Sector Wrap: Rural Hospital Operators

At a health care conference hosted by Citi Wednesday, LifePoint Hospitals Inc., Community Health Systems Inc. and Health Management Associates Inc. reaffirmed financial outlooks for investors. The industry, overall, has been feeling the effects of a weakening economy, including unpaid medical bills and declining admissions as patients delay elective surgeries.

"We face the same challenges we've been talking about for a while, they're still there," said LifePoint Chief Executive William F. Carpenter, during Citi's global health care conference in New York.

But, several rural hospital operators are their regions' sole providers and have seen at least modest growth in admission.

LifePoint's first-quarter profit rose 40 percent on a mix of rising admissions, emergency room visits and longer hospital stays. The company operates 48 hospitals located throughout 17 states and is the sole area hospital in the majority of its communities. Boasting about 2,000 physicians currently, the company hopes to increase that figure by 5 percent each year.

The company reaffirmed full-year profit guidance of $2.35 to $2.65 per share, with adjusted admission increases of up to 2.5 percent. Analysts polled by Thomson Financial expect profit of $2.45 per share, on average.

Franklin, Tenn.-based Community Health Systems saw admissions more than double during its first quarter, pushing profit above Wall Street expectations. The company plans to finish 2008 with 900 physicians, up from 769 in 2007.

The company operates 116 hospitals in mostly rural areas throughout 28 states and is the sole provider in 65 percent of its markets. In 2008, the company expects profit between $2.25 and $2.45 per share, with admissions growth up to 1.5 percent. Analysts expect profit of $2.33 per share.

Naples, Fla.-based Health Management Associates also expects to add physicians and recently converted its doctor contracts from payment based on salary to payment based on a production basis, with incentive pay for practice performance.

The company also reaffirmed its guidance for 2008 earnings from continuing operations between 40 cents and 50 cents per share. Analysts expect profit of 47 cents per share.