Select Medical (SEM), Inova Health Form JV in Northern Virginia


Select Medical Holdings Corporation SEM recently announced a joint venture (JV) with a non-profit health organization called Inova Health System for a critical illness recovery center in northern Virginia. The joint venture is expected to own and operate the hospital, which will be located within Inova Mount Vernon Hospital.

The specialist hospital is expected to have 32 beds and begin operations in the first half of next year. This decision comes at an opportune time as demand for specialty care increases in Northern Virginia. The joint venture will be responsible for providing world-class post-acute services to hospitalized patients. After the new facility opens, patients from Inova’s five hospitals, who do not require intensive care services, will be transferred to the new recovery hospital in the event of serious illness.

The joint venture with SEM should enable Inova Health System to expand its continuum of care. Given the lack of a truly specialized post-acute care service in the region, the new hospital will be the first of its kind in the region. Select Medical will likely be the majority owner of the new facility. This move will strengthen SEM’s footprint in Northern Virginia.

SEM does business in 46 states plus the District of Columbia. At the end of the first quarter, Select Medical had 105 critical illness recovery hospitals, 30 rehabilitation facilities and 1,901 outpatient rehabilitation clinics. The addition of the hospital should be followed by similar moves from the end of SEM, which will increase its capacity and expand its reach. This can help Select Medical improve its cash position in turn.

Expansions and the creation of new facilities fuel SEM’s growth. The increasing incidence of diseases leads to an increase in the number of patient admissions. This, in turn, bolsters Select Medical’s revenue. The metric increased 12.2% year-over-year in 2021. Revenue is forecast to be between $6.25 billion and $6.40 billion in 2022, with the midpoint indicating a 2% increase from the 2021 level of $6.2 billion. Over the forecast period 2021-2023, SEM is targeting a revenue CAGR of 4-6%.

Price performance

Shares of Select Medical have risen 2% in the past three months against a 4.5% decline in the industry it belongs to.

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Zacks ranking and other key picks

Select Medical currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks overall medical space are Assertio Holdings, Inc. ASRT, Altimmune, Inc. ALT and UnitedHealth Group Incorporated UNH, each carrying a Zacks rank of 2 at present. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks’ consensus estimate for Assertio’s second-quarter earnings points to a 125% improvement over the figure reported a year ago. ASRT has seen an upward revision in estimates over the past 60 days versus none in the opposite direction.

Assertio’s earnings have exceeded estimates twice in the past four quarters and missed the same the other two times, with the average surprise being 26.4%.

Zacks Consensus Estimate for Altimmune’s 2022 net income indicates an 8.2% improvement over 2021 levels. ALT has seen four upward estimate revisions in the past 60 days versus none in the opposite direction.

Altimmune’s earnings beat estimates in three of the last four quarters and missed the mark once on the remaining occasion.

The Zacks consensus estimate for UnitedHealth’s net income in 2022 indicates growth of 14.4% from the level of the prior year period. The UNH has witnessed one upward revision in estimates over the past 60 days versus none in the opposite direction.

UnitedHealth’s earnings have exceeded estimates in each of the past four quarters, averaging 3.7%.

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