Health Management Says U.S. Issued Subpoena on Payments

Health Management Associates Inc. (HMA), an operator of 71 hospitals in the U.S., said its accounting procedures, including payments from government health programs, are being investigated by federal regulators.

The company received a subpoena April 25 from the Securities and Exchange Commission for documents including records of payments from Medicare and Medicaid, the U.S. health programs for the elderly and poor. The government also asked for data on revenue from privately insured or uninsured patients, the Naples, Florida-based company said in a statement yesterday.

Health Management operates hospitals in 15 states and got almost 40 percent of its $5.9 billion in revenue last year from Medicare and Medicaid, according to data compiled by Bloomberg. The company said it’s cooperating with the SEC and is unable to determine the potential financial effects.

“This is a very active, impactful investigation,” Sheryl Skolnick, an analyst at CRT Capital Group in Stamford, Connecticut, said in an e-mail. “It’s going to cost money and be a lot more of a distraction.”

The SEC request is just an inquiry and not uncommon when a government investigation is going on, Chief Executive Officer Gary Newsome told investors today on an earnings conference call. The SEC is seeking records back to Jan. 1, 2007, he said.

“This is really early,” Newsome said. “We just received this late last week. It’s very early in the process.”

Shares Fall

Health Management fell 4.2 percent to $10.76 at the close in New York. The company’s shares have gained 55 percent in the past 12 months.

Health Management was thrown into the spotlight in December when the CBS Corp. (CBS) television program “60 Minutes” aired a report criticizing the company’s emergency room practices. The company at the time called the report inaccurate.

Health Management last month reduced the high end of its profit forecast because preliminary data for the first quarter showed a decline in admissions. The company estimates full-year profit from continuing operations of 86 cents to 95 cents a share.

Hospitals have been under pressure to improve care and cut costs as the U.S. health overhaul focuses on tying payment rates to better quality. Government programs also have been reducing payments and penalizing facilities that have too many patients readmitted after their initial treatment.

To contact the reporters on this story: Stephanie Armour in Washington at sarmour@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net

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

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