By Dinah Wisenberg Brin Of DOW JONES NEWSWIRES Investors should get an update on Health Management Associates Inc.'s (HMA) turnaround progress and a glimpse of broader industry trends when the company reports third-quarter results next week, opening the earnings reporting season for publicly traded hospital operators. While admissions, outpatient visits and revenue climbed and HMA reduced its debt in the first half of the year, the Naples, Fla.-based company also saw a decline in cash from continuing operations and other activities. "HMA's CEO has been in place for a year and has quickly moved to improve operating metrics, physician and patient relationships and relationships with the Street. But steep and accelerating declines in key cash flow metrics trouble us and suggest that HMA's turnaround is far from complete," said Pali Capital analyst Sheryl Skolnick this week in initiating coverage with a neutral rating. HMA, which reports after the market close Monday, operates hospitals in nonurban areas. The company and its peers have struggled for years with providing uncompensated care to large numbers of uninsured patients--a situation they hope will change if Washington policymakers adopt a health-care overhaul that extends coverage to millions more Americans. Hospitals also are likely to provide updates on how the H1N1 virus, the soft economy and widespread layoffs are affecting admissions. Community Health Systems Inc. (CYH) and Universal Health Services Inc. (UHS) also report next week. Hospital shares generally are up sharply this year as companies have reined in costs and investors anticipated a boost from health reform. HMA shares have more than quadrupled year to date, and Pali's Skolnick said that sparked a sale by an investor whom she considers "the best trader" of HMA shares, company Chairman William Schoen, who over the years "has an outstanding record of timing the monetization of his ownership." Schoen sold 200,000 shares for $8.33 this month, exercising options with less than a year before their expiration date. "We have learned that when he sells, we don't buy," said Skolnick. HMA is the only one of the five major public acute-care hospital operators that was trading higher than its long-term average price-to-earnings valuation Friday. HMA shares recently traded at $7.47, a bit below the 52-week high of $8.58 reached on Oct. 12 and far higher than the year-low of 79 cents a share hit on Nov. 24. The group all were trading lower. -By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@dowjones.com
