Health Management Associates, Inc. and its subsidiaries primarily operate general acute care hospitals in non-urban communities. As of December 31, 2009, we operated 55 hospitals with a total of 8,418 licensed beds in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Washington and West Virginia.
Services provided by our hospitals include general surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care and pediatric services. We also provide outpatient services such as one-day surgery, laboratory, x-ray, respiratory therapy, cardiology and physical therapy. Additionally, some of our hospitals provide specialty services in, among other areas, cardiology (e.g., open-heart surgery, etc.), neuro-surgery, oncology, radiation therapy, computer-assisted tomography (“CT”) scanning, magnetic resonance imaging (“MRI”), lithotripsy and full-service obstetrics. Our facilities benefit from centralized resources, such as purchasing, information technology, finance and accounting systems, legal services, facilities planning, physician recruiting services, administrative personnel management, marketing and public relations.
Our Class A common stock is listed on the New York Stock Exchange under the symbol “HMA.” We were incorporated in Delaware in 1979 but began operations through a subsidiary that was formed in 1977. We became a public company in 1991. We have been named to the list of Fortune Magazine’s World’s Most Admired Companies, appearing as the top hospital company in the “Health Care: Medical Facilities” category for two of the last four years.
Acquisitions, Divestitures, Joint Ventures and Other Activities
Part of our strategic business plan calls for us to acquire underperforming non-urban general acute care hospitals that are available at a reasonable price, align with our business model and otherwise meet our strict acquisition criteria. Historically, we proactively identified acquisition targets and responded to requests for proposals from entities that were seeking to sell or lease hospital facilities. As a result, we customarily entered into multiple agreements each year to acquire or lease hospital facilities. In recent years, we moderated our acquisition activity to focus on (i) improving, developing and enhancing the operations of our existing health care facilities and (ii) identifying joint ventures and other arrangements that augment our position in the markets where we already have health care operations. We will continue to pursue these two important strategies but we also plan to evaluate various hospital acquisition candidates in 2010 and beyond. We believe that our improved balance sheet and available borrowing capacity provide us the leverage needed to consider acquisition opportunities at this time; however, there can be no assurances that we will close any hospital acquisition transactions in 2010.
We regularly evaluate our portfolio of hospitals and, if an individual hospital no longer meets our short and long-term performance criteria, we consider strategic alternatives, including, in some cases, divestiture. Where appropriate, and consistent with our performance criteria and other objectives, we explore collaborative relationships, including joint ventures, with physicians and others. Generally, at any given time, we are actively involved in negotiations concerning possible acquisitions, divestitures and joint ventures. Recently completed transactions are set forth below.
Effective December 1, 2009, we acquired the Sparks Health Systems in Fort Smith, Arkansas. The purchase price for this acquisition, which included a 492-bed general acute care hospital, physician practices and other related health care operations, was approximately $138.2 million.
As a result of a restructuring of our joint venture with Novant Health, Inc., which is described below under “Joint Ventures and Other Activities,” we exchanged substantially all of our interest in each of 70-bed Franklin Regional Medical Center in Louisburg, North Carolina and 125-bed Upstate Carolina Medical Center in Gaffney, South Carolina for all of the minority interests in certain other hospitals in which we already held a majority interest.
On August 28, 2008, we completed the sale of Southwest Regional Medical Center, formerly a 79-bed general acute care hospital in Little Rock, Arkansas. We had previously closed this hospital on July 15, 2008. The selling price was approximately $14.3 million and yielded a gain of $3.2 million.
On June 1, 2008, we closed the Woman’s Center at Dallas Regional Medical Center (the “Center”), which was formerly a 172-bed specialty women’s hospital in Mesquite, Texas. The decision to close the Center primarily resulted from losses at the facility and our intention to focus resources on Dallas Regional Medical Center at Galloway, our 202-bed general acute care hospital in Mesquite, Texas.
On January 1, 2008, we closed Gulf Coast Medical Center (“GCMC”), formerly a 189-bed general acute care hospital in Biloxi, Mississippi. In large part, our decision to close the hospital was due to its inability to rebound from the devastating effects of Hurricane Katrina.
We are currently evaluating various disposal alternatives for the Center’s and GCMC’s tangible long-lived assets, which primarily consist of property, plant and equipment; however, the timing of such divestitures has not yet been determined.
Joint Ventures and Other Activities
General. As of December 31, 2009, we had established joint ventures to own/lease and operate 24 of our hospitals, including new joint ventures at 16 hospitals during the year ended December 31, 2009. Local physicians and/or other health care organizations own minority equity interests in each of the joint ventures and participate in the related hospital’s governance. We own a majority of the equity interests in each joint venture and manage each hospital’s day-to-day operations. We continue to evaluate new joint venture opportunities.
