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John P. Gavin, CFA, is the founder and CEO of Disclosure Insight®, an independent publisher of investment research. Mr. Gavin has spent his entire career of over 25 years in the financial services industry. Prior to starting “DI” in 2000, he worked as an equity analyst and portfolio manager with... More
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  • Long Time HMA General Counsel Quietly Resigns Amidst Challenging Legal and Regulatory Environment 0 comments
    Jan 10, 2012 2:40 PM | about stocks: HMA

    Despite announcing favorable expected results for 4Q and FY11 yesterday, Health Management Associates Inc. (NYSE: HMA) shares were down as much as 30% today on concerns regarding a whistle-blower lawsuit involving Medicare billing. During 2010, approximately 41% of HMA’s net revenue related to services rendered to patients covered by Medicare and various state Medicaid programs. The company also quietly disclosed the resignation of its long time General Counsel, Timothy Parry, the timing of which seems concerning given the company's litigation and interaction with regulators.

    The 8-K regarding HMA's expected quarterly and full year results was released on EDGAR today. The 8-K also included a disclosure that on 5-Jan-12, Parry (age 57, General Counsel since 1997) announced his intention to resign as General Counsel and Secretary effective immediately and retire from the company effective 2-Mar-12. No press release was found regarding his resignation on the company's website nor was it mentioned in the 9-Jan-11 press release attached to the 8-K.

    According to a Bloomberg article, the whistle-blower lawsuit (which does not appear to have been disclosed by HMA in its filings) was filed by former HMA director of compliance Paul Meyer. This is not the only issue facing HMA:

    • In Jan-10, HMA and one of its subsidiaries were named in a qui tam lawsuit entitled United States of America ex rel. J. Michael Mastej v. Health Management Associates, Inc. et al. in the U.S. District Court for the Middle District of Florida related to improper Medicare claims, which remained ongoing as of the most recent 10-Q filed in Oct-11.
    • In Feb-10, HMA disclosed that several of its hospitals received letters requesting information in connection with a DOJ investigation relating to kyphoplasty procedures (a minimally invasive spinal procedure used to treat vertebral compression fractures). It was later disclosed in Feb-11 that the letters were received during 2H09. The company reported the DOJ was investigating hospitals and hospital operators in multiple states to determine whether certain Medicare claims for kyphoplasty were incorrect when billed as an inpatient service rather than as an outpatient service, and it believed that the investigation originated with a False Claims Act lawsuit against Kyphon, Inc., the company that developed the kyphoplasty procedure. The investigation remained ongoing as of the most recent 10-Q.
    • In Feb-11, HMA disclosed it had received a letter from the DOJ in Sep-10 indicating that an investigation was being conducted to determine whether certain hospitals improperly submitted claims for the implantation of implantable cardioverter defibrillators (ICDs), which covered the period commencing with the company’s expansion of coverage for ICDs in 2003 to the present. The letter from the DOJ further indicated that the claims submitted by HMA’s hospitals for ICDs and related services needed to be reviewed to determine if Medicare coverage and payment was appropriate. The company reported that during 2010, the DOJ sent similar letters and other requests to a large number of unrelated hospitals and hospital operators across the country as part of a nation-wide review of ICD billing under the Medicare program. The investigation remained ongoing as of the most recent 10-Q.
    • Also in its 10-Q filed Aug-11, HMA disclosed that it and certain of its subsidiaries had received subpoenas from the U.S. Department of Health and Human Services, Office of Inspector General in May-11 and Jul-11. The subpoenas requested information on physician referrals, ownership and management at whole-hospital physician joint ventures, and emergency room management including the use of Pro-Med software. The company reported that it believes the subpoenas may have been served under the qui tam provisions of the False Claims Act. In its Oct-11 10-Q, HMA also disclosed that in addition to these subpoenas, certain of its hospitals received requests for information from state and federal agencies and that it was cooperating with these ongoing investigations.
    Stocks: HMA
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