HMA Loses $97M in Q3 as New Board, Glenview Approve CHS Merger

Naples, Fla.-based Health Management Associates posted a net loss of $96.6 million in the third quarter of this year, compared with a $40.9 million net profit in the same period last year, but the troubled for-profit hospital operator finally announced its new board has fully endorsed its pending merger.

HMAlogoIn September, Health Management's new board of directors hired financial and legal advisers to evaluate the company's $7.6 billion merger with Franklin, Tenn.-based Community Health Systems. Since August, the board met 11 times and conducted 18 meetings related to CHS' acquisition. Board members unanimously voiced their support for the deal, saying their "extensive review" will provide Health Management shareholders with the most value.

They also encouraged all shareholders to vote "for" the merger when the time comes. At least 70 percent of shareholders must ratify the deal.

"In addition to having confidence in the value of the transaction, we also support the merger's strategic rationale and benefits for HMA's patients, physicians and associates across the communities we serve," said Steve Shulman, board chairman, in a news release. "HMA and [CHS] are stronger together. The combined entity will be better positioned to address healthcare trends and challenges."

CHSlogoCHS Chairman, President and CEO Wayne Smith also released a comment on the board's decision, saying, "We are pleased that HMA's board of directors unanimously supports the merger agreement and appreciate their thoughtful review of this important opportunity. While our industry faces a challenging operating environment overall, we continue to believe in the long-term strategic and financial benefits to be gained from the combination of our organizations."

Health Management underwent a board shakeup in August after a majority of shareholders voted to remove and replace the old board. New York City-based hedge fund Glenview Capital Management, a $6 billion entity that is the largest shareholder of Health Management and run by Larry Robbins, initiated that process through a consent solicitation. Glenview executives have been critical of Health Management's performance all year. Kelly Curry resigned as CFO in September, while Gary Newsome left his post as president and CEO in July. Currently, John Starcher Jr. serves as interim president and CEO, while Gary Bryant serves as interim CFO.

In its own statement, Glenview said it will vote its shares — representing 14.5 percent of Health Management — in favor of the CHS acquisition, which is expected to close in the first quarter of 2014. Glenview also owns about 10 percent of CHS.

GlenviewCapitalHowever, Glenview expressed displeasure at Health Management's third-quarter report. In addition to the $96.6 million net loss and $73.3 million operating loss, Health Management's net revenue tumbled 1.2 percent to $1.42 billion. The results also reflected a $31 million restatement. Earlier this month, Health Management disclosed 11 of its hospitals did not achieve meaningful use and therefore had to repay Medicare and Medicaid electronic health record incentive payments back to the government.

"We are disappointed to learn of the weakness at HMA as reflected in their Q3 results, which we believe reflects on the stewardship of the old board and prior senior management," Glenview said in its statement. "However, we are gratified that the new board and a refocused and reconstituted management team are actively stabilizing and addressing financial and operating performance."

For the nine months ended Sept. 30, Health Management posted a $72.8 million net loss, compared with $114.2 million of profit last year. Net revenue declined 0.5 percent to $4.37 billion. Same-hospital admissions plunged 6.8 percent in the third quarter and were down 7.5 percent on the year. Surgeries dropped 2.1 percent and 3.2 percent in the third quarter and first nine months, respectively.

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