Health Management rises on upgrade to ‘Outperform’

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NEW YORK (AP) — Shares of hospital operator Health Management Associates Inc. rose Friday after a Robert W. Baird analyst upgraded the stock, citing the outlook for progress in 2010.

Baird analyst Whit Mayo said management will likely provide positive guidance for the year “soon,” while costs for bad debt and uninsured patients could be ebbing. Also, the Naples, Fla., company is likely making progress in patient volumes, he added.

The stock gained 42 cents, or 5.6 percent, to reach $7.88 in afternoon trading. Shares are up fivefold from a 52-week low of $1.47 last January, though they are below their October peak of $8.58.

Mayo upgraded shares to “Outperform” from “Neutral”, while boosting the price target to $10 from $8.

“Bottom line, there are too many catalysts along with undeniable operating progress under way for us to remain ‘Neutral’-rated on the stock,” he said, in a note to investors.

He said 2010 guidance should be above Wall Street forecasts, with management giving an “upbeat, bullish” outlook. The company’s management is scheduled to make an investor presentation Wednesday at the J.P. Morgan Healthcare Conference.

Also, bad debt that weighed down the sector in the latter half of 2009 will likely be less of a factor in 2010, with the volume of uninsured patients flattening. Bad debt refers to patients’ bills that are unlikely to be repaid.

Mayo now expects 2010 profit of about 58 cents per share, up a nickel from his prior estimate. On average, analysts polled by Thomson Reuters expect profit of 55 cents per share.

Mayo said the company has made “traction” over the past 12 months at becoming more efficient and productive and lowering wait times.

Health Management owns 55 hospitals with about 8,400 beds in non-urban areas. In the third quarter ended in September, the company’s profit more than doubled as hospital admissions increased.

“Physician recruiting has picked up dramatically in recent quarters, and we sense that recent new doctor-adds are just now beginning to contribute to Health Management’s admissions and profitability,” he said.