Sector Snap: Rural and suburban hospital operators

NEW YORK (AP) -- A Credit Suisse analyst took a positive view Thursday on three companies that run hospitals in rural and suburban markets, saying they could experience some significant benefits from health care reform.

Analyst Ralph Giacobbe upgraded LifePoint Hospitals Inc. shares to "Outperform" from "Neutral" and raised his price target on shares of LifePoint, Community Health Systems Inc., and Health Management Associates Inc. Giacobbe said the companies typically have a large share of the markets they operate in, and that will help them as prices for public health insurance exchanges are negotiated. It also provides protection against health insurers who might want to offer narrower coverage.

Giacobbe rural hospital operators have suffered bigger declines in admissions than urban operators in recent years, but they could experience volume growth over the coming years. He added that reform may also drive the companies to expand their businesses with new acquisitions.

Community Health, of Franklin, Tenn., has 135 hospitals in 29 states. Health Management Associates is based in Naples, Fla., and it runs 71 hospitals. LifePoint is headquartered in Brentwood, Tenn., and it runs 57 hospitals in 20 states.

Giacobbe raised his price target on LifePoint shares to $60 from $48 while raising his target on Community Health Systems to $61 per share from $55 and his estimate on Health Management Associates to $16 per share from $12. He rates Community Health and Health Management shares "Outperform."

Shares of LifePoint rose $1.93, or 4 percent, to $50.57 in afternoon trading after reaching a six-year high of $50.65 earlier. Community Health shares gained 71 cents, or 1.5 percent, to $47.80 and Health Management stock added 6 cents to $13.66.