ST. PETERSBURG — In 2010, Health Management Associates paid $21.5 million to take over three tiny Central Florida hospitals that had been hemorrhaging cash for then-owner Shands HealthCare.
This year Shands, which kept a 40 percent ownership interest in the hospitals, got a check for about $400,000. The hospitals that in one year lost $12 million are making money.
"They've done a fantastic job of riding this financial ship with us," said Tim Goldfarb, chief executive officer of Shands, the University of Florida's not-for-profit affiliated health care system. "HMA is doing everything they promised they'd do."
That's the kind of partnership HMA refers to when touting its ability to turn around underperforming, non-urban hospitals.
The chain's promise Wednesday to transform the much larger Bayfront Medical Center, however, will be a whole different venture.
HMA plans to put its latest acquisition at the center of its existing hospitals along the west coast of Florida, strengthening the entire network.
HMA senior vice president Alan Levine, an influential Republican who headed up Gov. Rick Scott's transition team on health issues, said Bayfront will become the referral hub of a network that will include six other HMA hospitals: Brooksville Regional, Spring Hill Regional, Pasco Regional, Venice Regional, Charlotte Regional in Punta Gorda and Peace River Regional in Port Charlotte.
"Clinically, it fits as a flagship facility for our hospitals," Levine said. Plus, he said, "there may be opportunities to expand our footprint with Bayfront to do things on an outpatient basis."
HMA executives suggested several ways they might turn a profit at Bayfront, where operating margins have been tiny, and charity care has been generous. Among them: Using their size to strike better deals with insurers and suppliers, and offering services such as specialized surgeries that could attract more patients.
At the Central Florida Shands hospitals, the largest of which has just 80 beds, HMA used its top recruiters to find new doctors willing to move to rural areas, Goldfarb said. That kept more patients from migrating out of town for specialty services.
Goldfarb said HMA made good on its promise not to lay off existing employees.
Several investment analysts said Bayfront doesn't quite fit HMA's portfolio, but the acquisition still could have sound reasons behind it.
For one, HMA is employing a common strategy of clustering hospitals in a region, which could increase its negotiating power.
"They had the spokes and they just needed the hub," said Frank Morgan, an analyst with RBC Capital Markets. "That's not an insane strategy."
HMA was founded in 1977 by four doctors who set out to buy a privately owned hospital in Kentucky. The partnership laid the foundation for HMA, now a Fortune 500 company with 70 hospitals in 15 states and 35,000 employees.
Though one of the leading hospital chains, HMA is nowhere near as big as the largest for-profit health provider, HCA, which owns a number of Tampa Bay hospitals.
HMA is expected to report about $5.8 billion in revenue this year, Morgan said. By contrast, HCA is on track for $32.6 billion.
HMA reported a 5.5 percent decrease in revenue this past quarter compared to the same period a year earlier. Part of the issue, HMA says, is that its hospitals wrote off more charity and indigent care last quarter ($28.1 million) compared to the same quarter a year ago ($24 million).
As of December 2011, the company had $3.6 billion in long-term debt and capital lease obligations, executives told investors in an end-of-year report. But HMA also has $400.3 million of available credit.
Glen Losev, an analyst with WallachBeth Capital, said stock prices for HMA have been disappointing but unsurprising given the economy. He said he isn't recommending buying HMA stock right now, which closed Wednesday at $7.23, up 4 cents.
But, "would I want them to come into my town? Yes.
"They do their homework,'' he said. "They are very methodical in what they do."
Staff writer Letitia Stein contributed to this report. Jodie Tillman can be reached at email@example.com.