Glenview Capital Becomes Health Management Associates’ Largest Owner

Glenview Capital has purchased approximately six million shares of Health Management Associates, Inc. (NYSE:HMA), making Larry Robbin’s hedge fund the largest shareholder of the company. The fund held a 5% stake in the company as of late April 2012 with 12,824,276 shares. The fund’s 13F for the third quarter listed a total of 25,629,276 shares owned. The latest 13F filed with the SEC shows the fund now holding 33,609,503 shares equal to 13.11% of outstanding shares. The second largest owner of the company is Wellington Management Company with 26,410,006 shares held.

Health Management Associates, Inc. (NYSE:HMA) by and through its subsidiaries operates general acute care hospitals and other health care facilities in non-urban communities. The company recently made national headlines after  CBS’ “60 Minutes” aired an investigative report regarding the companies actions. Over 100 current and former employees said that the health hospital operator applied pressure towards admitting patients who did not need treatment into the hospital, in order to boost profits.

On the company’s conference call in response to a question about the 60 Minutes show, Bob Farnham – Health Management Associates, Inc. – SVP, Finance, stated:

We thought the piece was obviously very, very one sided. It was about emergency room admissions and physicians were being pressured to admit patients.

But I will tell you a couple of things. One is there wasn’t one patient identified that was admitted that shouldn’t have been admitted. There was no – actually quality was mentioned. They mentioned it — no one had anything to say about our quality. Quality scores were good.

We spent time with 60 Minutes and gave them a lot of evidential material. We utilized an outside analytics firm that poured over a lot of Medicare data, and we had a conference call before — I am sure you saw that, Michael. We had a conference call before that showed our ER admit rates and the number of tests ordered per emergency room patient was basically flat over the last five years.

They interviewed a number of physicians and individuals, all — basically all have litigation of some form or fashion against the Company and have some ax to grind. But 60 Minutes didn’t mention any of that. And so I am sure we will continue to have some fallout from it, but the response that we have had from the analyst community, from most of our physicians as well, has been very supportive, very supportive.

Many sell side analysts covering the company agreed that the 60 Minutes coverage was one sided and biased.

For the nine months ended 30 September 2012, Health Management Associates, Inc. (NYSE:HMA) revenues increased 19% to $4.4B. Net income before extraordinary items decreased 18% to $121.8M. Revenues reflect Number of Surgeries increase of 20% to 297K, Patient Days increase of 6% to 1.1M, Net revenue increase of 19% to $5.04B. Net income was offset by Salaries/Benefits increase of 17% to $1.94B (expense), Other Operating increase of 27% to $969.4M (expense). The company has a market cap of approximately $2.34 billion.

Disclosure: No position