* Shares rise 3.8 percent from IPO price in early trading
* Investors brush off concerns on its debt, healthcare law
* Trading on NYSE under symbol "HCA" (Adds analyst comment, updates share prices)
By Debra Sherman
CHICAGO, March 10 (Reuters) - Shares of private equity-backed hospital operator HCA Holdings Inc were up 4 percent on Thursday in a strong stock market debut, even as the broad market sank.
The shares were at $31.20 at midday, after rising as much as 5 percent to $31.50 earlier in the session -- above the $30 pricing in an initial public offering on Wednesday.
HCA's IPO was the biggest private equity-backed offering ever in the United States and is likely to encourage a new round of exits this year.
The top U.S. for-profit hospital operator overcame concerns about its high levels of debt and the possible downside from a new U.S. healthcare law, selling more shares than anticipated at the high end of the given price range.
"HCA has been public twice so there was a lot of demand and a lot of name recognition," said Jeff Jonas, a portfolio manager at Gabelli Health and Wellness Trust Mutual Fund, which bought HCA shares.
"HCA is the best in the (hospital) space," he added. "It has highest margins, best growth rates, and is in the best states -- Florida and Texas. They are extremely well positioned."
Tim Nelson, an analyst with Nuveen Asset Management, said the IPO, the most successful deal in years, has "given credibility to the hospital space" in the minds of many fund managers and it opens the door for more public offerings.
"It's hard to imagine a space with more uncertainty than hospital. There's uncertainty surrounding Medicaid and Medicare reimbursements, uncertainty about healthcare reform and the issue of a universal mandate," he said. "The level of interest was positive for the space overall."
Yet other publicly traded hospital operators saw their shares fall on Thursday, with a 1.4 percent decline for the broader Standard & Poor's 500 Index. Community Health Systems shares dropped 3.4 percent after some industry experts said a newly public HCA could attempt to outbid Community Health's takeover attempt of Tenet Healthcare, whose shares were off nearly 1 percent.
Shares of Lifepoint Hospitals Inc were down 1.4 percent, shares of Health Management Associates Inc were down 3.2 percent, and shares of Universal Health Services Inc were down 1.8 percent.
Wall Street analysts said they expect the hospital sector to continue to consolidate, with larger operators scooping up both large and small hospitals and hospital groups.
HCA was taken private in 2006 in a $21 billion deal, excluding debt, that involved Bain, KKR, Bank of America Corp, Citigroup Inc and HCA's founder, healthcare mogul Dr. Thomas F. Frist Jr.
In its IPO, the Nashville, Tennessee-based company sold 126.2 million shares for $30.00 each, raising $3.79 billion. It had planned to sell 124 million shares for $27 to $30 each.
Underwriters on the IPO were led by Bank of America Merrill Lynch, Citi and JPMorgan. (Additional reporting by Clare Baldwin, editing by Gerald E. McCormick, John Wallace and Matthew Lewis)