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Select Medical Allies OhioHealth

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Select Medical Holdings Corporation (SEM) has inked a deal with OhioHealth, pursuant to which it will establish an inpatient rehabilitation hospital in central Ohio. This, the OhioHealth Rehabilitation Hospital will focus on acute treatment of neuroscience patients, mainly those suffering from neurological trauma and stroke.

In recent times there has been a surge in the number of neuroscience patients who need rehabilitative care. The new establishment is focused on satisfying the needs of these patients in Ohio. This new hospital will open in Aug, 2013.

As per the deal, the existing 15 inpatient rehabilitation beds of OhioHealth’s Riverside Methodist Hospital will be shifted to the new rehabilitation hospital. The present bed capacity of 15 allows OhioHealth to retain only one third of its patients in need of inpatient rehabilitative care. With the new OhioHealth Rehabilitation Hospital, it will be able to cater to more patients with an increased bed capacity of 44.

Select Medical is well known for its specialty hospitals and rehabilitative care. Presently it serves 30,000 patients per day and has a huge network of 100 hospitals specializing in long-term acute care, 15 medical rehabilitation hospitals, and approximately 1,000 outpatient clinics providing physical and occupational therapy. The aforementioned alliance is expected to enhance the network of Select Medical thus increasing the number of patients served.

Among its recent ventures towards business expansion, Select Medical acquired two inpatient rehabilitation facilities from Global Rehab Management, LLC and its affiliates in the San Antonio and Phoenix markets last month.

During the first quarter of 2013, Select Medical’s revenues increased 0.8% year over year to $750 million. We expect the association with OhioHealth to help the company generate a steady stream of revenues by making way for receiving more patients in Ohio. The Specialty Hospitals segment of Select Medical contributed 74.4% of total revenues during the quarter. We expect these initiatives of the company to increase the contribution of this segment going forward.

However, the company will have to check rising operating expenses so as to not mar the top-line strength and consequently pressurize the margins. We presently have a Zacks Rank #5 (Strong Sell) on Select Medical. Among other favorable names in the industry, Aetna Inc. (AET) carries a favorable Zacks Rank #1 (Strong Buy) whereas Centene Corp. (CNC) and Health Net Inc. (HNT) carry a Zacks Rank #2 (Buy).

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