Health Management Reports Income Drop, Rise in Bad Debt Expense

Hospital operator Health Management Associates (NYSE: HMA) Friday reported a drop in net income for the third quarter on an increase in revenues. HMA also reported a sharp rise in bad debt expense.

The Naple, Fla.-based operator of 59 hospitals said that revenues for the third quarter rose to $1.07 billion from $989 million in the third quarter of 2006, an increase of 8.2 percent. But net income fell to $30.4 million in the third quarter this year compared with $74.4 million in the third quarter of 2006, a drop of more than 59 percent.

Much of the drop in net income was attributable to charges taken on discontinued operations.

Provision for doubtful accounts, or bad debt expense, was $126.5 million for the third quarter compared to $94.1 million for the same period a year ago, and $150.6 million for the second quarter ended June 30, 2007. As a deliberate part of its operating strategy, HMA sold certain accounts receivable during the quarter that were over one year old that it had previously written off entirely from its balance sheet. Bad debt expense for the quarter was reduced by $16.0 million from the sale of these accounts receivable.

Since February 2007, HMA has given a 60% discount to uninsured patients for non-elective services. Uninsured discounts for the quarter were $155.6 million compared to $153.3 million for the quarter ended June 30, 2007. Charity/indigent care writeoffs for the quarter were $19.2 million, compared to $156.9 million for the same period a year ago and $18.5 million for the second quarter.

HMA said in a supplemental release Friday that that uninsured accounts receivable declined $9 million during the third quarter compared with the second quarter ended June 30, 2007, attributable to the sale of certain accounts during the third quarter.