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HMA stockholders overwhelmingly approve merger

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Health Management Associates Inc. stockholders this morning overwhelmingly voted in favor of a merger agreement under which Community Health Systems Inc. has agreed to acquire HMA.

According to a news release, approximately 98.7 percent of the votes cast at today's special meeting were in favor of adoption of the merger agreement, representing approximately 81.7 percent of HMA's outstanding common shares.

Steve Shulman, chairman of the HMA board, said, "We are gratified that HMA stockholders have approved our merger with Community Health Systems and look forward to taking the steps necessary to complete the transaction."

Wayne T. Smith, chairman of the board, president and CEO of CHS, said, "We are pleased stockholders have seen the significant strategic value in combining with CHS. We are working now to finalize regulatory approvals, and we expect to complete this transaction quickly so that we can integrate our two companies and deliver on our plans for long-term growth and value creation."

CHS, based in Tennessee, currently owns, leases or operates 135 hospitals in 29 states, including one local facility, Memorial Hospital in York. HMA, based in Florida, currently operates 71 hospitals in 15 states, including three local facilities: Carlisle Regional Medical Center, Lancaster Regional Medical Center and Heart of Lancaster Regional Medical Center.

The proposed merger has been recommended by two separate and successive HMA boards of directors. HMA shareholder approval of at least 70 percent is required for the merger to proceed, as is final regulatory approval.

In October, CHS reported that its third-quarter net income was down 91 percent from the previous year due partially to lower admissions but largely to setting aside $98 million for an expected settlement with the Department of Justice and its "investigation into the company's short stay hospital admissions for the years 2005-2010, as well as their investigation at our hospital in Laredo, Texas."

The most recent report noted an additional $3.5 million put in reserves "related to Tricare and Medicaid" and said CHS "is also negotiating a corporate integrity agreement with the Office of the Inspector General of the Department of Health and Human Services."

CHS had projected a decrease in same-store adjusted admissions of 3.5 to 4.5 percent compared to 2012 for the year. Instead, it reported, preliminary results show a same-store adjusted admissions decrease of 4.7 percent. Overall admissions were down 6.7 percent for the year, with net operating revenues ranging from $12.975 billion to $13 billion and adjusted EBITDA ranging from $1.825 billion to $1.850 billion. Those figures exclude expenses related to the pending HMA deal as well as the settlement reserves mentioned earlier.

Based on an HMA acquisition date of Jan. 1, 2014, the company's projections for 2014 are as follows. It noted that it actually expects the deal to close by the end of January and will then issue revised projections with its scheduled February earnings release.

• Net operating revenues less provision for bad debts of $19.7 billion to $21.2 billion.

• Adjusted EBITDA of $2.925 billion to $3.200 billion.

• Net cash flow from operating activities of $1.650 billion to $1.875 billion.

The projections assume completing three to four additional targeted hospital acquisitions, of those currently in process, in 2014. They also assume achievement of HMA acquisition synergies of approximately $100 million during the first year of operations, with total synergies of more than $250 million expected to be realized over the first two years of operations.

CHS and HMA are listed for trading on the New York Stock Exchange under the symbols CYH and HMA.

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