Health Management Associates, Inc. Comments on UBS Analyst Report
NAPLES, Fla., Dec 09, 2003 /PRNewswire-FirstCall via Comtex/ -- Health Management Associates, Inc. (NYSE: HMA) announced today that it believes an analyst report issued December 8, 2003 by UBS analyst Ken Weakley contained material errors that substantially distorted Mr. Weakley's analysis and negatively impacted HMA's stock price. Less than one year ago, HMA had engaged UBS investment banking on a project for the Company. However, because of UBS' relationship with HealthSouth Corporation, HMA determined it was in the best interest of the Company and its shareholders to terminate the project and its relationship with UBS investment banking. The timing and content of UBS' report raises concerns regarding its independence and objectivity.
HMA has consistently stated that 55% of its managed care contracts are reimbursed on a percent of charge basis. Mr. Weakley, in his report, erroneously assumed that those contracts also represented 55% of HMA's commercial net patient revenue. Prior to issuing his report, neither Mr. Weakley nor any other representative of UBS contacted HMA to verify this data point set forth in the report. For the year ended September 30, 2003, HMA's net patient service revenue totaled $2.56 billion. Of that amount, $1.05 billion, or 41%, represents commercial and managed care revenue. At most, $250 million, or 24% of the $1.05 billion of commercial and managed care revenue is related to percent of charge based reimbursement, which represents less than 10% of total net revenue.
On a conference call hosted by Mr. Weakley on December 8, 2003, Mr. Weakley stated that HMA's negotiated discounts on commercial, charge based contracts range from 20 to 40% of gross charges, which he reported was data provided by HMA. For competitive reasons HMA has never publicly discussed with Mr. Weakley, or any other analyst, its range of discounts negotiated with commercial payors.
Although based on a small sampling of 10 DRGs, Mr. Weakley concludes that HMA's charges are 20 to 30% higher than rural, publicly-owned hospital companies. This conclusion is not surprising, considering HMA's geographic range, average facility size and complexity of services, all of which combine to yield a higher case mix index. Moreover, HMA's local charge structure reflects improvements in the quality of health care arising from substantial investments in property, plant, equipment and physician recruitment, as compared to area competitors.
Data in Mr. Weakley's report confirms that HMA's pricing increases have been below industry averages. To date, HMA has not received any inquiries into its pricing policies from any state or federal government agency. In addition, HMA's Medicare outlier payments represented 3.8% of Medicare payments for the year ended September 30, 2003, below the national average.
While gross charges have recently become more visible with regard to outlier payments and the uninsured, HMA believes the primary focus within the industry will continue to be net revenue. For the year ended September 30, 2003, HMA's same hospital net revenue per adjusted admission was $6,920, which is appropriate relative to both its rural and urban peers, based on acuity and cost structure. HMA's same hospital net revenue per adjusted admission increase for the year was 4.9%, at the low end of the industry range. HMA previously reported renegotiating 209 managed care contracts during fiscal year 2003, or 17% of its total number of contracts. HMA's average increase on the renegotiated contracts was approximately 9%. HMA's overall managed care pricing objective is an increase of 5 to 8%, a stark contrast to the average 15% health insurance premium increases generally reported by the nation's insurance companies. HMA's locally-negotiated rates with managed care payors reasonably reflect local market conditions.
One of Mr. Weakley's conclusions predicts a dramatic decline in HMA's operating margins based solely on gross charge reductions. HMA is not anticipating lowering any of its charges. HMA's net revenue per adjusted admission, and increases therein, fall within the middle of the range for its industry, yet HMA's operating margins continue to be 500 to 600 basis points higher than its peers, indicating the critical role of effective resource management, rather than an emphasis on net revenue. HMA's fifteen years of uninterrupted operating earnings growth and industry leading operating margins are a function of its selective markets, proprietary management information system, strong hospital management and, above all, a focus on quality of care.
"Fiscal year 2003 marked HMA's 26th year of excellence. Our record, reputation, and our integrity have earned HMA the trust and respect of employees, physicians, patients, vendors and payors. HMA's integrity has been called into question by Mr. Weakley, and his innuendo that HMA's practices resemble other's who have chosen a different path, must be addressed," said Joseph V. Vumbacco, President and Chief Executive Officer. "Going forward we remain committed to the philosophy, strategies and ethics that have been our trademark in delivering high quality health care to the non-urban communities we serve."
HMA is the premier operator of non-urban general acute care hospitals in communities situated throughout the United States. HMA has generated 15 years of uninterrupted operating earnings growth and operates 52 hospitals in 16 states with 7,540 licensed beds.
SOURCE Health Management Associates, Inc.
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John C. Merriwether, Vice President of Financial Relations of
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