quarter compared to the same period in the prior year. Revenue per adjusted admission increased 8.4% at the Company's acute care hospitals and 4.1% at the Company's behavioral health facilities for the current quarter compared to the same period in the prior year.

      During the quarter, the Pennsylvania Insurance Commissioner obtained a rehabilitation order for the insurance company that provides UHS the majority of its professional liability insurance. This order gives the Pennsylvania Department of Insurance statutory control over the insurance company including the ability to thoroughly analyze, evaluate, and oversee financial operations. No provision has been made for any potential contingencies on UHS's September 30, 2001 financial statements as a result of the rehabilitation order as such amount, if any, could not be reasonably estimated. UHS believes the insurance company continues to have a substantial liability to pay claims on behalf of UHS and an inability to discharge this liability could have a material adverse affect on UHS.

      The Company opened the 180-bed replacement hospital in Laredo, Texas in late August and is continuing to build the new George Washington University Hospital with an expected opening in mid-2002. We expect to announce an acquisition of an acute care hospital within a few days and to complete another acquisition before year-end. Back to TOC.

US Oncology Reports Q3 2001 EPS of $0.13

US Oncology Inc. announced results for the third quarter ended Sept. 30, 2001. Net patient revenues for the third quarter increased 7.8 percent to $475.9 million from $441.3 million reported in the comparable quarter last year. Company revenue for the third quarter increased 10.5 percent to $372.7 million from $337.3 million reported in the comparable quarter last year. Net income was $12.9 million, or $0.13 per share, in the third quarter 2001 compared to $11.6 million, or $0.12 per share, during the same period in 2000.

      "We continue to make progress toward accomplishing previously announced strategic initiatives," said R. Dale Ross, chairman and CEO. "The Company has devoted a significant level of energy to implementing a set of coordinated strategies to improve performance and position the Company for continued growth. These strategies focus on achieving operational excellence, transitioning practices from the Revenue Model to the Earnings Model, eliminating non-core services and unproductive practice relationships, and identifying strategic options to accelerate future growth. Our success in improving operational performance is reflected in current quarter results. We have greatly improved our capital structure and operating platform."

      The key financial indicators of USON's successful implementation of these strategies are as follows:

• Operating Cash Flow was $53.4 million for the third quarter, down from $64.8 million for the second quarter of 2001, compared to $45.1 million for the third quarter of 2000.
• Accounts Receivable Days Outstanding decreased to 56 in the third quarter, down from 58 in the second quarter of 2001 and 70 in the third quarter of 2000. Long-Term Debt was reduced by $43.4 million during the third quarter and by $116.9 million during the first nine months of 2001.
• Same market Field EBITDA(1) increased to $159.4 million during the third quarter, up from $158.8 million for the second quarter of 2001, compared to $155.3 million for the third quarter of 2000.
• Same market EBITDA(1) for the third quarter increased to $44.0 million, up from $42.6 million during the second quarter of 2001, compared to $42.1 million for the third quarter of 2000. In the nine months ended September 30, the Company recruited 63 physicians into existing network-affiliated practices.

"We believe the recently announced Service Line Structure will accelerate growth in external markets in a less capital-intensive manner," said Ross. "In addition, as our existing practices complete their evaluation of the Service Line Structure, we believe many will elect to make the transition to that structure. At the same time, however, we are firmly committed to our existing operations, which remain strong and durable. In the final analysis, the successful conclusion to our conversion strategy is having our affiliated practices on either the Earnings Model or the Service Line Structure." During the fourth quarter, the Company will meet with affiliated practices to review the benefits of the Service Line Structure.

      At the same time, the Company will continue to transition Revenue Model practices to either the Earnings Model or the Service Line Structure. The Company has successfully converted practices accounting for 16 percent of 2000 revenues from the Revenue Model to the Earnings Model, which now represents 57 percent of the Company's net revenue.