Community Health sees slight boost from U.S. health law in 2014

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[January 07, 2014]  (Reuters) Community Health Systems Inc, which awaits a shareholder vote this week on its proposed takeover of smaller hospital operator Health Management Associates Inc, said it expects the new U.S. healthcare law to provide a slight boost to 2014 earnings.

Community Health, the No. 2 U.S. hospital company behind HCA Holdings Inc, also said it was negotiating an agreement with the U.S. Office of the Inspector General to settle a probe related to allegations of false claims to the federal Medicare program for the elderly and disabled. Such deals, called corporate integrity agreements, typically last five years and involve annual reviews by an independent organization.

Community Health said it was setting aside $101.5 million in 2013 to settle those claims and undisclosed issues at a company hospital in Laredo, Texas.

For 2013, it said it expects its adjusted earnings before interest, tax, depreciation and amortization to range from $1.825 billion to $1.85 billion, excluding expenses for the settlements and pending purchase of Health Management. It forecast operating revenue of $12.975 billion to $13.0 billion.

Results in 2013 reflect a greater-than-expected deterioration in patient volumes at the company's hospitals, including a 6.7 percent decrease in admissions for the year, Community Health said.

The company, which said it was providing 2014 projections to reflect the Health Management acquisition as if it occurred on January 1, forecast adjusted EBITDA of $2.925 billion to $3.2 billion for the year ahead. It sees 2014 operating revenue, less a provision for bad debts, of $19.7 billion to $21.2 billion.

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The 2014 outlook includes a benefit to adjusted EBITDA from healthcare reform of between 0.5 percent and 0.8 percent of net operating revenue.

Community Health said it anticipates the Health Management transaction, valued at $3.6 billion plus a contingent value right of up to $1 per share, to close by the end of this month.

Health Management shareholders are expected to vote on Wednesday on the pending merger. Health Management's board in November backed the takeover after a review period spurred by activist investor Glenview Capital.

(Reporting by Susan Kelly in Chicago; editing by Bernard Orr and Lisa Shumaker)

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