Novant Health, Inc. On March 31, 2008, Novant Health, Inc. and one or more of its affiliates (collectively, “Novant”) paid us $300.0 million for (i) a 27% equity interest in a limited liability company that then owned/leased and operated our seven general acute care hospitals in North Carolina and South Carolina (the “Carolina Joint Venture”) and (ii) certain property, plant and equipment of the physician practices that were affiliated with those hospitals. This transaction yielded a gain of approximately $203.4 million. During 2008, we also recorded a charge of $7.9 million for the present value of our estimated payments to Novant to partially offset certain operating losses of the aforementioned physician practices (the “Physician Subsidy”). Effective October 1, 2009, the Carolina Joint Venture was restructured as described below, resulting in a gain of $10.4 million.
all of the equity interests in 149-bed Davis Regional Medical Center in Statesville, North Carolina, 64-bed Sandhills Regional Medical Center in Hamlet, North Carolina, 116-bed Carolina Pines Regional Medical Center in Hartsville, South Carolina and 82-bed Chester Regional Medical Center in Chester, South Carolina were distributed from the Carolina Joint Venture to us;
Franklin Regional Medical Center and Upstate Carolina Medical Center continue to be owned by the Carolina Joint Venture; however, Novant now manages both hospitals and receives 99% of the net profits, net losses, free cash flow and capital accounts of those hospitals (effectively reducing our interest in each hospital from 73% to 1%);
105-bed Lake Norman Regional Medical Center in Mooresville, North Carolina continues to be owned by the Carolina Joint Venture and managed by us (subject to certain management rights expressly delegated to Novant); however, we now receive 70% of the net profits, net losses, free cash flow and capital accounts of the hospital (effectively increasing Novant’s interest in the hospital from 27% to 30%);
we paid Novant approximately $7.6 million, which included the purchase of certain assets used by physicians previously employed by Novant who returned to our employment. Additionally, we agreed to make ten annual installment payments of $200,000 to Novant, the first of which was in January 2010; and
our remaining Physician Subsidy obligation, if any, was cancelled.
Our markets are generally non-urban areas with populations of 30,000 to 400,000 people located primarily in the southeastern United States. Typically, the hospitals we operate are, or we believe can become, the sole or preferred provider of health care services in their respective markets. Our target markets generally have the following characteristics:
As evidence of our commitment to quality, Lake Norman Regional Medical Center, our 105-bed hospital in Mooresville, North Carolina, achieved Magnet Status designation in February 2007 for excellence in nursing services by the American Nurses Credentialing Center’s Magnet Recognition Program. The Magnet Recognition Program recognizes health care organizations that demonstrate excellence in nursing practice and adherence to national standards for the organization and delivery of nursing services. Additionally, Charlotte Regional Medical Center, our 208-bed hospital in Punta Gorda, Florida, and Physicians Regional Health System, our two-hospital system in Naples, Florida, were ranked among the nation’s top hospitals, according to an independent study of mortality and complication rates by Health Grades, Inc. (“HealthGrades”). Both hospitals received HealthGrades’ Distinguished Hospital Award for Clinical Excellence™ based on clinical quality performance. HealthGrades is a leading health care ratings organization, providing ratings and profiles of hospitals, nursing homes and physicians. Barrow Regional Medical Center, our 56-bed hospital in Winder, Georgia, and Walton Regional Medical Center, our 77-bed hospital in Monroe, Georgia, were two of twelve hospitals named to the Chairman’s Honor Roll for Georgia Hospital Association’s Partnership for Health and Accountability, recognizing their delivery of high quality health care services. Additionally, Yakima Regional Medical and Cardiac Center, our 214-bed hospital in Yakima, Washington, was awarded the Gold Performance Achievement Award from the American College of Cardiology for its treatment of heart attacks. Yakima Regional Medical and Cardiac Center is one of only four hospitals in the state, and the only one in central Washington, to receive this prestigious honor. Lastly, Summit Medical Center, our 103-bed hospital in Van Buren, Arkansas, was named an “Innovator” Award winner by the Arkansas Foundation for Medical CareSM for sharing innovative and successful strategies with its peers and acting as a mentor to other facilities for the delivery of quality health care.
We implemented a medication error prevention program using “Safescan™,” a handheld bedside medication administration system designed to help eliminate medication errors by using a clinician-designed bar code scanning device to verify medication orders at the point of care.
We initiated a program to enhance and upgrade our emergency room clinical systems to more effectively manage patient flow and outcomes. Thus far, the enhancements have included hardware and software upgrades, as well as the development of uniform clinical guidelines to be implemented company-wide to ensure consistent patient treatment and accurate benchmarking of outcomes. Additionally, our initiative calls for comprehensive training of all clinical personnel and physicians responsible for emergency room patient care. Our emergency room initiatives are expected to continue for the next couple of years.
We implemented a comprehensive quality improvement program called “Process for Perfection,” which is a centralized approach to collecting hospital quality data, measuring that data against internal and external benchmarks, evaluating areas of improvement and excellence and implementing systemic processes to affect the delivery of high quality health care to our patients. Through this program, we have been able to track vast improvements in our core quality measures.
We also pursue various clinical means to increase utilization of the services provided by our hospitals, particularly emergency and outpatient services. These include:
“Nurse First,” an emergency room service program that provides for a well-qualified nurse to quickly assess the condition of a patient upon arrival in the emergency room;
“MedKey™,” a free identification and patient information card that streamlines the registration process; and
“One Call Scheduling,” a dedicated phone system that physicians and other medical personnel can use to simultaneously schedule various diagnostic tests and services.