Health Management Shares Decline Most in Four Years After Counsel Resigns

Health Management Associates Inc. (HMA), an operator of acute-care hospitals, fell the most in four years after the company said its general counsel resigned and an analyst raised concerns about an October lawsuit against the company involving Medicare billing.

HMA dropped 22.7 percent to $5.38 at 1:01 p.m. in New York, after earlier declining as much as 31 percent. Timothy Parry will retire immediately as counsel and leave in March, the company said in a filing. MaryAnn Hodge, an HMA spokeswoman, said the change is unrelated to a former employee’s lawsuit.

Sheryl Skolnick, an analyst for CRT Capital Group LLC in Stamford, Connecticut, wrote in a note to investors yesterday about a suit filed by a former HMA employee named Paul Meyer. Meyer, who said he was wrongfully fired after pointing out compliance issues, has “long experience” investigating Medicare fraud, Skolnick wrote.

“What investors are going to do is assume the worst,” said Whit Mayo, an analyst with Robert W. Baird & Co. in Nashville, who has an “outperform” rating on the stock. “Pressures from any investigation-related matters could be weighing on the company.”

Meyer said in his complaint that several HMA hospitals had won higher government payments from the Medicare program for the elderly and disabled, in part by “the submission of fraudulent billing to Medicare through the improper admission of patients as inpatients even though such patients clearly did not meet the standards for inpatient admission.”

Concerns Treated ‘Appropriately’

When Meyer raised concerns of Medicare fraud, the company “treated them seriously and appropriately,” said Susan Toepfer, representing HMA on the case from Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson in Miami.

Meyer, in the legal papers, said he was fired on the day he told the company he would report violations to the U.S. government. Toepfer said he was fired after refusing to give back documents HMA needed to respond to a federal subpoena.

“This is not a fraud case, it is an individual wrongful termination case,” Toepfer said in a telephone interview.

Toepfer said she didn’t have authorization to say if Parry was working on the case before he resigned. Hodge said she couldn’t comment further on personnel matters or pending litigation.

Whistleblower Act

Meyer could win back pay and damages in the suit under the Florida Whistleblower Act, which HMA does not think he is entitled to, Toepfer said. A trial is scheduled for January 2013.

The Naples, Florida company also said yesterday that fourth-quarter earnings excluding some items were 25 to 26 cents a share. That beat analyst estimates for 19 cents. The company, whose facilities are located in the southern U.S., also forecast 2012 earnings of 80 cents to 90 cents.

The case is Meyer v. Health Management Associates Inc., 11- cv-62479-RNS, U.S. District Court, Southern District of Florida (Ft. Lauderdale).

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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